Colin Towe v JP & KM Murray Pty Ltd t/as Brisbane Motor Imports [2014] NSWCATCD 56

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Colin Towe v JP & KM Murray Pty Ltd t/as Brisbane Motor Imports [2014] NSWCATCD 56 Hearing dates: 19 March 2014 Decision date: 24 April 2014 Before: G Kinsey, General Member Decision: The applicant Colin Towe is ordered to deliver to the respondent JP & KM Murray Pty Ltd t/as Brisbane Motor Imports the original engine fitted to the applicant's Toyota Landcruiser within 14 days of the date hereof. The respondent is ordered to arrange with the applicant for the delivery of the engine and pay the transportation costs. Upon delivery of the engine to the respondent, the respondent is ordered to pay the applicant Colin Towe the sum of $3,000.00 within 7 days of the date of delivery of the engine to the respondent. Category: Principal judgment Parties: Colin Towe (applicant) JP & KM Murray Pty Ltd t/as Brisbane Motor Imports (respondent) File Number(s): GEN 13/58310

reasons for decision Application 1In an application filed in the Registry on 5 November 2013, the applicant sought an order to fix or replace faulty goods or deliver or return goods to the value of $8,240.00. 2At the hearing, the applicant sought an order for $8,240.00 being a full refund of the purchase price of a second-hand 4.2 turbo diesel engine purchased from the respondent. Jurisdiction 3The Tribunal finds that the claim was a "consumer claim" as defined in section 3A(1) of the Consumer Claims Act 1998 and it has jurisdiction to hear and determine the application. Procedural Directions 4On 17 January 2014 the Tribunal made directions for the service of documents. 5Pursuant to those directions, the applicant served documents including: a. Statement of Geoff Callaghan of Penrith G & J Motors; b. Letter from the applicant to the respondent faxed 11 September 2013; c. Email from Lee Notton sent on 16 January 2014. 6The respondent relied on the following documents: a. Statement/Submission emailed on 30 January 2014; b. Tax Invoice issued by the respondent to Ess Garage Doors dated 18 December 2012, which included Warranty Terms. Applicant's Evidence 7The applicant gave sworn evidence at the hearing. He recounted how on a trip to Warren the engine of his Toyota Landcruiser blew up. The vehicle was towed from Blackheath to Penrith. 8He wanted to purchase a second-hand engine. In December 2012 he contacted Brisbane Motor Imports ("BMI") and spoke with someone called Brian. He inquired about buying a 4.2 turbo diesel multi valve engine. 9BMI had an engine in stock. The agreed price was $8,400.00. The applicant says that he was told the engine had been imported from Japan and had done about 100,000 kilometres. Mr Towe's son paid $8,400.00 on his Visa card for the engine. He has now repaid his son $8,400.00 for the engine. 10The engine arrived just prior to Christmas. The applicant contacted Geoff Callaghan of Penrith G & J Motors to arrange installation. The motor was fitted by Mr Callaghan towards the end of January 2013. He told the applicant that the camshaft was chipped. BMI offered $700.00 as compensation. Further, Mr Callaghan advised the applicant that he had checked the engine and found that the thermostat and water pump were rusty and that the fan in the turbo was jammed. He noted that, when the engine was started, it was noisy, did not run smoothly and the oil pressure was low. 11The applicant contacted BMI and told them of the problems with the engine. He asked for an exchange engine but this request was refused. 12Mr Towe sought the assistance of the Office of Fair Trading but the dispute was not resolved. He then made application to the Tribunal. 13The second witness called for the applicant was Geoff Callaghan who is an experienced automotive engineer. In his statement tendered in evidence, Mr Callaghan describes himself as "a qualified and licensed automotive and heavy vehicle diesel engineer with extensive experience over 40 years working on Toyota 4WD vehicles". He confirms that he was engaged by the applicant to remove and replace the engine in his Landcruiser. 14Whilst fitting the engine he observed that the turbocharger was seized, the water pump was full of rust and the harmonic balancer was damaged. He noted significant wear on the camshaft lobes and severe tooth wear on one gear in the timing gear train. Three of the six diesel fuel injectors were unserviceable. 15Mr Callaghan concluded that: "Component condition and wear indicated that this engine was approaching the end of its service life - normally 300,000-500,000 kilometres." 16At the hearing, Mr Callaghan confirmed the contents of his written report and his findings from an examination of the engine. His evidence was that the wear in the engine was consistent with it having been fitted to a vehicle which had travelled between 300,000.00 to 500,000 kilometres. 17Mr Callaghan gave evidence of his conversations with BMI and the agreement with them that the warranty on the engine would be extended from 3 to 6 months. 18The applicant also relied on an email from Lee Notton to support his claim that BMI had represented that the engine had done about 100,000 kilometres. Mr Wotton alleged that BMI had told him that: "They had an identical motor that had only done 100,000 kilometres and came with a warranty." Respondent's Evidence 19On 30 January 2014 the respondent emailed two documents which it intended to rely on at the hearing. These were: a. Statement outlining dealings between BMI and the applicant; b. Copy of invoice 2561 dated 18 December 2012 relating to the sale of the engine ("the invoice"). 20Sworn evidence was also given by Jason Murray. The respondent's evidence may be summarised as follows: a. BMI spoke with an associate of the applicant in December 2012 about a second-hand 4.2 1 hd-ft 24 valve motor which was in stock; b. In complete form, the engine sold for $11,000.00 retail with a 3-months parts only warranty; c. As the motor being sold was incomplete, it was being sold for $9,500.00; d. When asked about how many kilometres the engine had done, the reply was: "With it being an import motor we work on these having travelled around 100,000 kilometres but do not get kilometre readings from overseas." e. BMI makes no guarantees about the kilometres each engine has done because they rely on information supplied by their agents. f. BMI explained to the applicant that the harmonic balancer was damaged and the turbo charger was not attached to the motor; g. BMI advised Mr Towe of the missing parts and for this reason could not test the engine; h. The applicant negotiated a price of $8,200.00 to purchase the engine with Mr Towe's original engine to be returned to BMI at their cost once the exchange engine had been fitted; i. Subsequently, the applicant notified BMI about a chipped camshaft and offered $700.00 as compensation. This offer was refused. j. The respondent relied on the terms of the warranty which only covered parts and not labour charges. BMI says it still has not received the engine from Mr Towe's vehicle. k. BMI has offered to pay the applicant $700.00 so long as the exchange engine is returned. 