At the conclusion of the hearing of this appeal on 7 February 2022 we made orders, including, that the appeal was allowed, the order made by the Tribunal on 21 September 2021 requiring the appellant to pay the respondent the sum of $8620.00 was set aside and the proceedings were remitted to a differently constituted Tribunal for redetermination. We also reserved the question as to whether the respondent should pay the appellant's costs of the appeal, following an application for such costs and submissions by the parties in respect of that application at the hearing of the appeal.
These are our reasons for making those orders and for our decision that the appellant's application for costs of the appeal should be dismissed.
[2]
Facts
The respondent lives in Byron Bay.
Whilst we are not in a position to give a full account of the facts, the following facts are apparent from the documentary material presented to the Tribunal at first instance, or were otherwise uncontroversial:
1. On 25 September 2020 the appellant (European Automotive), in Ballina, supplied and installed a used replacement engine into the respondent's 2007 VW Transporter at a cost of $8,620.00 (inclusive of GST). The replacement engine was supplied into this vehicle at a time when it had mileage of 170,832 km. The replacement engine had mileage of 106,000 km. The work carried out by European Automotive included the replacement of an air filter, timing belt kit, including water pump and drive belt but did not involve replacing any of the other operational systems associated with the engine.
2. On 18 December 2020, by which time the odometer reading on the vehicle had increased to 174,818 km, European Automotive, following mechanical problems raised by the respondent, checked the engine for faults and found "atmospheric pressure sensor to charge pressure sensor correlation fault" (see invoice, dated 18 December 2020). The vehicle was tested, including by a test drive, and returned to the respondent.
3. On 29 March 2021, by which time the vehicle's mileage had increased to 178,214 km, Buchanan Motors, in Murwillumbah, did some work on the vehicle for a cost of $99.00. The tax invoice in respect of this work stated:
After having the car CO [carbon dioxide] tested for exhaust gas in the cooling system (Exhaust gas present on test). Removed EGR [exhaust gas reticulation] cooler and checked for leaks. No leaks were found at time of testing so refitted EGR back to Van. Recommend taking car back to person who fitted the engine as we suspect that it has a blown head gasket or possibly cracked head. [Our emphasis]
1. At this time, the respondent did not take the car back to European Automotive.
2. There was a reference in the Application to the respondent having taken the vehicle to Buchanan Motors at an earlier time. The respondent's Application said that a new coolant reservoir was installed by Buchanan Motors on 16 March 2021 at a cost of $194. There was no evidence of an invoice in respect of any such works.
3. On 18 April 2021, the respondent sent an email to Mr Oke of European Automotive. He stated that there had been a complete engine failure on 4 March 2021. He also stated:
….
The initial engine was diagnosed with a cracked head gasket which warranted an engine replacement as the best solution. As I understand it, a cracked head gasket shows symptoms as exhaust gas leaking into the coolant system and causing pressure to build in the coolant reservoir. The issue made itself apparent when the coolant level sensor alarm was activated as the pressure building in the reservoir caused the coolant levels to drop below the optimal level.
Not long after the engine replacement the same issue arose, pressure in the coolant reservoir causing the level to drop and the alarm to sound. I have reason to believe the new engine had a small crack which slowly expanded ending with my coolant reservoir exploding a few months later.
Because of this and various incidents leading up to the complete engine failure I believe the engine was faulty before installation.
….
1. An email exchange between the respondent and Mr Oke, following the email of 18 April 2021, appears to suggest that subsequent to 29 March 2021 the vehicle continued to be driven, at least from Murwillumbah to Brunswick Heads.
2. The respondent presented to the Tribunal a "Vehicle Record Report" from Woods Mechanical, in Lismore, dated 4 June 2021. In his "Simplified summary of events", also presented to the Tribunal, the respondent stated that "Woods Mechanical Lismore diagnosed vehicle with cracked head". However, the typewritten part of this report contains no reference to this and some unidentified handwriting on the document states only "pressure in cooling system failed TK test possible head or gasket". The report does not identify the vehicle the subject of the report, nor does it identify the "Technician", despite that entry in the document.
