On 13 May 2016, Magistrate Wahlquist determined that Nicole Bonnefin was entitled to reject a second-hand BMW motor vehicle she had purchased from Prestige Auto Traders Australia Pty Limited ("Prestige"). Prestige now appeals that decision.
This appeal concerns the application of the Australian Consumer Law ("the ACL") contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth) and in particular s 259(3) of the ACL.
The statutory basis for this appeal is to be found in s 39(1) of the Local Court Act 2007 (NSW) which provides as follows:
"A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law."
The jurisdiction of this Court to review the decision of Magistrate Wahlquist is limited to errors which involve a question of law. The grounds of appeal relied upon by Prestige are set out below at [68]. They assert a misdirection regarding the law, a failure to provide adequate reasons, a denial of procedural fairness and a contention that there was no evidence to make certain factual findings. There is no issue in this appeal that such grounds involve questions of law alone. In circumstances where the grounds include assertions of there being "no evidence" to make certain findings and of a denial of procedural fairness, it is necessary to set out both the evidence and procedural history in some detail.
[3]
Background
On or about 13 October 2014, Ms Bonnefin entered into a contract with Prestige for the purchase of a 2007 BMW X5 V8 four-wheel drive vehicle for $37,750. Ms Bonnefin transferred the registration of the vehicle, comprehensively insured it and took possession of it on 1 November 2014. An inspection report was obtained from the NRMA prior to Ms Bonnefin's taking possession of the car. At the time of purchase, the vehicle had driven over 91,000km.
A statutory dealer guarantee for defective vehicles applied to the sale of the vehicle by virtue of s 68(1) of the Motor Dealers and Repairers Act 2013 (NSW) ("the MDR Act"). The dealer guarantee for this vehicle was subject to a time limit of three months after sale and a distance limit of 5,000km after sale: s 69(5) of the MDR Act.
Ms Bonnefin's evidence was that she purchased the vehicle primarily for its four-wheel drive function so that her Jet Ski trailer could be towed and reversed down boat ramps. Although it was purchased in her name, her husband, Heath Bonnefin, drove the vehicle as well. It was Mr Bonnefin who dealt with Prestige at all relevant times.
Shortly after Ms Bonnefin purchased the vehicle, she and her husband detected a number of mechanical failures and defects in relation to its operation. On or about 20 November 2014, the coolant in the coolant reservoir was observed to be low and replacement coolant had to be purchased by Mr Bonnefin.
On 16 December 2014, an error message reading "4x4 and DSC have failed" appeared on the dashboard. Mr Bonnefin's evidence was that when the "4x4 and DSC have failed" error message was displayed, the cruise control function could not be turned on. Nor could the Dynamic Stability Control ("DSC") (traction control at a more advanced level) and four-wheel drive functions operate. This led to the vehicle slowing down and speeding up at irregular intervals.
On 16 December 2015, Mr Bonnefin returned the vehicle to Prestige to be fixed.
On 22 December 2014, the vehicle was returned to Mr Bonnefin. Prestige had replaced the coolant expansion tank under warranty. Prestige's mechanic, Warren Phan, told Mr Bonnefin that day that the leaking coolant was fixed, but that as he didn't know why the "4x4 and DSC have failed" message appeared he was not able to fix it.
On 3 January 2015, Mr Bonnefin drove the vehicle to Byron Bay. Ms Bonnefin and Tim and Rachel Richardson were also in the vehicle. Mr Richardson drove the vehicle part of the way. The vehicle slowed and stopped autonomously at irregular intervals near Port Macquarie and the error message "4x4 and DSC have failed" appeared on the dashboard. Once the vehicle was stopped at Port Macquarie it would not restart. The NRMA was called but after some time the vehicle started again and the request for help was cancelled. Shortly thereafter, when the vehicle was near Coffs Harbour, a warning light appeared on the dashboard. The vehicle was stopped and again it would not restart. The NRMA was called again but, as before, the vehicle eventually started and the NRMA was cancelled.
[4]
Evidence concerning the defects
There was a significant factual dispute before Magistrate Wahlquist regarding the relevance and significance of the various defects.
There was no dispute that the defect concerning the caster mounts existed. Prestige argued that it was due to wear and tear and not covered by the statutory warranty. It was submitted that there was no breach of the guarantee in relation to this defect as a reasonable consumer would have expected such a defect in a second-hand vehicle.
Nor was there any dispute that the defect that caused the coolant to leak on 25 January 2015 existed. Prestige argued that, although the coolant was under warranty when it leaked and was replaced for the first time in December 2014, the second time the coolant leaked it was due to wear and tear and not covered by the statutory warranty. Accordingly, Prestige refused to repair the defect. It was submitted that there was no breach of the guarantee in relation to this defect as a reasonable consumer would have expected such a defect in a second-hand vehicle.
There was a significant factual dispute in the Local Court proceedings as to whether the defects concerning the four-wheel drive, DSC and cruise control functions were in fact ongoing as at the time of the rejection of the vehicle. The evidence of Ms Bonnefin and Mr Bonnefin was that the "4x4 and DSC have failed" error message and failure of the cruise control function were continuing problems that remained unfixed. On the other hand, the evidence adduced by Prestige was that their mechanics were unable to detect any problem despite repeated testing.
Ms Bonnefin and Mr Bonnefin provided affidavits and were cross-examined. An affidavit of Mr Richardson and a statement from Mr Julier were also relied upon as part of Ms Bonnefin's case, but neither of those witnesses gave evidence.
Mr Bonnefin annexed a number of emails to his affidavit setting out the history of complaints made to Prestige concerning the vehicle. Not all of the complaints in the emails were repeated in the body of his affidavit. It was never put to Mr Bonnefin in cross-examination that the failure of the four-wheel drive, DSC and cruise control functions did not persist after the vehicle was fixed in Byron Bay. Mr Bonnefin's reason for rejecting the vehicle on behalf of his wife was set out in his affidavit as follows:
"Because it had been more than 10 weeks since I notified the defendant about the 4x4 and cruise control failures and because the defendant was not able to fix the problems on any of the 3 occasions that I returned the Vehicle to them, and because the vehicle had also been inspected by two different mechanics during this time without the problems being fixed, I formed the view that the 4x4 failure problem was not one that could be fixed, or fixed in a reasonable time, which to me meant that the plaintiff and I could not use the car for the main purpose for which it was purchased."
[emphasis added]
[5]
Relevant legislation
There was no issue in the Local Court proceedings that the supply of the vehicle was made in the course of trade or commerce and that Ms Bonnefin was a consumer within the meaning of s 3 of the ACL. Nor was there any issue taken that Prestige guaranteed to Ms Bonnefin that the vehicle would be of acceptable quality within the meaning of s 54(2) of the ACL. Section 54 provides:
"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."
[emphasis added]
Prestige denied that it had breached the guarantee in s 54(2). The Magistrate found in favour of Ms Bonnefin. No ground of appeal addresses any complaint with that finding by her Honour.
Ms Bonnefin contended that the breach of the guarantee in s 54 by Prestige entitled her to reject the vehicle under s 259(3) of the ACL. Section 259 of the ACL provides:
"259 Action against suppliers of goods
(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.
(2) If the failure to comply with the guarantee can be remedied and is not a major failure:
(a) the consumer may require the supplier to remedy the failure within a reasonable time; or
(b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time--the consumer may:
(i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or
(ii) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection.
(3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:
(a) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection; or
(b) by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods.
(4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.
(5) Subsection (4) does not apply if the failure to comply with the guarantee occurred only because of a cause independent of human control that occurred after the goods left the control of the supplier.
(6) To avoid doubt, subsection (4) applies in addition to subsections (2) and (3).
(7) The consumer may take action under this section whether or not the goods are in their original packaging."
[emphasis added]
[6]
Judgment in the Local Court
The Local Court proceedings were heard on 11 November 2015 and 8 April 2016. Her Honour reserved her decision and delivered reasons for judgment on 13 May 2016.
