Ulmer v Volkswagen Group Australia Pty Ltd

Jurisdiction

1. The applicant relies on section 54 of the ACL. The ACL is incorporated into the law of NSW by sections 27 and 28 of the Fair Trading Act 1987 (NSW) (FTA).
2. Section 79J of the FTA gives the Tribunal jurisdiction to hear certain "consumer claims".
3. Having regard to the definitions of "consumer" and "supplier" in section 79D of the FTA and the definition of "consumer claim" in section 79E of the FTA, the Tribunal is satisfied that the Application contains a consumer claim between the applicant consumer and the respondent as defined by Division 1 of Part 6A of the FTA. In particular, the Tribunal notes that s 79E(2) provides that a consumer claim includes a claim by a con sumer against a manufacturer who is not the direct su pplier of the relevant goo ds to the con sumer.
4. The amount claimed by the applicant is $8,400 and is therefore below the prescribed amount stipulated by section 79S of the FTA.
5. The fault complained of in the Vehicle first manifested itself in June 2019. As has already been noted, the Application was made on 17 March 2022. The Tribunal is satisfied that the claim was made within the appropriate period of time for the purposes of section 79L of the FTA, ie, within 3 years of the of the cause of action giving rise to the claim having accrued.
6. The Tribunal is therefore satisfied that the Application contains a consumer claim in respect of which the Tribunal has jurisdiction as conferred by Part 6A of the FTA.

Evidence

1. In determining the Application, the Tribunal has had regard to the following: 1. The material filed by the applicant on 24 March 2022, 6 April 2022 and 21 April 2022. The applicant's material was marked Exhibit A1 at the hearing on 28 June 2022. 2. The matters stated by the applicant in the Application lodged on 17 March 2022. 3. The material filed by the respondent on 5 May 2022. This was marked Exhibit R1 at the hearing on 28 June 2022. 4. The oral evidence and submissions of the parties at the hearing on 28 June 2022.
2. The findings made by the Tribunal on the basis of the above evidence is set out below.

