Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Fischlin v MC Investments (N'cle) Pty Ltd [2023] NSWCATCD 75 Hearing dates: 11 May 2023 Date of orders: 03 July 2023 Decision date: 03 July 2023 Jurisdiction: Consumer and Commercial Division Before: S Hanstein, General Member Decision: 1 Within 14 days of the date of this decision, and on a date agreed between the parties, the applicant is to return the vehicle to the respondent and to do all things necessary to revest the title of the vehicle in the respondent. 2 On the day the vehicle is returned, the respondent is to pay to the applicant the sum of $17,300. Catchwords: CONSUMER LAW — Consumer guarantees — Supply of goods — Guarantee as to acceptable quality — Motor vehicle — Whether vehicle of acceptable quality — Whether major failure — Rust Legislation Cited: Australian Consumer Law (NSW) Civil and Administrative Tribunal Act 2013 Motor Dealers and Repairers Act 2013 Cases Cited: Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSWCATAP 80 Texts Cited: Nil Category: Principal judgment Parties: Thomas Fischlin (Applicant) MC Investments (N'cle) Pty Ltd ATF MC Investments Trust T/A New Lambton Auto Centre (Respondent) Representation: Applicant in person Mark Chalhoub (Respondent) File Number(s): MV 22/44474 Publication restriction: Nil REASONS FOR DECISION 1. This case concerns a 2003 Ford Falcon BA XR8 vehicle, purchased by the applicant from the respondent on 10 September 2022 at a price of $17,300. 2. The applicant claims that the vehicle is not of acceptable quality within the meaning of the Australian Consumer Law (NSW) ("ACL (NSW)") and seeks a refund. He also seeks compensation for expenses incurred. 3. Both parties attended the hearing and gave oral evidence and submissions. They both also relied on documentary evidence. Neither party sought to cross-examine any of the authors of reports or statements relied upon by the other. 4. The applicant has raised a number of concerns with the vehicle and provided reports or other documents from a number of different businesses. For the reasons set out below, I am satisfied that the applicant's claim should succeed because of the rust concerns, and therefore these reasons are focused on that issue. Relevant law 1. Section 54 of the ACL (NSW) provides, relevantly: 54 Guarantee as to acceptable quality (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality. (2) Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; and (d) safe; and (e) durable; as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods. ... (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. 1. Section 259 of the ACL (NSW) provides, relevantly: 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) ... (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 ... (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. ... 1. Section 260 of the ACL (NSW) provides, relevantly: 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… 1. Pursuant to section 263(4) of the ACL (NSW), if the goods are rejected: (4) The supplier must, in accordance with an election made by the consumer: (a) refund: (i) any money paid by the consumer for the goods; … Applicant's case 1. The applicant's evidence and submissions included the following. 2. The vehicle has pervasive rust. The presence of the rust affects the structural components, and the durability and appearance of the vehicle. Repair of the rust would cost about $17,000, being around 100% of the purchase price of the vehicle. The existence of the rust was not pointed out to, or readily observable by, the applicant prior to purchase of the vehicle. Much of the rust was concealed behind carpet, panels and trims. The vehicle had been re-painted at some time, and as paint is worn away the rust is becoming more apparent. 3. Within a week of purchase, the applicant informed the respondent that he sought a refund. Respondent's case 1. The respondent denies the claim by the applicant. Its evidence and submissions included the following. 2. The applicant had the opportunity to obtain a pre-purchase inspection report and to inspect the vehicle before purchasing. He was aware of the condition of the vehicle he was purchasing. The pre-purchase inspection report described the body of the vehicle as "fair", and noted paint and panel repairs, and the applicant still decided to purchase it. 3. The major rust issue identified by the applicant (behind the rear passenger seat) was repaired by the respondent, at its cost, as a measure of goodwill, as well as other repairs requested by the applicant being carried out. 4. The vehicle was roadworthy and did not fail to be of acceptable quality, particularly noting its age. This vehicle, being 20 years old, was entitled to have some wear and tear and "rust spots". Findings 1. I am satisfied, on the balance of probabilities, of the following matters. 