After describing the nature of the claim, her Honour identified the problems with the vehicle, as described by Ms Bonnefin and Mr Bonnefin, as being:
1. Leaks to the coolant reserve. These first occurred in or around 20 November 2014. This problem was fixed by the defendant on 22 December 2014. It re-occurred on 27 January 2015 and was not fixed on 31 January 2015 when the vehicle was returned to Prestige.
2. The deactivation of the four-wheel drive function. This first occurred on 15 December 2014 and continued on and off until the vehicle was returned to Prestige for the last time on 13 February 2015.
3. The deactivation of the cruise control function. This first occurred on 15 December 2014 and continued on and off until the vehicle was returned.
4. The loosening of the front caster mounts. This was first identified by the mechanic at Banksia Motors in Byron Bay on 8 January 2015. Further complaint was made about this to Prestige on 10 January and 31 January 2015. The problem was never fixed.
5. Error messages appeared on the on-board computer system. This first occurred on 15 December 2014 and continued on and off until the vehicle was returned.
6. The rear right speaker malfunctioned by omitting a high-pitched static noise at full volume. This was never fixed.
Her Honour then set out the terms of s 54 of the ACL and noted the plaintiff's submission that the test in s 54(2) requires the court to consider what the reasonable consumer who purchased the vehicle, having paid the price that he or she had, would regard as being "acceptable quality" if he or she had known at the time of the supply of the vehicle of the defects that are now known. Her Honour held that the relevant test is not what the consumer knew at the time of supply. This was said to be supported by the decision of the Full Court of the Federal Court in Medtel v Courtney (2003) 198 ALR 630. Her Honour cited in particular the judgment of Branson J, where her Honour observed at [70]:
"Section 74D [of the Trade Practices Act 1974 (Cth), the predecessor to the ACL], as is mentioned above, calls for the quality, or fitness for purpose, of the goods to be measured against what it was reasonable to expect in that regard at the time of the supply of the goods to the consumer. That measurement must be undertaken, in my view, in the light of information concerning the goods available at the time of trial. However, the issue remains whether the goods were as fit for the relevant purpose as it was reasonable to expect at the time of their supply to the consumer."
[7]
The grounds of appeal
On 25 July 2016, Ms Bonnefin filed an amended summons seeking leave to appeal and commencing an appeal. It contained eight grounds of appeals described in these terms:
"Existence of defects
1. The Court erred in finding that the error messages (Error Messages) displayed intermittently at the dashboard of the second-hand 2007 BMW X5 (Vehicle) purchased by the Defendant (Ms Bonnefin) from the plaintiff (Prestige Auto) indicated that the cruise control function and/or the 4 wheel drive function were in fact intermittently disabled or failed. Specifically the Court:
(a) Had before it no evidence capable of supporting such a finding; and/or
(b) Gave no adequate reasons for that finding.
2. The Court erred in finding that the cruise control function and/or the 4 wheel drive function were in fact intermittently disabled or failed. Specifically the Court:
(a) Had before it no evidence capable of supporting such a finding; and/or
(b) Gave no adequate reasons for that finding.
Acceptable quality
3. The Court erred in by finding that the leaks in the coolant reservoir, the loosening of the front caster mounts, the intermittent Error Messages and, if these findings are allowed to stand, the intermittent disablement of the cruise control function and/or of the four wheel drive function (Defects) resulted in the vehicle not being of 'acceptable quality' as this phrase used in s 54 of the Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010 (ACL), in circumstances where the Vehicle at the time of purchase was second hand, had travelled a distance of over 91,000 kilometres and was sold at 1/3 of the price at which a new model of such car would be sold. Specifically the Court:
(a) Did not give sufficient weight to those matters as required by ACL, s 54(2) and (3); and/or
(b) Gave no adequate reasons for the weight awarded to those matters.
4. The Court erred in finding that the NRMA inspection obtained by Ms Bonnefin and/or the test drive by her prior to the purchase were not examinations which 'ought reasonably to have revealed' that the Vehicle was not 'of acceptable quality', within the meaning of ACL, s 54(7) (as opposed to in fact not having revealed the Defects).
Ability to reject the Vehicle
Major failure
5. The Court erred in directing itself as to the test for 'major failure' in ACL, s 259(3).
6. The Court erred in finding that any of the Defects, were 'major failures' within the meaning of s 259(3).
Failure which cannot be remedied
7. The Court erred by not addressing the issue raised by Prestige Auto in its submissions that Ms Bonnefin was precluded from relying on the allegation that any of the Defects could not have been 'remedied' within the meaning of ACL, s 259(3) (as opposed to them being a 'major failure') in circumstances where that issue was not pleaded by her and was only first raised at the hearing.
8. In any event, the Court erred in finding that any of the Defects could not have been 'remedied' in the meaning of ACL, s 259(3). Specifically the Court:
(a) Had before it no evidence capable of supporting such a finding; and/or
(b) Gave no adequate reasons for that finding."
[8]
Grounds 7 and 8: her Honour's finding that the defects "could not be remedied"
[9]
Submissions on behalf of Prestige
The complaint under Ground 6 is that it was unfair for the Magistrate to permit Ms Bonnefin to rely upon the trigger in the chapeau of s 259(3); namely, that the defect concerning the four-wheel drive, DSC and cruise control function could not be remedied. It was submitted that, at paragraph [10] of the statement of claim filed in the Local Court, Ms Bonnefin pleaded that she was entitled to reject the vehicle because of "major failures" within the meaning of s 260 of the ACL. Similarly, in the letter to Prestige from Ms Bonnefin's solicitor on 13 March 2015, reliance was placed on the defect being a "major failure". The case identified in the "Plaintiff's Statement of Facts and Issues" document was also that the defects constituted "major failures". In his opening address at the Local Court hearing, counsel for Ms Bonnefin referred to the case relying upon the defects being "major failures". It was not until closing submissions that counsel for Ms Bonnefin first made submissions in reliance upon both limbs in the chapeau to s 259(3) of the ACL.
It was submitted on behalf of Prestige that her Honour's determination of the matter on both bases resulted in a denial of procedural fairness and prevented a trial according to law. Counsel relied upon the decision in Seltsam Pty Limited v Ghaleb [2005] NSWCA 208 per Ipp JA at [78]-[79]. The unfairness to Prestige was that it was not afforded the opportunity to adduce evidence as to whether the defect had been fixed by Mr Julier or to adduce expert evidence as to whether the defects were remedied by 24 February 2015. It was submitted that a properly conducted trial might have produced a different result.
Further complaint was made under Ground 7 that the Magistrate failed to provide reasons as to why she considered that Ms Bonnefin was entitled to rely on both limbs in s 259(3). The reasons do not disclose consideration of this threshold question of whether such a case was open on the pleading.
As for Ground 8, it was submitted that there was no evidence to support her Honour's finding that that the four-wheel drive and cruise control defects were not remedied. Mr Julier's evidence was that he had fixed the problem. Mr Phan did not detect any defects on 16 February 2015. The only evidence of any defect after the vehicle was collected from Banksia Motors was the "non-specific hearsay evidence" to the effect that Mr Bonnefin had complained about it to his wife and his brother-in-law and to Prestige. This material did not detail any separate occurrences except on 25 January 2015.
[10]
Submissions on behalf of Ms Bonnefin
Counsel for Ms Bonnefin relied upon the pleadings, statement of facts, addresses and course of the hearing in support of her submission that Prestige was clearly on notice that she contended that the defect regarding the four wheel drive, DSC and cruise control functions could not be remedied.
It was also submitted that any actual procedural unfairness caused by Prestige's inability to cross-examine Mr Julier (which procedural unfairness Ms Bonnefin denies) was caused by the failure of Prestige to comply with the orders of the Local Court. The evidence of Mr Julier was admitted as reply evidence. Prestige filed its evidence in the Local Court six weeks from the first date on which it had been ordered to serve its evidence, three weeks from the extended date on which it had been ordered to serve its evidence, ten weeks after Ms Bonnefin served her evidence and seven business days before the hearing.
