Wanna v Xtreme Car Sales Group 1 Pty Ltd [2023] NSWCATCD 32 | Case summary

Consideration

I find that the claim is a "consumer claim" as defined in section 79E of the Fair Trading Act 1987 ("the FTA").
I find that Wanna is a consumer, Xtreme Car Sales is a supplier and the application is a claim by a consumer that arises from a supply of goods and services by a supplier to a consumer under a contract made in New South Wales.
I find that the application was made within the 3 years period from the date on which the cause of action arose (Section 79L(1)(a) of the Fair Trading Act 1987). The amount of $48,231.53 sought by Wanna is within the jurisdictional limit of the Tribunal. I find the Tribunal has jurisdiction to hear and determine the application.
Wanna submits the vehicle was not fit for purpose and was not of acceptable quality in breach of the consumer guarantees in the ACL NSW.
Section 54 of the ACL NSW is in the following terms: 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) If: (a) goods supplied to a consumer are not of acceptable quality; and (b) the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer's attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality. (5) If: (a) goods are displayed for sale or hire; and (b) the goods would not be of acceptable quality if they were supplied to a consumer; the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to a consumer's attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent. (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
Has there been a failure by Xtreme Car Sales to comply with the consumer guarantee of acceptable quality set out in section 54 of the ACL NSW? In Matumaini v Automobile Industries [2017] NSWCATAP93 the Appeal Panel stated at [73]: "The question which the Tribunal had to consider and answer was whether, at the time of the sale, the vehicle was of acceptable quality as that phrase is defined in s 54 (2) of the ACL NSW. In other words it was not necessary for the Appellant to prove that at the time of the sale, there was a particular identified defect which caused the vehicle not to be of an acceptable standard."
The question which the Tribunal must consider and answer is whether at the time of sale, the vehicle was of acceptable quality as that phrase is defined in section 54(2) of the ACL NSW. It is not necessary for the Applicant to prove that at the time of sale, there was a particular identified defect which caused the vehicle not to be of acceptable quality.
Wanna bears the onus of proof. She must produce evidence which satisfies the Tribunal on the balance of probabilities it is sufficient to make the orders sought in the application.
The MD Notice attached to the vehicle and provided to Wanna contains the following statement: "This vehicle does not come with a dealer guarantee under the Motor Dealers and Repairers Act 2013. The dealer is not required by the Act to repair or make good any defect which may exist or occur in this vehicle. A current inspection report must be supplied at the time of purchase".
Wanna signed the consumer acknowledgement on the MD Notice. She knew that the vehicle was sold without any form of statutory warranty.
There is a dispute whether Wanna received the inspection report at the time of sale. Xtreme Car Sales produced a copy of the RMS Report dated 4 February 2022 and contended it was given to Wanna with her other documentation. Wanna denies receiving the report. I am satisfied a current RMS Inspection Report was in existence at the time of sale. I prefer the evidence of the dealer on this issue.
The MD Notice contained a further statement regarding her rights under Australian Consumer Law as follows:" This vehicle comes with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure."
In Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSWCATAP 80 the Appeal Panel summarised the relevant statutory provisions relevant to these proceedings at {15}-[20]: 15 Section 3 of the ACL (NSW) provides the grounds on which a person is taken to have acquired goods as a "consumer". Relevantly, certain remedies in the ACL (NSW), including those relating to consumer guarantees, are only available to consumers. There was no dispute before the Tribunal at first instance or in the appeal that the Tribunal had jurisdiction to hear this claim under the ACL (NSW). For reasons appearing later, this was in fact a threshold jurisdictional issue that was not addressed before the Tribunal at first instance or raised by the parties in the appeal. 16 Subdivision 2A, Division 1 of Part 3.2 of the ACL (NSW) provides for statutory guarantees in relation to the supply of goods. Relevantly, s 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. 17 Part 5.4 of the ACL (NSW) provides remedies for breach of the statutory guarantees. 18 Section 259(1) of the ACL (NSW) provides that a consumer may take action against a supplier if one of the guarantees that relates to the supply of goods is not complied with. If the failure to comply can be remedied and is not a major failure, the consumer may require the supplier to remedy the failure within a reasonable period (s 259(2)(a)). If the supplier refuses or fails to comply, the consumer may have the failure remedied and recover all reasonable expenses incurred by the consumer in having the failure so remedied or notify the supplier that the goods are rejected (s 259(2)(b)). 19 If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may notify the supplier that the consumer rejects the goods or, by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid (s 259(3)). 20 Section 259(4) provides: 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.