2. The applicant paid a deposit of $500 for the vehicle on 27 August 2022, and then obtained a pre-purchase inspection report dated 31 August 2022. That report noted, among other things, that there were panel and paint repairs to various panels, and the overall paint condition and panel condition was "fair". Overall body structure was reported as "good". There was no mention of any rust or corrosion. The inspection carried out for the purpose of the report was a "non-intrusive (visual)" inspection, with no dismantling of the vehicle, and it was stated that it "should be taken as a guide only". 3. The applicant informed the respondent that he was happy to go ahead with the purchase if a few issues that had been identified in the pre-purchase report were rectified and that: The final price will be subject to negation between us in regards to the other services/repairs that need to be done with the car (eg. Mechanic brake was a bit soft, might need a brake fluid flush – see page 41… 1. On 7 September 2022, purportedly to address the issues identified in the pre-purchase report, the respondent caused the following to be done at a cost of $650: replaced right fog lamp, replaced broken bonnet release cable and replaced right hand rocker cover gasket. This latter item was apparently to rectify the engine oil leak. At the applicant's request, the respondent also organised a wheel alignment. 2. The applicant inspected the vehicle on 10 September 2022, including by test driving, and purchased it for an agreed price of $17,300. The price previously put forward by the respondent was $17,990. The vehicle had done approximately 165,000 km. The invoice noted "I have inspected the vehicle and accept it in its condition". The respondent did not inform the applicant that the vehicle was affected by rust or corrosion. (There is no suggestion the respondent was aware.) The Motor Dealer's Notice stated that the vehicle had not had significant damage caused by exposure to water; and had not had major modifications including the replacement or repair of any of the panels, structural members or components by cutting or welding. 3. Upon driving it home, the applicant noticed the vehicle drifted to the left and so, on 12 September 2022, he had the vehicle inspected by PT Precision Auto, who pointed out major panel and rust issues and recommended the vehicle be returned to the supplier. The applicant had the vehicle inspected by a number of other businesses, who agreed there were significant issues with rust and panel misalignment. After further inspection, a large rust hole was identified behind the rear passenger seats. The applicant obtained a quote, dated 21 September 2022, to rectify rust issues (not limited to that hole) in the vehicle for a cost of about $13,000. 4. On 21 and 24 September 2022, the vehicle failed e-safety checks. The first report noted rust issues and "excessive play in both lower ball joints", and the second noted "structural rust" and "oil leaks front of engine, dripping oil on road surface". 5. The respondent caused some repairs to be carried out, including to rectify the rust to the right rear parcel shelf panel. That rust repair was at a cost of approximately $2,000. 6. On 7 February 2023, the respondent caused an e-AUVIS Check Report ("blue slip") inspection to be undertaken, and the vehicle passed. 7. The applicant subsequently had inspections carried out by two mechanics, in March 2023, and reports have been provided. The reports set out the authors qualifications and years of experience, and state that each of the authors conducted an inspection and road test of the vehicle, inspecting the condition of the body of the car, and its mechanical/electrical function. 8. The report by Mr Lyman sets out a list of issues with the vehicle, notes some items that need replacing and states that the vehicle is not really safe to drive in current condition due to the front brake lines, the front lower ball joints, hard to start issue and car pulls left when accelerating. There is no mention of rust concerns. 9. The report by Mr Smith lists issues with the vehicle, including: Various rust spots (some have been repaired, some need to be repaired). 1. The applicant obtained an estimate, dated 3 April 2023, for body work repairs on the vehicle in the sum of nearly $17,000. The quote identifies a number of areas where rust is visible, and also old repairs/rectification are visible. The estimate states "car requires work in multiple areas". Consideration 1. I am satisfied this is a consumer claim and the Tribunal has jurisdiction to hear and determine it. 2. This is a finely balanced case. I have carefully considered the evidence and submissions of the parties and, on balance, I am satisfied that the vehicle was not of acceptable quality within the meaning of section 54 of the ACL (NSW). 3. The most significant rust issue, and the one that caused the car not to be roadworthy in September 2022, was that behind the rear passenger seat. This has been rectified, and the car subsequently passed its "blue slip" inspection. It is clear however that there are other areas with rust and/or corrosion, and areas where repairs have been done previously, and that repairing all of those areas would be an expensive course of action. 