As for the complaint, raised for the first time in this Court, that the evidence that the DSC/4x4 warning light came up on the dashboard of the vehicle approximately once a week from December 2014 to February 2015, was hearsay evidence, it was submitted that no objection was made to this evidence in the Local Court. Nor was Mr Bonnefin cross-examined on this point. In her evidence, Ms Bonnefin stated that she regularly saw the warning light. No objection was taken to the hearsay assertion in the affidavit of Mr Richardson. It was submitted that her Honour was entitled to accept this evidence and to give it the weight that she considered appropriate.
[11]
Consideration
I will first consider the allegation of procedural unfairness concerning s 259(3) of the ACL. It is well established that a failure to afford procedural fairness to a party constitutes both jurisdictional error and error of law within jurisdiction: Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1 at 569 [60], citing Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82; [2000] HCA 57 at 89 [5], 91-101 [17]-[42], 143 [170].
A similar complaint was made in an appeal concerning "a question of law" in Warkworth Mining Limited v Bulga Milbrodale Progress Association Inc [2014] NSWCA 105 ("Warkworth"). The Court (Bathurst CJ, Beazley P and Tobias AJA) held that in such an appeal "…it is necessary for there to have been legal error in the manner in which a question was determined in the Court below": at [5]. The Court went on to summarise the legal principles relating to procedural fairness at [34]- [38] as follows:
"As the authorities indicate, it is sometimes not difficult to determine that a particular circumstance requires procedural fairness to be accorded. The difficult question, more often, is in determining what is required in the particular circumstance to satisfy the obligation and whether those requirements have been satisfied in the given case. It is in this sense that Gleeson CJ in Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; 214 CLR 1 commented, at [37], in respect of procedural fairness that:
'Fairness is not an abstract concept. It is essentially practical. Whether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice.'
Insofar as procedural fairness relates to the issues raised in the grounds of appeal, the statement of Mason J in Kioa v West [1985] HCA 81; 159 CLR 550 at 587 is of particular relevance. As his Honour stated:
'… recent decisions illustrate the importance which the law attaches to the need to bring to a person's attention the critical issue or factor on which the administrative decision is likely to turn so that he may have an opportunity of dealing with it.' (citations omitted)
This passage was endorsed by McHugh and Gummow JJ in Ex Parte Lam, at [81]. See also SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; 228 CLR 152 at [32].
On the same question, Mark Aronson and Matthew Groves, Judicial Review of Administrative Action, 5th ed (2013) (Thomson Reuters) at 527 have said:
'A fair hearing presumes that the parties to it are fully informed of, and able to respond to, the relevant issues. That is not possible if disclosure is inadequate. Inadequate disclosure can also reduce the accountability, acceptability and quality of decision-making.'
Whilst the preceding comments were made in reference to administrative decision-making, procedural fairness is also 'an essential characteristic of judicial proceedings': RCB v The Honourable Justice Forrest [2012] HCA 47; 247 CLR 304 at [42]. However, as the High Court there observed, 'its content is dependent upon the nature of the proceedings and the persons claiming its benefit'."
[12]
Grounds 5 and 6: her Honour's finding that the relevant defects constituted "major failures"
It is convenient to deal with Grounds 5 and 6 together. Ground 5 relies upon a contention that the Magistrate erred in directing herself as to the relevant test for "major failure". Ground 6 asserts that there was no evidence for her Honour to make the relevant findings.
[13]
Submissions on behalf of Prestige
Counsel for Prestige relied upon three discrete arguments in relation to Ground 5.
First, it was submitted that her Honour erred in law by misdirecting herself as to the test for "major failure" in s 260(a) of the ACL. It was submitted that her Honour misstated when it is that defects are to be assessed for the test for "acceptable quality" and that she effectively adopted that as the same test for "major failure". Her Honour considered that the condition of the goods "at the time of trial" is the relevant time when determining whether goods are of "acceptable quality". This was an error, it was submitted, because it uses the power of hindsight, in respect of events that occurred between the time of supply and the time of trial, to make a ruling whether goods are acceptable at the time of the transaction.
The passage in which this error is said to have occurred is extracted above at [62].
Second, it was submitted that her Honour erred by noting that there are similarities between the definition of "acceptable quality" in s 54(2) of the ACL and that of "major failure" in s 260(a) of the ACL, such that a finding that a good is not of acceptable quality automatically means there will also be a "major failure". It was submitted that, if this were correct, then s 260(a) would be "redundant". It was submitted that the two tests are different.
The test under s 54(2) focuses on the reasonable consumer being acquainted with the state and condition of the goods, whereas s 260(a) is concerned with the consumer being acquainted with the nature and extent of the failure. It was submitted that her Honour conflated the two tests by only using the language contained in s 54(2). In making this submission counsel for Prestige noted the absence of any authority regarding the differences between the tests in ss 54(2) and 260(a). He also conceded that the evidence in this matter regarding whether the vehicle was of an "acceptable quality" and that regarding whether the defects were a "major failure" were the same.
Third, it was submitted that her Honour's reasons do not disclose any separate consideration of the statutory test in s 260(a). It was submitted that the absence of reasons for the finding of "major failure", separate from the finding of unacceptable quality, was an error of law in itself.
[14]
Submissions on behalf of Ms Bonnefin
On behalf of Ms Bonnefin it was submitted that, although her Honour's reference to the relevant time for determining whether the goods were of acceptable quality was "inelegantly expressed", it is clear that her Honour was acknowledging that matters known at the time of trial are relevant to the consideration of what a reasonable consumer would consider to be of acceptable quality at the time of supply, including latent defects. The latent defects in this case were the intermittent but significant failures of the four-wheel drive, DSC and cruise control functions as well as the leaking coolant.
As for the submission that her Honour had conflated the test for "acceptable quality" in s 54(2) with that of "major failure" in s 260(a), it was submitted that nowhere in her Honour's reasons did she state that the defects constituted "major failures" because the defects caused the car to not to be of "acceptable quality".
As for the "no evidence" argument, Ms Bonnefin submitted that there was evidence that, when the error message appeared on the dashboard, the vehicle from time to time slowed down and sped up at irregular intervals and that the cruise control, DSC and four-wheel drive did not function. This made the car unsafe to drive. It was open to her Honour to find, based upon that evidence, that the faults were "major failures".
As for the argument concerning the coolant leak, it was submitted that, even if her Honour erred in holding that the leaking coolant was a "major failure", the remaining failures concerning the DSC, cruise control and four-wheel drive functions were "major failures" in any event.
[15]
Consideration
The relevant test in s 54(2) of the ACL of whether or not goods are of "acceptable quality" is an objective one based on whether a reasonable consumer who was aware of the "defects" in the goods at the time of the supply would have considered them to be of acceptable quality. There was no issue taken that the determination of what is objectively reasonable for a consumer to expect is to be made taking into account the relevant information known as at the time of the trial, including "after-acquired knowledge": Medtel v Courtney at [66] and [70].
Her Honour quoted from the decision in Medtel v Courtney in her reasons. Her Honour was satisfied that knowledge of defects for the purpose of the "acceptable quality" test is to be assessed at the time of the trial. It was accepted by Prestige in this Court that this is the appropriate test. Rather, the complaint made on behalf of Prestige is that when her Honour was considering s 54(7) of the ACL in the passage described above at [56], she again referred to Medtel v Courtney and stated that, "…the relevant time of whether the goods are of acceptable quality is at the time of trial."
I am satisfied that a fair reading of her Honour's reasons overall is consistent with the application of the correct test with respect to the question of when the reasonable consumer's knowledge is to be assessed, being the time of trial. To conclude otherwise would require a finding that, after having quoted from Medtel v Courtney and stated the test correctly, her Honour found the opposite test to be the case shortly thereafter. Although her Honour's shorthand reference to the test is somewhat inelegantly phrased, as submitted by counsel for Ms Bonnefin, I am not satisfied that her Honour erred regarding the correct test.