In LSH Auto (Sydney) Pty Ltd v Sherman (No 2) [2021] NSWCATAP 272 the Appeal Panel set out the legal principles applicable in a case involving a claim under section 54 of the ACL NSW at [35]-[36]: 35 The relevant principles to apply in a case such as the present were summarised by Derrington J in Vautin v By Winddown (No 4) [2018] FCA 426; (2018) 362 ALR 702 as follows: "[142] Mr Vautin asserts that the existence of the construction defects in the sandwich core panels of Revive means that the vessel is not of an "acceptable quality" within the meaning of the guarantee imposed by s 54 of the ACL. In determining whether the guarantee in that section is contravened the following matters are relevant: (a) The test as to whether goods are of an "acceptable quality" is an objective one; being taken from the perspective of a "reasonable consumer" (APS Satellite Pty Ltd (formerly known as Sky Mesh Pty Ltd) v Ipstar Australia Pty Ltd [2016] NSWSC 1898 (APS Satellite Pty Ltd) at [57]; Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145; 284 ALR 1; [2011] FCAFC 128). (b) The question for the "reasonable consumer" is whether the goods in question have the identified qualities enumerated in 54(2) to an "acceptable standard". This requirement is derived from the words "as a reasonable consumer ... would regard as acceptable". (c) The "acceptable standard" is used as the yardstick against which the qualities of the goods are to be measured. It is ascertained by a consideration of the matters referred to in s 54(3); the nature of the goods, their price, any statement made about the goods on packaging or labels, any representations made about the goods by the supplier or manufacturer, and any other circumstance relating to their supply. (d) It is necessary the goods have all of the qualities identified in s 54(2) to the ascertained acceptable standard. Those qualities are that the goods are fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable. (e) In the assessment of whether the goods meet that relevant standard, the reasonable consumer is taken to be fully acquainted with the state and condition of the goods (including any hidden defects of the goods). (f) If the goods supplied do not have all of the identified qualities to the acceptable standard, they will not be of an "acceptable quality". [143] In compendious terms, the issue is whether, objectively, the goods supplied (when taking into account their actual quality including any latent defects) are, to an acceptable standard, fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable when measured by a standard which reflects the nature of the goods, their price, statements about the good as per their packaging, representations made about the goods and any other relevant circumstance. In Prestige Auto Traders Australia Ltd v Bonnefin [2017] NSWSC 149 at [132] N Adams J identified the manner in which s 54 should be applied in the following way: "The relevant test in s 54(2) of the ACL (NSW) 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 Pty Ltd v Courtney (2003) 130 FCR 182; 198 ALR 630; [2003] FCAFC 151 at [66] and [70].'" 36 In Australian Competition and Consumer Commission v Jayco Corporation Pty Ltd [2020] FCA 1672 Wheelahan J said: "[25] ... The standards under s 54(2) include that goods will be fit for all purposes for which goods of that kind are commonly supplied. This general standard of fitness for purpose is not dependent upon the consumer communicating any intended purpose to the supplier or relying upon the supplier's skill or judgment. And, in relation to the general standard, it does not suffice that the goods will be fit for only some of those purposes. [26] The standard of acceptable quality in s 54(2) has as its reference point a construct, namely the objective standard of a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects of the goods. 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] UKHL 3; [1956] AC 696 at 728 (Lord Radcliffe). [27] The hypothetical question whether the reasonable consumer would have regarded the quality of the goods as acceptable is to be determined at the time of supply. However, the reference in s 54(2) to hidden defects has the consequence that for the purposes of determining that question, the reasonable consumer may be acquainted with information known at the time of trial: cf, Medtel Pty Ltd v Courtney [2003] FCAFC 151; 130 FCR 182 at [70] (Branson J, Jacobson J agreeing). The standard of acceptable quality prescribed by s 54(2) is not absolute, or a standard of perfection. It is tempered by what a reasonable consumer would regard as acceptable having regard to the several matters in s 54(3). These matters render the standard of acceptable quality elastic, and context specific: Contact Energy Ltd v Jones [2009] NZHC 2631; [2009] 2 NZLR 830 at [95] (Miller J). The significance of the components of the guarantee of acceptable quality will therefore vary with the circumstances of each case."