3. On 1 July 2021 the vehicle was "presented" or "admitted" to European Automotive: see written report from Mr Oke, dated 24 August 2021, provided to the Tribunal and the respondent's "Simplified summary of events". According to Mr Oke's report, the mileage at that time was 178,893 km - an increase of 679 km since 29 March 2021.
P8 Auto Ltd t/as European Automotive Ballina v Dolling [2022] NSWCATAP 41 | Case summary | Zoe
Mr Oke's report, dated 24 August 2021, states that from the inspection on 1 July 2021 "Catastrophic failure of engine not present." No reference is made to finding a cracked head gasket or cracked head. There is reference to a coolant reservoir being replaced on 16 March 2021, that a coolant reservoir failure can cause low coolant levels and/or engine overheating conditions and that engine overheating conditions can and do lead to a cracked cylinder head or cylinder head gasket. In a separate statement from Mr Oke, provided to the Tribunal at first instance, he said that in his professional experience of nearly 10 years it was "much more likely that a failed coolant reservoir causes a cracked head and/or head gasket, than a cracked head/head gasket causes a reservoir failure". He also said the replacement engine had been test driven after installation and the engine and its systems, including its cooling system were in normal working order.
On 27 July 2021 the respondent commenced proceedings in the Tribunal seeking an order that the appellant fix or replace the faulty motor vehicle or parts to the approximate value of $8,620. It was said in the Application that the engine started having problems soon after it was replaced and there was a complete engine failure on 4 March 2021, less than six months after it was installed. In his Application, the respondent set out a narrative in relation to his claim. This included that on 8 March 2021 the coolant reservoir exploded and that since he was in Murwillumbah he took the vehicle to Buchanan Motors and that on 16 March 2021 a new coolant reservoir was installed. It was said that he then had a "sniff test" performed on the engine and was told it either had a leak in the EGR or the head gasket was cracked again. It was said that on 29 March 2021 Buchanan Motors tested the EGR and it was found to be in working order and the engine was therefore diagnosed with a cracked head gasket.
[3]
Issues raised by the material before the Tribunal
The material before the Tribunal raised, at least, the following issues:
1. What was the true state and condition of the replacement engine at the time of supply by the appellant and would a reasonable consumer have regarded that state and condition as acceptable, having regard to the age of the replacement engine supplied?
2. Facts and matters that were relevant to the assessment referred to in (1) include that the vehicle had not been diagnosed by any mechanic as actually having a cracked head gasket or cracked head, the coolant reservoir did not appear to be part of the goods supplied by European Automotive with the replacement engine, the significance of the presence of exhaust gas referred to in the Buchanan Motors invoice, the engine was driven for a substantial mileage after the supply, and the respondent's particular use of the vehicle may have adversely impacted the condition of the replacement engine.
3. How, and in what respect, was there any failure by the appellant to comply with the statutory guarantee of due care and skill or with the statutory guarantee of fitness for purpose in relation to the work carried out by the appellant to install the engine?
4. If the problem that had arisen with the replacement engine was not shown to be a cracked head gasket or cracked head, but, nevertheless, was not of acceptable quality at the time of supply, what was the loss or damage caused by the failure to comply with the statutory guarantee for the purposes of the remedy prescribed in s 259 (4)? What was the reasonable cost to repair the problem? Did the respondent by his use of the vehicle after 29 March 2022 make the situation worse with the consequence that the loss which has eventuated goes beyond the loss or damage suffered "because of the failure to comply with the guarantee": see s 259 (4).
[4]
The Tribunal's decision
Remarkably, the Tribunal's reasons make no reference to the absence of the respondent at the hearing in the Tribunal at first instance on 21 September 2021 or to any consequential consideration given by the Tribunal to an order that the respondent's claim be dismissed because of his failure to appear at the hearing.
It was only at the hearing of the appeal that we were informed of this feature of the hearing at first instance - the written submissions on appeal provided by the legal representatives of the parties made no reference to this. At the hearing of the appeal, Mr Gradidge, solicitor, who appeared for European Automotive, sought to rely on the respondent's absence from the hearing in making a contention that this had led to procedural unfairness for the appellant because it had not been able to test the respondent's evidentiary material. Mr Gradidge also told us that the appellant, which was unrepresented at the hearing, had raised no issue about the respondent's absence and that this was because the representative had not understood the potential significance of this.