The second error alleged under this ground concerns her Honour's direction of law to herself regarding the test for "major failure" in s 260(a) of the ACL. It is contended that her Honour did not separately consider that test after finding that the goods were not of "acceptable quality" under s 54(2).
The relevant passage is extracted at [62] above. The complaint made is that her Honour did not independently consider s 260(a) of the ACL because she had already found that the vehicle was not of acceptable quality under s 54(2).
I am not satisfied that any error is disclosed in her Honour's reasons concerning the test for "major failure" in s 260(a).
[16]
ORDERS
I make the following orders:
1. The appeal is dismissed.
2. The appellant is to pay the respondent's costs of the appeal
[17]
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: 16 April 2018
On 4 January 2015 in Byron Bay, the vehicle once again did not start. The error message "4x4 and DSC have failed" appeared. The vehicle had to be towed to a third-party mechanic in Byron Bay, namely Banksia Motors.
On 7 January 2015, Mr Bonnefin had a telephone conversation with a mechanic at Prestige, Phillip Parrin, who told him that the problem may be with the alternator.
On 8 January 2015, Mr Bonnefin collected the vehicle from Banksia Motors. The mechanic employed at Banksia Motors, Paul Julier, had run a diagnostic test. The diagnostic test identified various errors. Mr Julier refitted the main engine intake pipe and reset the computers and adaptations. He then drove the vehicle for 100km and was satisfied that it was working. Mr Julier told Mr Bonnefin that he did not know why the error message was appearing. He also told him that the front caster mounts were weak and should be replaced and that such a replacement would be covered by the statutory guarantee.
On 10 January 2015, Mr Bonnefin returned the vehicle to Prestige and sent an email to Mr Phan with a request that the warning light and the deactivation of the cruise control, which had continued to occur intermittently, be fixed. Mr Bonnefin also requested a replacement of the caster mounts as recommended by Mr Julier of Banksia Motors. Mr Bonnefin reported that a friend had told him that it was not necessary to diagnose the problem with the DSC and four-wheel drive while the error message was being displayed.
Mr Pham responded by email on 16 January 2015. He stated:
"Regarding your friend's mechanic scanner, we have the same capability. The issue is not about getting the fault codes, but how you interpret the information and create a test plan and carry out diagnose [sic]. If any one [sic] was just to order parts and fit them to the car by just reading the fault codes from the scanner, the chance [sic] are they will get it wrong and lose a lot of money."
On 24 January 2015, Mr Bonnefin collected the vehicle from Prestige. The castor mounts were not replaced and he was informed that Prestige had been unable to detect any problem with the DSC or four-wheel drive functions.
The following day a warning sign appeared indicating that the coolant was low and needed to be refilled.
On 30 January 2015, Ms Bonnefin took the vehicle to another mechanic, City West Automotive, in the hope that the fault could be identified. The fault was not able to be identified. The mechanic told Ms Bonnefin that the battery should be replaced as the "4x4 and DSC have failed" warning usually appears when the batteries have low voltage. Ms Bonnefin was also told to replace the front caster bushes.
Mr Bonnefin sent another email Mr Phan at Prestige setting out the problems with the vehicle the following day, 31 January 2015. It was, relevantly, in these terms:
"I took the car to a local BMW dealer before the warranty expired to see if they could diagnose why the 4x4 and DTS [sic] have failed" light has showed up on the car every few days since we bought it.
The dealer said that this fault code comes up when the voltage drops too low from the battery. He advised that the battery needs to be replaced. But the problem could be the alternator not working properly to charge the battery.
Also he advised that the caster brushes [sic] need to be replaced.
And there is still the outstanding issue of the coolant leaking from the car again.
When I bring the car in this time could you please get your staff to properly fix the "4x4" warning light issue. I don't want to keep taking the car in to get this problem fixed only to be sent away with the issue still occurring. Other BMW mechanics seem to know about this issue and have been able to solve it so I hope your garage will be able to also."
[emphasis added]
On 13 February 2015, Mr Bonnefin returned the vehicle to Prestige again for the problems listed in the email of 31 January 2015 to be fixed. He left the vehicle on the premises of Prestige.
On 16 February 2015, Mr Phan advised Mr Bonnefin that Prestige would not fix the leaking coolant because the vehicle was out of warranty, having driven more than 5,000km since purchase. He advised that Prestige could not do anything about the failure of the four-wheel drive as no problem could be detected. Nor could he do anything about the caster bushes as they were not covered by the statutory guarantee.
Mr Bonnefin did not collect the vehicle from Prestige. Instead, on or about 24 February 2015, he sent an email to Joseph Patrick at Prestige rejecting the vehicle and requesting a refund of the purchase price on behalf of his wife. Mr Bonnefin deposes that on the same day he had a telephone conversation with Paul Young, the general manager of Prestige, as follows:
"Mr Young: We will not issue a refund because the car has done too many kilometres since purchase.
[Mr Bonnefin]: The 4x4 failure happened very early on after not many kilometres. Also, your service department either could not or would not rectify the problem on three separate occasions. So we have had to put up with a faulty, unreliable car for the whole of the 3 month warranty period, and for us the cruise control is a significant problem.
Mr Young: The cruise control ceasing to work is not a warranty item, so it's not my problem if that stops working. There is nothing further I am willing to do other than get my service team to take a look at the car.
[Mr Bonnefin]: The car has already been to your service department three times, including one time for two weeks, and they couldn't or wouldn't fix the car.
Mr Young: We aren't finding any fault codes related to the 4x4 coming up on the computer so we can't fix it. You can complain to Fair Trading if you want."
On 13 March 2015, Ms Bonnefin's solicitor wrote to Prestige asserting that Ms Bonnefin had given notice of the rejection of the vehicle on 24 February 2015. The solicitor described the faults as follows:
"12. Between 1 November 2014 to 13 February 2015, and through no fault of Ms Bonnefin, the BMW X5 has had the following problems and deficiencies:
(a) leaks in the coolant reservoir;
(b) the disablement of the 4x4 function;
(c) the disablement of the cruise control function;
(d) loosening of the front caster mounts; and
(e) constant error messages on the onboard computer system.
13. These problems have not been repaired to date, despite Ms Bonnefin's repeated efforts to notify and return the vehicle to you for service during this period."
On 8 April 2015 Ms Bonnefin commenced proceedings in the Local Court against Prestige.
It was put to Ms Bonnefin in cross-examination that the error codes did not reappear after the vehicle was collected from Banksia Motors. She denied this. Although she gave no details of any recurrence of the problem after Byron Bay in her affidavit, she gave evidence in cross-examination that "…like I stated to you earlier I regularly saw it [the DSC/4X4 light] but because I didn't have exact dates I didn't put it in my affidavit."
The affidavit evidence of Mr Richardson described what occurred on the trip to Byron Bay, which was not disputed. Mr Richardson also stated in his affidavit that, "Between late December 2014 and mid-February 2015 the plaintiff told me on a number of occasions with reference to the Vehicle, words to the effect of 'the car is not working properly and displaying error messages again.'" No objection was made to that evidence nor was Mr Richardson required for cross-examination.
The evidence of Mr Julier was that when he received the vehicle in Byron Bay on or about 4 January 2015 it was in "Limp Home" mode. The engine and the DSC/4x4 lights were all on. Mr Julier carried out a complete scan of the vehicle. He further inspected the vehicle and found that the main engine intake pipe had come adrift. He refitted the pipe and reset the car's computers and adaptations. His statement then is in these terms:
"[7] I then test drove the vehicle for about 100KM, during this testing no faults reoccurred.
[8] The DSC and 4x4 modules are on the same networking system so when there is a problem with one of the modules they are all effected [sic], which will cause the DSC/4x4 light to come on. Usually reduced power/limp mode will activate to protect the vehicle and for safety reasons.
[9] When the Vehicle left my shop the Vehicle appeared to be working correctly.
[10] The DSC/4x4 issue may have reoccurred after leaving my shop, but I have no way of knowing if it did. There are many reasons/faults that can develop that will cause this DSC/4x4 failure and only proper interpretation of the software will reveal the causes."