Assessment of the Evidence and Findings of Fact

1. The applicant purchased the Vehicle on 29 March 2014. The receipt for the purchase of the Vehicle was issued by Barloworld Motor (Aust) Pty Ltd (Barloworld). As already indicated, there is no dispute between the parties that the respondent is the manufacturer of the Vehicle. I therefore find that, for the purposes of the ACL, Barloworld was the supplier of the vehicle and the respondent was the manufacturer of the Vehicle.
2. The receipt for payment indicates the Vehicle's make as Volkswagen, its model as Polo Trendline 63KW and its production dated as 12 March 2014.
3. The applicant paid $18,500 for the Vehicle.
4. It appears that the Vehicle was driven by the applicant and his wife without any discernible problems until about June 2019.
5. In about June 2019, the applicant says that the Vehicle started "stammering in forward motion". He says that by July 2019 the Vehicle "would completely stop in mid-traffic" and that it "would only restart after shutting down the ignition and restarting". By this time, the Vehicle had travelled 47,644 kms. The applicant considered the Vehicle "too dangerous to drive" due to the frequency that this problem was occurring.
6. I accept the applicant's evidence in relation to the problems which started to be experienced with the Vehicle from about June 2019. As one of the drivers of the Vehicle, he was clearly in a position to give evidence as to the problems experienced when driving the Vehicle. At the hearing, there was no real challenge to his evidence in this respect. He appeared to me to be endeavouring to assist the Tribunal as best he could in the Tribunal's fact-finding function by giving honest evidence.
7. On 8 August 2019, the applicant arranged for Central Transmissions Pty Ltd (Central Transmissions) to inspect and service the Vehicle because of the problems which were being experienced with it.
8. Central Transmissions carried out repairs to the Vehicle. The Invoice issued by Central Transmissions on 8 August 2019 described the work performed on the Vehicle as: "repair automatic transmission; supply & fit dual clutch assembly; supply & fit reconditioned 7 speed mechatronics unit".
9. The applicant paid Central Transmissions $4,650 for the repairs carried out in August 2019.
10. The applicant's evidence includes a statement from Gian Rossi of Central Transmissions. Mr Rossi gives evidence of the inspection of the Vehicle prior to the repairs which were done in August 2019. Mr Rossi states: Upon testing we found the vehicle would struggle/shudder when accelerating through the ranges. The vehicle would shudder then stall. We would then cycle the ignition & the vehicle would reset & the symptoms would repeat. We were able to identify the initial shudder as a dual clutch issue. The fault codes found in the transmission indicated a hydraulic accumulator fault with the mechatronics. As a result we supplied a mechatronics repair kit which included the hydraulics accumulator…
11. In October 2019, the Vehicle was the subject of a product recall by the respondent "due to a production fault" (the First Product Recall). Regrettably, the respondent did not include any specific details in Ex R1 about the First Product Recall. The respondent disputed the applicant's contention that the problems which he experienced with the Vehicle were related to the First Product Recall. The respondent did not, however, seek to substantiate its position in this respect by including in its written evidence specific details about the production faults which led to the First Product Recall.
12. The applicant presented evidence derived from information placed on the respondent's website which described the relevant fault in relation to the First Product Recall in the following terms: … overtime a crack in the transmissions pressure accumulator can occur. If the pressure accumulator cracks, oil and pressure is lost in the hydraulic system of the gearbox. As a result, the transmission of the engine power via the gearbox is interrupted. The experience of this symptom would be comparable to depressing the clutch in a vehicle fitted with a manual transmission. This could increase the likelihood of accident affecting the occupants of the vehicle and other road users.
13. By the time of the First Product Recall, the applicant had arranged for repairs to the Vehicle (as set out above). There is no dispute between the parties that the Vehicle was of a make and model that made it subject to the First Product Recall in October 2019. As already indicated, there is, however, a dispute between the parties as to whether the production faults which triggered the First Product Recall were the same faults which the applicant experienced with the Vehicle in 2019. I will consider this aspect of the dispute between the parties further below.
14. The Vehicle was subject to another product recall in July 2020 (the Second Product Recall). As with the First Product Recall in October 2019, the respondent did not include any specific details in its written evidence about the production faults which led to the Second Product Recall.
15. At the hearing, Ms O'Connor described the production fault which led to the Second Product Recall as relating to the "mechatronic unit upper box".