4. The evidence does not establish that the presence of the rust and/or corrosion affects the structural integrity or safety of the vehicle. Further, the applicant and the inspector carrying out the pre-purchase inspection did not notice the presence of the rust and/or corrosion, suggesting that it does not adversely affect the appearance of the vehicle. However, I am satisfied, on the balance of probabilities, that because of the presence of the rust to the extent it is, the vehicle is not of acceptable quality as it is not as free from defects or durable as a reasonable consumer fully acquainted with the state and condition of the goods would regard as acceptable. 5. In coming to this conclusion I have had regard to the following matters: 1. The vehicle is 20 years old and had done about 165,000 km, and no dealer guarantee under the Motor Dealers and Repairers Act 2013 was applicable. 2. No rust or corrosion was observed prior to purchase by the applicant or the pre-purchase inspection and the presence of rust was not disclosed by the respondent. The areas where the rust is present are not areas that were readily able to be observed in a visual inspection, for example being under carpet or behind rubber or trims. 3. The vehicle may well be expected to have some rust at this age but, significantly in this case, the presence of the rust was not disclosed or readily discoverable. 4. Significant rust was identified only days after purchase and, it can easily be inferred, was therefore present at purchase. 5. The most significant area of rust was repaired but extensive rust remains. I am satisfied of this on the basis of the reports provided by the applicant. Not all of the reports report on the rust issue in the same way but I am reasonably satisfied that is because some mechanics were likely focussing on mechanical issues instead. The vehicle did pass the "blue slip" inspection in February 2023 but that in itself does not establish that the rust is not significant. 6. Whilst the evidence does not establish that the presence of the rust and/or corrosion at this stage affects the structural integrity or safety of the vehicle, it can nevertheless in my view be considered to be a defect. And without rectification the rust can reasonably be expected to progress further and become a more significant issue, likely affecting the durability of the vehicle. 7. Rectification is likely to be expensive relative to the value of the vehicle. Whilst the quotes or estimates provided by the applicant likely involve work to bring the vehicle to a better standard that simply "acceptable", it is clear that rust repair is not easy and/or cheap, with the respondent having paid about $2,000 to fix the area that was fixed. 8. The price paid for the vehicle was $17,300, which was the price established without knowledge of the presence of the rust. 1. I am satisfied that section 54(7) of the ACL (NSW) does not apply. The applicant did inspect the vehicle prior to purchase and had a pre-purchase inspection done. Those inspections did not reveal the rust issues. I accept that was because of the location of the rust issues, and it was not the case that the pre-purchase examination ought reasonably to have revealed that the goods were not of acceptable quality. 2. I am satisfied that the failure to be of acceptable quality was a major failure within the meaning of section 260 of the ACL (NSW), as the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure to be of acceptable quality. Guidance is provided by the Appeal Panel in Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSWCATAP 80 at [101]. In coming to this conclusion, I have regard to the nature and extent of the rust issues and that likely rectification costs are high in proportion to the purchase price. 3. I am satisfied the applicant rejected the goods in the rejection period and is entitled to a refund. Other claimed expenses 1. The applicant has also claimed compensation for specified expenses that have been incurred. 2. Many of these are costs incurred in bringing these proceedings. Section 60(1) and (2) of the Civil and Administrative Tribunal Act 2013 provides that: (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. 1. I am not satisfied that there are special circumstances warranting an award of costs. Although the applicant has been successful, it was a finely balanced case, and nothing in the way the respondent has conducted itself in the proceedings would warrant an award of costs. 2. The other expenses claimed by the applicant are really expenses incurred in owning a vehicle. As he has had the vehicle, and use of it, for some time since the purchase, and is receiving a refund of the purchase price, I am not satisfied any further amounts should be allowed. Order 1. The order is as follows. 1. Within 14 days of the date of this decision, and on a date agreed between the parties, the applicant is to return the vehicle to the respondent and to do all things necessary to revest the title of the vehicle in the respondent. 2. On the day the vehicle is returned, the respondent is to pay to the applicant the sum of $17,300. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 September 2023