Applying the above principles to the facts of this case, the Tribunal is satisfied that when looked at objectively, the vehicle purchased by Wanna was not of acceptable quality at the time of sale.
Wanna complained of "a crackling noise" during the test drive. She gave evidence the noise became louder whilst she was driving home on 15 February 2002. She discussed the problem with Mr Dan Dan on 17 February 2022.
On 18 February 2022 Charbel El Azzi identified the issue as a faulty differential which required repair at a cost of $2200.00.
The authorities quoted above make it clear that the question whether the reasonable consumer would have regarded the quality of the vehicle as acceptable is to be determined at the time of supply.
The standard of acceptable quality is the objective standard of a reasonable consumer fully acquainted with the state and condition of the goods including any hidden defects. The standard of acceptable quality is not absolute or a standard of perfection. It is elastic and depends on the circumstances of each case.
The vehicle purchased by Wanna was not of acceptable quality because it did not satisfy the criteria in section 54(2) of the ACL NSW. At the time of sale, the vehicle was not fit for all purposes for which goods of that kind are commonly supplied, was not free from defects, was not safe and 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 section 54(3) of the ACL NSW.
In reaching this conclusion I have considered the relevant matters in section 54(3) of the ACL. The purchase price of the vehicle was $13,345.00. The vehicle when purchased by Wanna had an odometer reading of 208,403 kilometres. The vehicle was a 2014 model and 7 years old. Importantly the vehicle had a faulty differential at the date of purchase.
The Tribunal finds that a reasonable consumer fully acquainted with the state and condition of the vehicle (including any hidden defects), would not regard it as acceptable having regard to the matters in section 54 (3).
The Tribunal finds Xtreme Car Sales did not comply with the consumer guarantee in section 54 of the ACL NSW.
Section 259(1) of the ACL NSW provides that a consumer may take action against a supplier if a guarantee that relates to the supply of goods is not complied with. If the failure to comply can be remedied and is not a major failure, the consumer may require the supplier to remedy the failure within a reasonable period (s 259(2)(a)). If the supplier refuses or fails to comply, the consumer may have the failure remedied and recover all reasonable expenses incurred by the consumer in having the failure so remedied or notify the supplier that the goods are rejected (s 259(2)(b)).
Not every fault or combination of faults which represents a breach of the guarantee of acceptable quality constitutes a major failure under section 260(a) of the ACL NSW. The test is objective.
Xtreme Car Sales had notice of the faulty differential on 18 February 2022, if not earlier. Wanna did not reject the vehicle at that time but wanted the problem fixed. She wanted the dealer to pay for the cost of the repair.
The evidence shows she paid $2420.00 to Aatish Mechanical and Tyres and sought to recover the cost from the dealer which was her right under section 259.
I find the failure to comply with the consumer guarantee could be remedied and was not a major failure as defined in section 260 of the ACL NSW. Wanna required Xtreme Car Sales to remedy the failure and it failed to comply with the requirement.
Wanna had the failure remedied by Aatish Mechanical and Tyres. She is entitled to recover reasonable expenses in having the failure remedied. I find the cost of $2420.00 incurred by Wanna was a reasonable cost.
I find the failure to comply with the consumer guarantee in section 54 of the ACL NSW was remedied once the faulty differential was replaced. The vehicle satisfied the criteria in section 54(2) of the ACL NSW. The vehicle was fit for purpose and of acceptable quality.
On 18 April 2022 Wanna sent an email to Xtreme Car Sales which relevantly stated: "I demand either you pay for the cost of repair of $2200.00 or refund the purchase money and take the car back."