No procedural unfairness point had been raised by the appellant in the written submissions on appeal and Mr Harmon, who appeared for the respondent on the appeal, strongly objected to the issue being considered on appeal.
It was unnecessary for us to consider the procedural unfairness issue any further because, as explained below, there were other errors of law affecting the decision, which resulted in our decision to allow the appeal. Nevertheless, the respondent's absence from the hearing was relevant to the question as to whether, having decided to allow the appeal, the proceedings should be remitted for re-determination or re-determined by us following a new hearing.
When asked by us at the hearing of the appeal why the respondent had not appeared at the hearing, the respondent said he had missed the email notice of the hearing. There was no suggestion that he had deliberately failed to appear.
The reasons of the Tribunal, dated 6 October 2021, were, relevantly, as follows:
3. Goods and services applied to a consumer carry implied statutory warranties pursuant to the provisions of sections 54, 55, 60 and 61 of the Australian Consumer Law that the goods are and services are fit for purpose and of acceptable quality.
4. On 8 March 2021 the engine suffered a "cracked head gasket", as was subsequently diagnosed on 22 March 2021.
5. The respondent denies liability primarily upon the basis that the express warranty period which was set out under the terms of the subject vehicle sale had expired, but also asserts that it has not inspected the vehicle since receipt of the subject Application lodged in these proceedings and that there are various other possible causes the problem which cannot be "ruled out".
6. Parties to litigation respectively bear an evidentiary onus to prove or establish their claim or defence or submissions. It was open to the respondent to have the vehicle inspected further for the purpose of any additional expert report, but it elected not to do this.
7. The contention of the respondent that various electronics, fixtures and accessories to the engine are not "covered by warranty" is inaccurate.
8. The respondent was engaged to supply and install a replacement engine. It was under a duty to ensure that the engine was of proper and sufficient standard and installed in a proper and tradesman like manner. This duty is inferred into every commercial agreement of this nature pursuant to the provisions of the Australian Consumer Law as recited above, which generally apply regardless of the content of any particular written agreement between a supplier and a consumer.
9. Generally speaking, the legal duty set for the respondent was to take all appropriate steps to provide and install a replacement engine in a manner which resulted in a properly functioning motor vehicle. If additional parts or components or work tasks were required, it was incumbent upon the respondent to advise accordingly and to then proceed after the applicant was in a position to give informed instructions as to the repair and rectification work to be undertaken. This was not done.
10. The outcome is that the applicant has had an engine supplied and installed which has failed within a relatively short period of time. There is no adequate evidence to demonstrate that this has arisen for any reason other than a failure to meet the statutory duties for supply of goods and services as set under the Australian Consumer Law and outlined above.
[5]
The limited right of appeal and grounds of appeal
Under s 80 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), a party may appeal as of right to the Appeal Panel in an internal appeal on any question of law. In respect of any other grounds, leave to appeal is required. The appellant did not seek leave to appeal but relied upon errors of law.
In the Notice of Appeal the appellant identified, in short form, 10 grounds of appeal, including that the Tribunal failed to give proper consideration to the evidence, failed to give adequate reasons and misapplied the law.
[6]
Consideration
In our opinion, the decision was affected by each of these three errors of law.
As to inadequate reasons, the Tribunal did not identify its reasoning process, including the material evidence, for the conclusions that:
1. The engine suffered a cracked head gasket in March 2021.
2. The applicant had an engine supplied and installed which failed within a relatively short period of time.
3. These problems meant that there were breaches of the statutory guarantees concerning both the supply of goods and the supply of services in sections 54, 55, 60 and 61 of the Australian Consumer Law (ACL).
4. The amount of damages that the respondent was entitled to was the amount that he had paid for the supply and installation of the replacement engine.
In so deciding, we have applied the approach to the provision of adequate reasons set out in the decision of Bell P in NSW Land and Housing Corporation v Orr (2019) 100 NSWLR 578, as later summarised in the decision of the Appeal Panel in Origin Concepts Pty Ltd v Wynne [2022] NSWCATAP 31 at [20]-[23].