16. In January 2022, the applicant experienced further problems with the Vehicle which he describes as failures in the auto-transmission of the Vehicle. The applicant states that the Vehicle became "stuck in neutral and no gear can be selected". It had to be towed for repairs to be carried out. By this time, the Vehicle had travelled 67,696 kms. I accept the applicant's evidence in relation to the problems experienced with the Vehicle in January 2022.
17. On or about 18 January 2022, the applicant arranged for Central Transmissions to again inspect and service the Vehicle because of the problems which were being experienced with it.
18. Central Transmissions carried out repairs to the Vehicle. The Invoice issued by Central Transmissions described the work performed on the Vehicle in January 2022 as: "supply & fit recondition electrical transmission; supply & fit new transmission mechatronics unit".
19. The applicant paid Central Transmissions $3,750 for the repairs carried out in January 2022.
20. In an email sent to the applicant on 14 February 2022, Mr Rossi of Central Transmissions stated: "The vehicle arrived at our premises without any gears. Did not have forward or reverse". He described the fault which had to be repaired in January 2022 as relating to "an electrical malfunction with the mechatronic unit".
21. In January 2022, the applicant sought reimbursement from the respondent in the sum of $8,400, being the amount which he had paid to Central Transmissions for the repairs to the Vehicle. Various emails were exchanged between the parties in January 2022, however, they were unable to resolve their dispute.

The Applicable Law

1. Section 54 of the ACL relevant provides as follows: 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. (4) … (5) … (6) Goods do not fail to be of acceptable quality if: (a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and (b) they are damaged by abnormal use. (7) Goods do not fail to be of acceptable quality if: (a) the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and (b) the examination ought reasonably to have revealed that the goods were not of acceptable quality.
2. Section 271 of the ACL relevantly provides as follows: 271 Action for dam ages against manufacturers of go ods (1) If: (a) the guarantee under section 54 applies to a sup ply of goo ds to a cons umer; and (b) the guarantee is not complied with; an affected pers on in relation to the goo ds may, by action against the manufacturer of the go ods, recover da mages from the manufacturer. (2) Subsecti on (1) does not a pply if the guarantee under section 54 is not complied with only because of: (a) an act, defa ult or omission of, or any representation made by, any per son other than the manufacturer or an employee or agent of the manufacturer; or (b) a cause independent of human control that occurred after the go ods left the control of the manufacturer; or (c) the fact that the pri ce charged by the supplier was higher than the manufacturer's recommended retail pri ce, or the average retail pr ice, for the good s.
3. Section 272 of the ACL provides: 272 Dam ages that may be recovered by action against manufacturers of good s (1) In an action for da mages under this Division, an affected per son in relation to goo ds is entitled to recover d amages for: (a) any reduction in the value of the goo ds, resulting from the failure to comply with the guarantee to which the action relates, below whichever of the following price s is lower: (i) the p rice paid or payable by the con sumer for the go ods; (ii) the average retail pri ce of the goo ds at the time of su pply; and (b) any loss or dam age suffered by the affected per son because of the failure to comply with the guarantee to which the action relates if it was reasonably foreseeable that the affected perso n would suffer such loss or da mage as a result of such a failure. (2) Without limiting subse ction (1)(b), the cost of inspecting and returning the g oods to the manufacturer is taken to be a reasonably foreseeable loss suffered by the affected p erson as a result of the failure to comply with the guarantee. (3) Subsec tion (1)(b) does not app ly to loss or d amage suffered through a reduction in the value of the g oods.
4. Section 273 of the ACL provides: 273 Time limit for actions against manufacturers of goods An affected person may commence an action for damages under this Division at any time within 3 years after the day on which the affected person first became aware, or ought reasonably to have become aware, that the guarantee to which the action relates has not been complied with.
5. Section 79N of the FTA relevantly provides: 79N Orders in favour of claimant In determining a consumer claim wholly or partly in favour of a claimant, the Tribunal may, subject to this Division, make any one or more of the following orders that it considers appropriate - (a) an order that requires a respondent to pay to the claimant a specified amount of money, … (h) an order that requires a respondent to refund all or part of the purchase price of specified goods that are in the possession (or under the control) of the claimant and the claimant to return all or part of those goods to the respondent (whether the property in the goods has passed or not).