Wanna asserted she informed Mr Dan Dan she required a safe and reliable car so she could undertake her daily duties as a disability support worker. I am satisfied the vehicle was not fit for this purpose when sold to Wanna.
Once the faulty differential was replaced, the vehicle was made fit for purpose. Wanna did not experience any further issues with the vehicle until 28 April 2022.
In the period from 15 February 2022 to 28 April 2022, Wanna travelled approximately 5770 kilometres. This equates to 961 kilometres per week which as submitted by the dealer is above average travel.
In the period from 28 April 2022 to 26 May 2022, the vehicle travelled 8134 kilometres which equates to more than 2,000 kilometres per week.
I am satisfied the mileage travelled by Wanna was well above average and confirms the vehicle was fit for all purposes for which goods of that kind are commonly supplied. The vehicle travelled in excess of 13,904 kilometres in just more than 3 months.
The report from Aatish Mechanical and Tyres dated 26 May 2022 refers to the broken transfer case and gearbox, and the missing bolts from the broken gear box which were observed by MD Auto Mechanical on 28 April 2022. Whilst the report notes "a pre-existing mechanical issue, that has been with the car for a while", the report does not put any time frame on when the problem may have occurred.
I am not satisfied the defects noted in the report existed at the date of sale. The evidence does not support a finding the vehicle had a defective gearbox or transfer case when sold to Wanna. There is no evidence the bolts were missing at the date of sale.
When the vehicle was inspected by Aatish Mechanical and Tyres on 18 February 2022, Charbel El Azzi made no mention in his report of the broken transfer case and gearbox, or the missing bolts. I would expect he would notice these defects when replacing the differential.
When the vehicle was inspected by M D Auto Mechanical on 28 April 2022, the vehicle was passed as roadworthy. Although Wanna was informed of the missing bolts, she continued to drive the vehicle in the knowledge the gearbox housing was broken. She drove the vehicle for 8134 kilometres before it broke down. Xtreme Car Sales submitted she did further damage to the vehicle by driving it.
Xtreme Car Sales submitted the tightening of the bolts by MD Auto Mechanical contributed to the failure. Further the distance travelled by the vehicle since the date of purchase is an indicator it was fit for purpose and of acceptable quality at the time of sale.
I find the repair of the defects in the vehicle identified on and after 28 April 2022 are the responsibility of Wanna. There was no evidence upon which l could conclude that as of the date of sale that there was either a latent or patent defect in the gearbox or transfer case. The evidence suggests that other than the faulty differential, the vehicle was in good condition at the date of sale particularly given the distance travelled by the vehicle immediately after purchase.
Wanna can recover damages for any loss suffered by her because of the failure to comply with the guarantee of acceptable quality if it was reasonably foreseeable she would suffer such loss or damage as a result of the failure to comply with the consumer guarantee.
I find Wanna can recover $2420.00 for the cost of replacing the differential from Xtreme Car Sales. That amount represents the cost to remedy the failure of Xtreme Car Sales to comply with the consumer guarantee of acceptable quality.
As regards the other amounts claimed, Wanna has not proved it was reasonably foreseeable she would suffer such loss or damage because of the failure to comply with the consumer guarantee. In my view these losses or damage do not arise from the dealer's failure to comply with the consumer guarantee. Wanna has an obligation to maintain the vehicle after purchase.
A further issue for Wanna is the steps she has taken to mitigate her loss. In my view, Wanna has not taken reasonable steps to mitigate her loss. Wanna argued she did not have funds to pay for the repairs to the vehicle. I reject that as a valid reason.
Wanna's claims for hire car costs, loss of income, loan interest and other items listed in the schedule attached to her submission could have been avoided by taking reasonable steps to maintain and repair the vehicle.
Section 79U of the FTA requires that when making orders I must take into account what would be fair and equitable to all parties. I am satisfied that the proposed orders are fair and equitable to all parties.
For the above reasons the Tribunal orders Xtreme Car Sales to pay Wanna the sum of $2420.00 within 7 days.

Wanna v Xtreme Car Sales Group 1 Pty Ltd

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