Prestige relied upon affidavits from Paul Young, the general manager of Prestige, Mr Phan, who was a service advisor for Prestige, and Mr Parrin, the service manager for Prestige. Only Mr Parrin gave oral evidence at the hearing.
Mr Young's affidavit set out that the service team was unable to identify any faults with the four-wheel drive or cruise control when the car was first brought back in December 2014. When the vehicle was returned on 11 January 2015, the service team subjected the vehicle to numerous road tests until 24 January 2015 and was still unable to identify any faults. Nor were they able to detect any problem with the car slowing or speeding autonomously or the ignition failing to start. When the vehicle was returned on 16 February 2015, the technicians were again unable to identify the cause of the "4x4 and DSC have failed" warning light of which Mr Bonnefin and Ms Bonnefin complained. A diagnostic test was performed on 16 February 2015 and no faults were detected with the four-wheel drive or cruise control functions. When Mr Young spoke with Mr Bonnefin on 24 February 2015, he told Mr Bonnefin:
"We have received your email, but we are not going to give you a refund. There is no major defect with the vehicle. The service department have checked the vehicle previously with no fault codes. The car performed perfectly previously with us"
The evidence of Mr Phan was that when he spoke to Mr Bonnefin on 16 February 2015 he told him, inter alia:
"The car did not fault on our end and there is no fault code in our system. We are more than happy to send you a copy of the fault code report which displays no fault codes within the 4x4 system."
Mr Parrin gave evidence that when the vehicle was tested on 16 February 2015 no fault codes were detected. He tested the vehicle by connecting it to a computer. He stated that he was never able to verify the fault. If the warning light stayed on for any period of time it would have registered a fault code, but one was never detected.
Mr Parrin explained the diagnostic testing reports tendered by Ms Bonnefin (which had been conducted by Mr Julier) and Prestige. Mr Parrin had spoken with Mr Julier about the fault codes detected when the vehicle was tested by Mr Julier in Byron Bay in early January. He stated that there may have been a problem with the battery that caused the problem initially, but that it had been resolved by the time he looked at the vehicle on 16 February 2015. The Banksia Motors report shows that the problem could have been caused by sporadic under voltage of the battery. Mr Parrin agreed that sporadic under voltage detected in the DSC would mean that the car was not operating properly. He further stated that, if the battery voltage were depleted, the faults of which Mr Bonnefin and Ms Bonnefin complained may appear on the dashboard. A low battery voltage would cause several lights, including the DSC warning light, to come on. He explained that the voltage is the relationship between the car battery and the alternator. If the alternator is not working properly, then the battery is not going to remain charged.
Mr Parrin agreed that he told Mr Bonnefin on 7 January 2015 that the problem may have been a voltage or battery issue, which could be caused by a problem with the alternator. The battery was tested after the vehicle was returned again in early February 2015 and it was functioning normally. He stated that it can be assumed that if the battery was working properly so too was the alternator. He agreed that the cruise control, four-wheel drive and DSC functions can fail if the vehicle's alternator is not functioning properly. At no time did any mechanic at Prestige test the alternator. Mr Parrin agreed that if the light came on and stayed on there would be no traction control and the four-wheel drive function would not be working.
His evidence was that the vehicle was in "good working order" on 16 February 2015, but Mr Bonnefin refused to collect it.
Section 260 of the ACL defines "major failure" for the purposes of s 259 as follows:
"260 When a failure to comply with a guarantee is a major failure
A failure to comply with a guarantee referred to in section 259(1)(b) that applies to a supply of goods is a major failure if:
(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
(b) the goods depart in one or more significant respects:
(i) if they were supplied by description--from that description; or
(ii) if they were supplied by reference to a sample or demonstration model--from that sample or demonstration model; or
(c) the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
(d) the goods are unfit for a disclosed purpose that was made known to:
(i) the supplier of the goods; or
(ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made;
and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
(e) the goods are not of acceptable quality because they are unsafe."
[emphasis added]
Finally, s 262 of the ACL provides:
"262 When consumers are not entitled to reject goods
(1) A consumer is not entitled, under section 259, to notify a supplier of goods that the consumer rejects the goods if:
(a) the rejection period for the goods has ended; or
(b) the goods have been lost, destroyed or disposed of by the consumer; or
(c) the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or
(d) the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.
(2) The rejection period for goods is the period from the time of the supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to:
(a) the type of goods; and
(b) the use to which a consumer is likely to put them; and
(c) the length of time for which it is reasonable for them to be used; and
(d) the amount of use to which it is reasonable for them to be put before such a failure becomes apparent."
Section 262 does not specify a "rejection period" for particular goods. The rejection period is a matter of fact in each matter to be decided having regard to the matters listed in s 262(2). Her Honour was satisfied that the vehicle was rejected within the relevant period because complaint was made within the period of the three-month statutory warranty under the MDR Act. Although the rejection period under the ACL does not necessarily correlate with the statutory warranty period, no ground of appeal pertains to that finding. I am not satisfied of any error with respect to that factual finding in any event.
Her Honour went on to identify the factual dispute regarding whether each of the matters of which Ms Bonnefin complained in fact occurred. She set out the respective positions of each party on the factual matters in dispute. Her Honour referred to Mr Bonnefin's affidavit and noted that his evidence was supported by the evidence of Ms Bonnefin and that of Timothy Richardson. She noted that, although Mr Bonnefin did not set out all of the alleged failures in his affidavit, attached to it were emails to Prestige where problems with the warning light were identified on 10 January 2015 and 31 January 2015. On that, basis her Honour was satisfied that Prestige was made aware of the ongoing problems.
Her Honour noted Prestige relied upon the evidence of Mr Parrin and Mr Phan that the problems had been fixed. In relation to the error messages, her Honour referred to the evidence that when mechanics at Prestige performed full diagnostic testing on 16 February 2015 they could not identify any problem, nor did the car's computer have any log messages. In relation to the caster mounts, Prestige asserted that the damage was the normal "wear and tear" that would reasonably be expected in a vehicle that had travelled a distance of 91,000km. Prestige was not advised of the fault with the right rear speaker.
In relation to the leaking coolant, her Honour referred to the evidence that Prestige had asserted that the fault had been repaired and that further testing did not reveal a problem. Alternatively, if the defects did exist they were of a nature that a reasonable consumer, fully acquainted with the state and condition of the vehicle, would regard as acceptable. Prestige relied upon the fact that the vehicle was second-hand and had travelled more than 91,000km at the time of purchase. Prestige also relied upon the fact that the purchaser had obtained an NRMA inspection report and tested the vehicle prior to purchase.
Her Honour referred again to the evidence of Ms Bonnefin and Mr Bonnefin, as well as the emails and the statement of Mr Julier. She then made the following factual findings:
"I am satisfied that the four by four DSC light was coming on intermittently after 1 January 2015 and that when this occurred, the cruise control was disabled. I am also satisfied that the front caster mounts were loose and complained of during the warranty period. I am satisfied that there was a coolant leak, which was initially fixed by the defendant, but that it re-occurred during the warranty period and was not fixed. I am satisfied that the rear speaker malfunctioning was not complained about to the defendant and although it may have occurred, there is no evidence that the defendant was given the opportunity to fix it. In any event, I do not think that the fault can be considered sufficiently serious to go to whether the goods were of acceptable quality".
Her Honour then referred to the reliance by Prestige on s 54(7) of the ACL and noted that none of the defects of which Ms Bonnefin complained are mentioned in the NRMA report. Her Honour referred again to the decision of Branson J in Medtel v Courtney and noted that the relevant time with respect to whether the goods are of acceptable quality is "at the time of the trial". She then went on to note:
"There is no evidence to indicate that the defects ought reasonably have been revealed at the time of purchase upon inspection. I do not think that the fact that the NRMA inspected the vehicle and did not find the faults complained of results in them being unable to argue that the goods are not of acceptable quality."