We also consider that the Tribunal misapplied the law. The Tribunal did not direct itself to the specific terms of the statutory guarantees and the statutory remedies for breach of these guarantees. Instead, it referred to duties owed by the appellant, rather than to guarantees, and set out the content of these duties in language that differs from the statutory provisions concerning the guarantees. It also appears to have proceeded on the basis that the statutory guarantees provided by the appellant extended to other components of the operation of the engine that had not been supplied or worked upon by the appellant.
It also seems that the Tribunal overlooked material evidence, including the invoices from Buchanan Motors and Woods Mechanical, with their references (leaving aside the uncertainty of the reference in the latter invoice) only to a suspicion or possibility of a cracked head gasket or cracked head, the invoice from European Automotive dated 18 December 2020, which only identified a sensor problem and the evidence that the failure that occurred on 4 or 8 March 2021 was with the coolant reservoir, not the replacement engine that was supplied.
[7]
Outcome of the appeal
For these reasons, we decided that the appeal should be allowed. We explored with the parties the possibility of our re-determining the merits of the claim even though Mr Gradidge, for the appellant, submitted that the outcome should be that the proceedings are remitted to the Tribunal for re-determination, with the parties having the opportunity to provide new evidence. In this regard, we raised with the respondent the question whether his claim should fail because of the lack of proof that the engine suffered a cracked head gasket or cracked head. Mr Harmon resisted such a decision on the basis that there was, at least, a case that there were breaches of the relevant statutory guarantees in relation to the replacement engine because of the discovery of the escape of gas, as referred to in the Buchanan Motors invoice, with the prospect also that this was associated with a cracked head gasket or cracked head.
Having regard to this contention, as well as the absence of the respondent from the hearing at first instance, including a lack of oral evidence from him, including in response to issues that arose in relation to his claim and the degree of complexity of fact-finding involved with his claim, we have decided that the proceeding should be remitted to a differently constituted Tribunal for re-determination.
Mr Gradidge submitted that we should order that the judgment sum, which had been received by the respondent, should be paid into the Tribunal pending the redetermination. The judgement sum was recovered by the respondent by a garnishee process of enforcement of the Tribunal's decision before the appellant applied for a stay, following the commencement of the appeal. When asked why the status quo should be disturbed, the only matter Mr Gradidge referred to was that the respondent may, potentially, be unsuccessful in his claim. We do not regard that as a sufficient reason to make the order sought by the appellant.
[8]
Costs of the appeal
At the conclusion of the appeal hearing, in light of the orders made allowing the appeal, Mr Gradidge applied for an order that the respondent pay the appellant's costs of the appeal. The application was opposed by the respondent. Mr Gradidge accepted that the appellant needed to establish that there were "special circumstances" that warranted such an order: see s 60 of the NCAT Act (the proceedings did not concern a claim exceeding $30,000 so as to permit a costs order in the absence of special circumstances; see Rule 38 (2) (b) of the Civil and Administrative Tribunal Rules 2014). He submitted that such an order was warranted because both parties needed to engage lawyers given the legal complexities concerning the operation of the consumer guarantees, which he contended were beyond the comprehension of laypersons.
Whilst we agree with Mr Gradidge's reference to a level of complexity in the law and its application in respect of this claim, we do not regard that as a "special circumstance", as required by s 60 of the NCAT Act. None of the other factors concerning "special circumstances" set out in s 60 (3), as matters the Tribunal might have regard to, were relied upon by the appellant.
Accordingly, the appellant's application for costs of the appeal is dismissed.
[9]
Orders
In combination, the orders made on this appeal were and are:
1. The appellant is granted an extension of time until 5 November 2021 in which to lodge the appeal.
2. The appeal is allowed.
3. The order made by the Tribunal on 21 September 2021 is set aside.
4. The proceedings are remitted to a differently constituted Tribunal for re-determination.
5. The Tribunal is to make directions which give the parties the opportunity to serve such evidence as they may wish to rely upon in the re-determination of these proceedings.
6. The appellant's application for the respondent to pay its costs of the appeal is dismissed.
[10]
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: 15 February 2022