Consideration

1. In Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 344 at [164] to [166], Lee J conveniently summarised some of the key principles formulated by the Courts in relation to s 54 of the ACL. His Honour said: [164] Despite the obscure drafting of other sections of the ACL, s 54 is relatively straightforward. The continued use of the conjunction "and" in s 54(2) makes clear that goods must possess all of the qualities listed in s 54(2), to the requisite standard, in order to comply with the guarantee of acceptable quality. Failure to possess any one of those qualities will result in a failure to comply with the guarantee: see Vautin v By Winddown, Inc (formerly Bertram Yachts)(No 4) [2018] FCA 426; (2018) 362 ALR 702 (at 732 [142(d) - (f)] per Derrington J); Australian Competition and Consumer Commission v Jayco Corporation Pty Ltd [2020] FCA 1 672 (at [25] per Wheelahan J). [165] The question of whether the goods are of acceptable quality is to be answered by reference to the quality of the goods at the time of supply: Capic v Ford Motor Company of Australia Pty Ltd [2021] FCA 715; (202 1) 154 ACSR 235 (at 377 [606] per Perram J); Jayco (at [27]); Vautin (at 738 [170]-[171], 760 [263]). The applicable standard of "acceptable quality" is to be determined by reference to what the "reasonable consumer" would regard as acceptable, having regard to the matters in s 54(3). The relevant enquiry is necessarily objective: Medtel Pty Ltd v Courtney [200 3] FCAFC 151; (2003) 130 FCR 182 (at 199 [43] per Moore J, 205 [64] and 207 [72] per Branson J, with whom Jacobson J agreed at 209 [81]); Capic (at 265 [105]). As Wheelahan J explained in Jayco (at [26]): The reasonable consumer sits with an array of other hypothetical persons who have been recruited by the law and by reference to whom objective standards are evaluated: see, Healthcare at Home Ltd v The Common Services Agency [2014] UKSC 49; 4 All ER 210 at [1] -[4] (Lord Reed JSC). Such a person has been described as an anthropomorphic conception of justice that is and must be the court itself: see Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 at 7 28 (Lord Radcliffe). [166] In determining whether the "reasonable consumer" would regard the goods as acceptable at the time of supply, one must assume that the construct is "fully acquainted with the state and condition of the goods (including any hidden defects of the goods)": s 54(2) of the ACL; see also Medtel (at 205-206 [65]-[70]).
2. Much of the dispute between the parties at the hearing concerned whether the problems experienced by the applicant with the Vehicle were attributable to the production faults which led to the First and Second Product Recalls. As I have already mentioned, the respondent did not present any detailed specific evidence about the production faults which were the subject of the First and Second Product Recalls. No satisfactory explanation was provided for this omission from the respondent's evidence. It is appropriate to infer that this evidence would not have assisted the respondent's case: see Jones v Dunkel (1959) 101 CLR 298; Manly Council v Byrne and Anor [2004] NSWCA 123 at [51].
3. I have, however, come to the conclusion that that the question of whether the problems experienced by the applicant with the Vehicle were attributable to the production faults which led to the First and Second Product Recalls is a distraction form the real issue for determination. The key question is whether the Vehicle was of acceptable quality, having regard to the qualities specified in s 54(2) of the ACL, at the time of its supply in March 2014. The evidence that the Vehicle's make and model has been the subject of product recalls because of production faults related to transmission is of some, albeit limited, probative value. It cannot of itself determine whether the Vehicle was of acceptable quality at the relevant time.
4. The evidence which is of most probative value is the evidence of the applicant in relation to the problems experienced when driving the Vehicle. I have set out my reasons above for accepting the applicant's evidence. This evidence indicates significant problems with the ability to drive and control the Vehicle and that these problems first became manifest in mid-2019. This resulted in the Vehicle stopping unexpectedly in mid-traffic. It also meant that by 2022 the vehicle did not have any gears. This created an obvious safety risk to occupants of the Vehicle, other motorists and pedestrians.
5. The applicant's evidence is corroborated by Mr Rossi whose inspection of the Vehicle in August 2019 indicated that it shuddered when "accelerating through the ranges" and then stalled. He also inspected the Vehicle in January 2022 and indicated that it was "without any gears".
6. A question arises as to whether the problems with the Vehicle which were experienced by the applicant in mid-2019 and then in January 2022 were due to faults which were present in the Vehicle when purchased by the applicant in March 2014. The respondent attributes the problems which were experienced with the Vehicle to "wear and tear".
7. I reject the respondent's contention that the problems with the Vehicle which were experienced by the applicant as being due to "wear and tear". The Vehicle was purchased brand new in 2014. A significant sum was paid for the Vehicle, ie, $18,500. There was no suggestion that the kilometres travelled by 2019, ie, 47,644 kms, was excessive or abnormal. There is also no suggestion that the kilometres travelled by 2022, ie, 67,696 kms, was excessive or abnormal. Even if the production faults which led to the First and Second Product Recalls were different to the specific faults with the Vehicle in 2019 and 2022, the evidence of the product recalls indicates that production faults can lie hidden and manifest themselves sometime after supply of the vehicle.
8. Having considered all of the above evidence, I do not accept it to be reasonable "wear and tear" for the Vehicle to become so unpredictable to control that it would stop unexpectedly in mid-traffic within the first 5 years of its life or that it would lose its gears within 7 years. I am comfortably satisfied, on the evidence before me, that the problems experienced with the Vehicle in 2019 and 2022 were due to faults which existed when it was purchased by the applicant in March 2014.
9. I am therefore satisfied that the supply of the Vehicle to the applicant constituted a breach of the guarantee as to acceptable quality in s 54 of the ACL. The problems with the Vehicle made it unpredictable and hard to control. This clearly affected the safety of the Vehicle. I consider that a reasonable consumer fully acquainted with the state and condition of the Vehicle would not have regarded it as acceptable having regard to the matters in s 54(2) and s 54(3) of the ACL.
10. As the applicant's claim is against the manufacturer of the Vehicle, ss 271, 272 and 273 of the ACL are engaged.
11. Sub-section 27(1) of the ACL provides the applicant with a cause of action against the respondent as the manufacturer of the Vehicle. There is no suggestion that any of the exceptions in sub-section 271(2) are applicable.
12. The 3 years limitation period stipulated in s 273 of the ACL has been complied with. The applicant first became aware that the guarantee had not been complied with in June 2019 and the Application was filed in March 2022. There is no suggestion that the applicant ought reasonably to have become aware of the breach of the guarantee earlier than June 2019.
13. That leaves the assessment of the damages to be awarded to the applicant in accordance with s 272 of the ACL.
14. The applicant claims $8,400 being the amount which he has paid to have the faults with the Vehicle repaired. There is no evidence to indicate that this was not a reasonable amount to pay to have the faults with the Vehicle repaired. The respondent did not make any submission that the amount was unreasonable. The actual cost paid for repair or rectification is generally regarded as sound evidence of the reasonable cost for such repair or rectification: In Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 at [99], Giles JA (with Sheller JA agreeing) said: "if the rectification work has been carried out and the actual cost is known, that provides sound evidence of the reasonable cost and should ordinarily provide the basis for damages".
15. I find for the purposes of s 272(1)(b) of the ACL that the loss or damage suffered by the applicant because of the respondent's failure to comply with the guarantee of acceptable quality under s 54 of the ACL was the amount paid by the applicant to remedy the faults with the Vehicle. It was not suggested that such loss or damage was not reasonably foreseeable as a result of the failure to comply with the guarantee of acceptable quality.
16. Alternatively, I find for the purposes of s 272(1)(a) of the ACL that the reduction in value of the Vehicle was the amount paid by the applicant to remedy the faults with the Vehicle. In Williams v Toyota Motor Corporation Australia Limited (Initial Trial) [2022] FCA 344 at [297], Lee J considered the cost of repair to be an indicator in ascertaining any reduction in value for the purposes of s 272(1)(a) of the ACL; see also Vautin v By Winddown, Inc (formerly Bertram Yachts)(No 4) [2018] F CA 426; (2018) 362 ALR 7 02 at [300] and [302] where Derrington J adopted a similar approach. There was no suggestion that the price paid for the Vehicle by the applicant did not align with the average retail price of the Vehicle in March 2014.

Conclusion and Orders

1. For the above reasons, the applicant is entitled to an order under s 79N of the FTA for the payment of $8,400 by the respondent.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 12 September 2023 - Formatting amendments. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 September 2023