Her Honour then considered the submissions made by Prestige that the vehicle was second-hand and had travelled 91,000 km at the time of purchase and that the price paid by Ms Bonnefin was approximately a third of the purchase price for a new, similar vehicle. She observed that the purchase price of the vehicle, being $37,750, was "still a significant amount for a motor vehicle". Her Honour found that, "Taking into account the matters to be considered under s 54(3), a reasonable consumer would expect that the "four by four, DSC [and] cruise control would work without repeated failure."
Her Honour went on to find:
"I am satisfied that the light on the dashboard coming on, with the message four by four DSC have failed, together with, at the same time, the obvious failure of one of the features of the car, being the cruise control, that it was more than just a failure of the dash light system, but a real unexplained defect. The vehicle was sold as a four-wheel drive with cruise control, and there was a defect in relation to these two features. This problem with the vehicle fails the test under s 54(2) (a) and (c).
The repeated leaking of the coolant can also be regarded as a defect pursuant to s 54(2)(c). The vehicle was not of an acceptable quality."
Having found that the goods were not of acceptable quality, her Honour went on to consider the appropriate remedy. She then set out sub-ss 259(3) and (4) of the ACL, extracted above at [45].
Her Honour first considered Ms Bonnefin's claim that the failure to comply with the statutory guarantee has not been remedied and "cannot be remedied" for the purposes of s 259(3). Ms Bonnefin relied upon the evidence of Mr Young and Mr Parrin concerning the inability of Prestige to detect the problem and thus to fix it and upon Mr Parrin's evidence that the problem was "unable to be remedied". Her Honour noted that Prestige agreed that the radiator hose was leaking badly on 16 February 2015 but, on the basis that it was not a "warranty item", Prestige had refused to repair it. Prestige fixed the radiator hose on 24 March 2015 after Mr Bonnefin advised that Ms Bonnefin had rejected the vehicle.
Her Honour then stated:
"Without going on to consider if the failure is major in regard to the four by four DSC warning light coming on and the cruise control being activated [sic], the evidence is that there was a defect and I am satisfied that this was a defect which was unacceptable and that it has not been fixed. The plaintiff took the vehicle three times to have this remedied. They say they could not fix it because it could not be detected. Regardless of this, I am satisfied that the defect exists and it has not been fixed. I do not have to go on to consider whether the failure can be characterised as a major failure, however I am satisfied that the defects are a major failure, in view of the test set out in s 260."
Her Honour then set out the terms of s 260 of the ACL and noted that the test for "major failure" was not dissimilar to the test as to what is "acceptable quality" as set out in s 54(2) of the ACL. Her Honour then stated:
"The court has already come to the determination a reasonable consumer, fully acquainted with the state and condition of the goods, would not, being aware of the condition of the goods at trial, have regarded them as acceptable. I am satisfied that the four by four DSC warning light failure can be classified as a major failure. The failure to repair the coolant leak, according to the defendant, was not required to be repaired under the warranty because it was caused by wear and tear."
Her Honour went on to find that she was not satisfied that the coolant leak was caused by wear and tear. Her Honour noted that the same problem was identified shortly after purchase and fixed by the defendant. It then re-emerged a month later. Prestige suggested that the cause of the problem was different at that time. Her Honour referred to this evidence, stating:
"According to the evidence of Mr Paul Young, the problem on 22 December 2014 required the replacement of the coolant expansion tank and the problem identified on 16 February 2015 was a leaking radiator hose caused by wear and tear. I am not satisfied that this is a reasonable distinction to make. Mr Bonnefin advised the defendant of this problem re-occurring by email at 27 January 2015, within the warranty period. I am satisfied that this comes under the definition of a major failure as per s 260A [sic, 260(a)]."
[emphasis added]
Her Honour next considered the relevant rejection period within the terms of s 262(2) of the ACL. She referred to the submission on behalf of Prestige that the rejection period is the period of the statutory guarantee, which had, being three months or 5000km, expired by the time of the rejection of the vehicle. It was noted that Ms Bonnefin paid for and collected the vehicle on 1 November 2014. The statutory guarantee period, lacking any evidence concerning mileage, expired on 31 January 2015. It was noted that the ACL does not include any reference to the duration of statutory guarantees in the matters to be taken into account when determining the relevant "rejection period".
Her Honour then referred to the evidence of Ms Bonnefin that she sought repair of the defects within the period of the dealer guarantee and that the car was with Prestige for repair until 24 January 2015 and again on 27 January 2015. On 31 January 2015, Ms Bonnefin again advised Prestige of the problems and was told to return the vehicle for further inspection. The vehicle was then returned again on 13 February 2015. Prestige did not repair the defect of which Ms Bonnefin and Mr Bonnefin complained. It was on 24 February 2015 that Mr Bonnefin sent an email on behalf of Ms Bonnefin to Prestige requesting a refund of the purchase price. Prestige told Mr Bonnefin on the same day that it would not issue a refund.
Her Honour found that, although the date that the vehicle was rejected was 24 February 2015 (which was a date after the expiration of the dealer guarantee), in circumstances where Ms Bonnefin and Mr Bonnefin repeatedly complained to Prestige of the defects within the warranty period and they were not repaired, the rejection period had not expired.
Her Honour was satisfied that Ms Bonnefin was entitled to reject the vehicle and went on to consider the consequences of the rejection. Her Honour next set out the terms of s 263 of the ACL (with respect to the consequences of the rejection of goods) and noted that, under s 259(4) of the ACL, Ms Bonnefin was entitled to recover damages. Her Honour then ordered that Ms Bonnefin was entitled to recover her costs, being $37,750, repair costs of $446.57 and transfer of registration cost of $1,165. The total amount ordered to be paid was $39,361.57, plus costs as agreed or assessed. Her Honour declined Ms Bonnefin's application to make an order for indemnity costs.
The first four of these grounds of appeal were abandoned in written submissions filed prior to the hearing of the appeal.
The remaining four grounds of appeal, being Grounds 5, 6, 7 and 8, turn on her Honour's finding under s 259(3) of the ACL. For ease of reference that sub-section is extracted again here. It provides:
"(3) if the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:
(a) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection; or
(b) by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods."
[emphasis added]
In this matter, Ms Bonnefin elected to reject the goods under s 259(3)(a).
As the summary of her Honour's reasons above discloses, her Honour found that the breach of the guarantee that the vehicle was of acceptable quality "could not be remedied" within the meaning of the chapeau to s 259(3). She noted that she did not then also need to consider whether the breach was also a "major failure" within s 259(3). Despite this, she went on to find that the breach also constituted a major failure.
Grounds 7 and 8 concern her Honour's first finding that the breach could not be remedied. Ground 7 contends that it was a denial of procedural fairness for Ms Bonnefin to be able to rely on that limb of s 259(3), because in the statement of claim filed she had elected instead to rely upon "major failure". Ground 8 contends that there was no evidence to find that the defects could not be remedied.
Grounds 5 and 6 concern her Honour's second finding that the defects also amounted to "major failures". Ground 5 contends that her Honour misdirected herself as to the correct statutory test for what amounts to a "major failure" and/or failed to provide adequate reasons for so finding. Ground 6 asserts that there was no evidence to find that the defects were in fact "major failures".
In circumstances where her Honour's determination that Ms Bonnefin was entitled to reject the vehicle was based upon two discrete findings, it was conceded by counsel for Prestige that the appellant would have to establish errors in relation to both findings in order to succeed in this appeal.
As Her Honour first found that the defects could not be remedied, it is convenient to deal with Grounds 7 and 8 first.
In effect, Ground 7 asserts that counsel for Prestige was taken by surprise when Ms Bonnefin relied upon an assertion that she was entitled to reject the goods because the defects were unable to be remedied. It is useful to have regard to the pleadings and manner in which the hearing was conducted in order to determine whether this complaint can be sustained.
In paragraph [10] of the statement of claim it was pleaded that:
"The Defects constituted major failures within the meaning of section 260 of the ACL, as
(a) they were of a kind that, had a reasonable consumer been fully acquainted with the nature and extent of the Defects, the consumer would not have acquired the Vehicle; and
(b) they rendered the Vehicle substantially unfit for a purpose for which vehicles of the same kind are commonly supplied, namely off-road driving and they could not, easily and within a reasonable time, be remedied to make the vehicle fit for such a purpose."
[emphasis added]
Paragraph [12] of the statement of claim pleaded that, "On or about 24 February 2015, the plaintiff notified the defendant that she rejected the Vehicle within the meaning of section 259(3) of the ACL."
Although the defects were described as being "major failures" in paragraph [10] of the statement of claim, both sub-ss 260(a) and (c) were particularised. Section 260(c) relies upon a definition of "major failure" which includes the goods not being able to be easily fixed within a reasonable time. Moreover, the pleading in paragraph [12] did not seek to draw any distinction between the alternative bases under s 259(3). Furthermore, the particulars provided in paragraph [12] of the statement of claim were listed as being the email to Prestige from Mr Bonnefin on 24 February 2015 (see below at [90]) and the letter from Ms Bonnefin's solicitor to Prestige on 13 March 2015 (extracted above at [25]).
In the email from Mr Bonnefin to Prestige on 24 February 2015, it was asserted that that one of the grounds for rejection of the vehicle was that it could not be fixed:
"As you would probably know, I've taken the car back to your service department 3 separate times during the warranty period to fix the "4x4 has failed" issue. Each time Warren from your service department tells me that they don't know what the problem is and can't do anything to fix it. The car is no good to me if the 4x4 continues to fail approximately once per week."
This is consistent with the assertion by Mr Bonnefin in his affidavit that, "I formed the view that the 4x4 failure was not one that could be fixed."
In the letter to Prestige from Ms Bonnefin's solicitor dated 13 March 2015, it was stated that, "…Mr Bonnefin was advised by Prestige Auto that their service technicians could not repair the 4x4 malfunction" and that, "…a reasonable consumer would not consider the vehicle's repeated operational failures and Prestige Auto's inability to repair its extensive defects acceptable."
It was pleaded in paragraph [13] of the statement of claim that, "On or about 24 February 2015, the plaintiff made an election within the meaning of section 263(4)(a) of the ACL to receive a refund of the Purchase Price for the vehicle." The particulars in support of that assertion were the same email and letter pleaded at paragraph [12] of the statement of claim.
At paragraph [10(c)] of the defence filed by Prestige on 8 May 2015 it was pleaded that diagnostic testing performed on the vehicle on 16 February 2015 "…failed to identify any history of logged faults with the 4x4 function or the cruise control function. The testing also failed to identify any history of logged error messages with the on-board computer system."
In the alternative, it was pleaded at paragraph [13] of the defence that:
"….the defendant says that if the alleged Defects did or do exist, the alleged Defects are not of a nature so as to constitute major failures within the meaning of s 260 of the ACL and are capable of remedy" [emphasis added]
The "Statement of Facts and Issues" prepared by Prestige in the Local Court referred, at paragraph [6], to the inability of the plaintiff to remedy the problems with the vehicle, including the four-wheel drive function:
"The Defects individually or in combination constituted major failures within the meaning of section 260 of the ACL, in particular, because the intermittent failure of the 4x4 function of a 4x4 car makes it unfit to be used for the purpose for which 4x4 cars are commonly supplied, that is for off-road driving and for towing boats and trailers, and it could not easily and within a reasonable time be remedied; and had a the [sic] plaintiff, as a reasonable consumer, been fully acquainted within the nature and extent of the Defects, she would not have acquired the Vehicle."
[emphasis added]
In his opening address, counsel for Ms Bonnefin submitted that the defects were not remedied. No complaint was made by counsel for Prestige at that stage. Nor was any objection made on behalf of Prestige to evidence led in Ms Bonnefin's case that Prestige was unable to remedy the faults with the vehicle.
Prestige led evidence from a qualified mechanic and tendered a diagnostic report to establish that, by 16 February 2015, there were no faults detected regarding the four-wheel drive, DSC and cruise control functions.
Complaint was made by counsel for Prestige in the Local Court in his closing address concerning this issue as follows:
"My reading of the statement of claim, and I'm sure my learned friend will correct me if I'm wrong on this, is that the case is put, and has indeed been litigated on the basis of an alleged major failure and that's found in paras 9 [sic] and specifically para 10 of the statement of claim.
The plaintiff alleges that the items set out in para 9, which are some of the items that your Honour has heard evidence about, amount to major failures. Nowhere in the statement of claim, and I'm more than happy to be corrected, does the plaintiff put her case on the basis of the other limb, which my learned friend has addressed you on and that other limb is found, of course, in s 259(3).
Your Honour will find, again my learned friend has discussed this, that there are two limbs there. One is that if the failure is one that cannot be remedied, then the right to make an election follows; or if the failure is a major failure and in my submission, the plaintiff is restricted in its case, to the second limb. For the avoidance of any doubt, the defendant submits that ultimately, this doesn't matter, because (1) the plaintiff fails at the s 54 threshold, and certainly, in any event, neither of the two limbs of s 259(3) are satisfied. But as a matter of procedural fairness, the plaintiff's case has been put on the basis of a major failure, and that is the basis upon which the plaintiff should be put to proof."
[emphasis added]
Counsel for Prestige went on to address the evidence in the case in support of the position that no defect could be detected. There was no exchange between the Magistrate and counsel concerning the complaint of counsel for Prestige with respect to Ms Bonnefin's reliance on the two limbs of s 259(3).
When counsel for Ms Bonnefin made his submissions in reply, he pointed to paragraphs [10(b)] and [12] of the statement of claim and submitted that Prestige was on notice that Ms Bonnefin relied on the fact that the defect could not be remedied.
I am satisfied that her Honour did not err by not providing reasons for permitting Ms Bonnefin to rely upon both limbs of s 259(3). My reasons are as follows.
First, counsel for Prestige in the Local Court indicated that he stood to be corrected as to whether the statement of claim mentioned both limbs of s 259(3). When, in reply, counsel for Ms Bonnefin pointed out paragraphs [10(b)] and [12] of the statement of claim, counsel for Prestige made no further submissions on the issue.
Second, counsel for Prestige told the Magistrate that "ultimately, it didn't matter" whether both limbs or triggers were relied upon, because his submission was neither could be satisfied in any event.
Third, no application was made that involved an exchange between counsel for Prestige and the Magistrate regarding this specified issue. The submission extracted above at [99] was simply one of many submissions made by counsel for Prestige. After making it, he went on to make submissions concerning the evidence. The focus of his submissions regarding s 259(3) was that no defects were ever in fact detected.
In these circumstances, it is not surprising that her Honour considered the matter to be resolved by the close of submissions and made no ruling at that time or subsequently concerning this issue. She was not asked to do so and, after paragraphs [10(b)] and [12] were brought to the attention of counsel for Prestige, no further discussion took place concerning whether one or both limbs were enlivened. Her Honour then reserved her decision.
In any event, I am satisfied that Prestige was on notice that Ms Bonnefin asserted that the vehicle was rejected because of the failure of Prestige to fix the defects. So much is apparent from the correspondence and pleadings set out above and the way in which the hearing was conducted. Although the statement of claim did not expressly state that both triggers in s 259(3) would be relied upon, I am not satisfied that the pleadings precluded the plaintiff from taking that course. As a matter of statutory construction, there is no bar in s 259(3) to a consumer relying upon both limbs in the alternative in order to establish an entitlement to reject goods.
Not only am I satisfied that Prestige was on notice that such an argument would form part of Ms Bonnefin's case, I am also satisfied that no practical unfairness was caused to Prestige in any event, given the state of the evidence in this matter. Prestige defended this aspect of the allegation by reliance upon evidence that the problem had been resolved and no longer existed. That is, that there was no problem regarding the four-wheel drive, DSC and cruise control functions at the time of the rejection of the vehicle. The evidence relevant to whether the defects could be remedied was the same evidence relevant to whether they constituted a "major failure".
Although there could be cases in which the evidentiary basis for finding that a defect could not be remedied may differ from the evidentiary basis for finding that the defect was a "major failure", this is not that case.
It was submitted on behalf of Prestige that unfairness was caused because, if it had known that Ms Bonnefin would rely upon both limbs, it would have sought leave to cross-examine Mr Julier in order to establish that he had fixed the relevant defect. I do not accept that this is the case. The uncontradicted evidence of Mr Julier extracted above at [35] was that, after he repaired the vehicle, he drove the vehicle for 100km and was satisfied that there was no longer a defect. It is difficult to see what further evidence could have been adduced from Mr Julier relevant to the issue of whether between 8 January 2015 and 16 February 2015 the defect could be remedied, as opposed to its being a "major failure".
I am not satisfied that any unfairness was caused to Prestige by Ms Bonnefin's being permitted to rely upon both limbs in s 259(3).
I turn now to Ground 8 and the assertion that there was "no evidence" that the defect could not be remedied. A claim that there is "no evidence" to support a particular finding raises a question of law: per Hayne, Heydon, Crennan and Kiefel JJ in Kostas v HIA Insurance Services Pty Limited (2010) 241 CLR 390; [2010] HCA 32 at [90] and Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33 at 326 per Mason J.
Her Honour had before her the evidence of Mr Bonnefin and Ms Bonnefin that the problem was ongoing after the vehicle was "fixed" by Mr Julier in Byron Bay. As against that evidence, she also had before her the evidence from Mr Perrin and Mr Phan from Prestige that the fault could not be detected when the vehicle was examined on 16 February 2015. Her Honour had to resolve a factual dispute as to whether the defect was still in existence at the time of the rejection of the vehicle. She accepted the evidence of Mr Bonnefin, Ms Bonnefin and Mr Richardson in the context of the long history of complaints concerning the vehicle, as set out in the emails, over the evidence called on behalf of Prestige that no such defect existed.
There was clearly sufficient evidence to enable such a finding. Complaint is now made, in support of Ground 8, that the evidence of Mr Richardson that he was told that the warning light came on approximately once a week from December 2014 to February 2015 was "hearsay." No objection was ever taken to any of that evidence in the Local Court. In any event, both Mr Bonnefin and Ms Bonnefin gave evidence about this. The numerous emails that Mr Bonnefin exchanged with Prestige, which are annexed to his affidavit, show that the complaint was ongoing.
Ground 8 does not assert that there was insufficient evidence or that her Honour gave too much weight to certain evidence. Such a ground would not involve a question of law. This ground asserts that there was "no evidence" to make such a finding.
It could not be said that there was no evidence before her Honour on this issue. The argument under this ground is, in effect, that the Magistrate should have made a different finding. Her Honour was entitled to accept the evidence before her and give it the weight that she considered appropriate.
Ground 8 is not made out.
I have found that no error is disclosed in her Honour's consideration of Grounds 7 and 8. In circumstances where her Honour found in favour of Ms Bonnefin on two separate bases, this appeal must fail no matter which findings I make in relation to Grounds 5 and 6. Nonetheless, I propose to go on to consider Grounds 5 and 6.
Next, it was submitted that there was no evidence to find that any of the defects were "major failures." Counsel for Prestige focused his submissions upon her Honour's finding that the failure to fix the leaking coolant was a "major failure". It was submitted that it was not reasonable to draw a distinction between the problem in the radiator hose that caused the coolant to leak for the first time, and which led to the replacement of the radiator hose under the dealer guarantee, and the "wear and tear" that Prestige claimed caused the second coolant leak. It was further submitted that there was no evidence that there were not in fact two separate sources of the coolant leak. Nor was there any evidence to establish that the distance travelled by the vehicle between purchase of the vehicle by Ms Bonnefin, the time of the replacement of the radiator hose and the time of the coolant leak did not lead to wear and tear. If her Honour's finding was that it was not reasonable to refuse to fix the second leak, that finding is not relevant to whether it was a "major failure", only to whether the defect came within the statutory guarantee of 5,000km or three months.
It was conceded that her Honour did not need to find numerous "major failures" and that, if this Court were satisfied that the defect concerning the cruise control, DSC and four-wheel drive failures was either unable to be remedied or a "major failure", then any error in the finding concerning the leaking coolant would not be determinative on its own.
First, her Honour observed that she did not need to find that the defect concerning the four-wheel drive, DSC and cruise control function was a "major failure", having already found that it could not be remedied. Despite this, her Honour went on to consider this second limb briefly for completeness. The adequacy of her Honour's reasons for going on to consider whether the defect was also a "major failure" must be considered in that context.
Second, her Honour commenced her consideration of this issue by first extracting the test in s 260(a) in full. There can be no doubt that her Honour was aware of the fact that she was considering a separate statutory provision.
Third, her Honour at no times stated that the test was the same as that in s 54(2). Rather, she simply observed that the tests were "not dissimilar". Her Honour was clearly aware, when considering s 54(2) of the ACL, that the test is whether a reasonable consumer fully acquainted with the state and condition of the goods would regard them as acceptable, whereas the test in s 260(a) is whether the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure.
Finally, as was conceded during the hearing of this appeal, the evidence relevant to the test in s 54(2) was the same as the evidence relevant to the test in s 260(a). Her Honour had already found that a reasonable consumer would expect that the four-wheel drive, DSC and cruise control functions would work without repeated failure. She had also found that the vehicle was sold as a four-wheel drive with cruise control and that there was a defect in relation to each of those features, which are central to the functioning of such a vehicle. Those factual findings were relevant to both tests.
It is apparent that there is considerable overlap between ss 54(2) and 260(a) of the ACL. I am not aware of any authorities concerning the interplay between the two sections, but as a matter of construction the two provisions clearly constitute separate tests. I am not satisfied in the particular circumstances of this appeal that error is disclosed because her Honour did not provide extensive reasons for separately finding that s 260(a) was satisfied on the evidence in this matter, having already found s 54(2) was satisfied. This is especially so in circumstances where her Honour had already found that the defects could not be remedied.
As for the submission that the reasons regarding her Honour's finding of "major failure" were inadequate, it is to be noted that the reasons must be viewed as a whole and not scrutinised in sections. Her Honour provided detailed reasons in this matter as extracted above at [49] - [67].
Ground 5 is not established.
Ground 6 contended that there was no evidence to find that the defects were "major failures". I have already considered the evidence that the defects could not be remedied under Ground 8. I make the same findings regarding the evidence concerning the four-wheel drive, cruise control and DSC functions under this ground. Prestige relied upon the same evidence, namely, that these defects did not exist.
A further discrete argument was relied upon under this ground that there was no evidence for her Honour to find that the defect that caused the coolant to leak was a "major failure".
The evidence before her Honour was that the coolant leaked in December 2014, shortly after the purchase of the vehicle, and was fixed by replacing the coolant expansion tank. Despite, this the coolant continued to leak. When the car was returned in January with a complaint that the coolant was still leaking, Prestige identified the source on that occasion as being a leaking radiator hose and refused to replace it on the basis that the leak was this time said to be caused by wear and tear.
Her Honour found that the fact that the coolant continued to leak after it had already been fixed once was a "major failure". She further found that the distinction drawn by Prestige between the first leak and second leak was not "reasonable". I am satisfied that it was open to her Honour to make such a finding. It would be quite unusual for the coolant to leak twice within a month for completely different reasons, and for one leak to be a defect that required fixing under the dealer guarantee and the other to fall into a completely different category. The evidence was that it had failed twice. This is sufficient for the coolant leak to constitute a "major failure".
In any event, even if I am wrong in this conclusion and it was not open for her Honour to draw such a distinction, nothing turns on that finding in circumstances where I am satisfied that there are no errors in her Honour's findings that the problems with the four-wheel drive, DSC and cruise control functions were "major failures" and could not be remedied. As was conceded by counsel for Prestige, it was sufficient that her Honour was satisfied that there was one major failure in order to find that the test was made out.