21Mr Murray requested an opportunity to inspect the engine but the Tribunal refused the application on the basis that the matter had been fixed for hearing and there had been ample time to make arrangements for this to be done. To allow an inspection of the engine would have delayed the matter unnecessarily. Findings and Determination 22The applicant claims that the respondent represented to him that the exchange engine had travelled about 100,000 kilometres and he relied on this representation when deciding to purchase it. The respondent admitted using words which suggested that the engine had travelled "around 100,000 kilometres" but says no guarantees were given about the kilometres travelled by each engine. 23The evidence of Mr Callaghan is that in his professional opinion the engine had probably done somewhere between 300,000 to 500,000 kilometres and was approaching the end of its serviceable life. The respondent did not provide an expert's report and this evidence was not seriously challenged by the respondent. 24The Tribunal finds on the evidence that the respondent had represented to the applicant that the exchange engine had done about 100,000 kilometres and the applicant had relied on this representation. The Tribunal accepts Mr Callaghan's evidence that the exchange engine had most likely done between 300,000 - 500,000 kilometres. 25The Tribunal finds that the respondent misrepresented the true condition of the exchange engine which exhibited considerably more wear and tear than could be expected of an engine which had travelled 100,000 kilometres. 26The exchange engine was sold to the applicant with a warranty. The invoice 0000 2561 set out the warranty terms as follows: "IMPORTANT: WARRANTY TERMS If within the period of the warranty, a unit is found to be defective, it will be repaired, replaced, or the purchase price refunded at the free choice of the vender upon return of the unit (freight prepaid) to our store. Specifically excluded from the warranty are:- 1. Any fitting, labour or transportation costs. 2. Any accessory units attached to the engine at the time of purchase. Such as the turbocharger, injector pump, injectors, fuel pump, starter motor, alternator, clutch, flywheel, distributor, carburettor or water pump etc. 3. Timing belt failure and consequential damage. A new Timing Belt MUST be installed. 4. Oil leakage, New oil seals are recommended to be fitted before install. 5. Damage resulting from incorrect or negligent fitting by the customer or his/her agents. 6. Any consequential loss or damage. 7. Parts used for competition use or modified from standard as supplied. Oil and Oil filter must be replaced before use. The cooling system including the radiator must be flushed and serviced, with a new water pump and thermostat to be fitted. The warranty is void if the unit is dismantled without prior consent." 27The warranty period is expressed to be 3 months. The evidence from Mr Callaghan is that the respondent agreed to extend the warranty period to 6 months. 28What is undisputed is that the applicant was given the option during the warranty period of having the engine "repaired, replaced or the purchase price refunded at the free choice of the vendor upon return of the unit (freight prepaid) to our store" if the unit was found to be defective. The warranty was subject to specific exclusions as listed above. 29The engine was delivered to the applicant a few days before Christmas. The warranty period initially expired about 18 March 2013 but was then extended to around 18 June 2013. 30According to the evidence from the applicant and Mr Callaghan, they first became aware of the problems with the engine in January/February 2013. At that point, they spoke with BMI but did not return the engine and request a refund of the purchase price. The applicant did not exercise his right during the warranty period to have the engine repaired, replaced or the purchase price refunded. 31The applicant was asked during cross examination why the engine was not returned during the warranty period. He replied that the engine was fitted to the vehicle and he was trying to get the engine running. 32The applicant filed an application on 5 November 2013 which was about 10 months after the exchange engine was purchased. 33Has the applicant by his conduct evinced an intention to continue with the contract? The authorities suggest that before a party may be regarded as having affirmed a contract, he must have two forms of knowledge: a. He must have known that as a matter of law, a right of termination must have arisen; and b. He must have known of the facts giving rise to the right of election. 34The applicant clearly had a right to return the engine to the respondent if it was found to be defective during the warranty period. The applicant did not exercise that right even though he knew the state of the engine. 35The Tribunal finds that by not exercising the right to return the engine and obtain a full refund during the warranty period, the applicant elected to affirm the contract. 36A further indication that the applicant affirmed the contract once the breach was discovered was that the applicant attempted to get the engine running. The applicant stated that the engine was in the vehicle and although it was running he was not confident that it would not break down. 37The Tribunal is satisfied that there has been a breach of contract and the applicant is entitled to damages. In assessing the damages, the Tribunal takes into account the obligation of the respondent to mitigate his loss. The applicant must take reasonable steps to minimise the loss he would suffer. 38During the hearing, the Tribunal encouraged the parties to try and reach a settlement of the dispute. Unfortunately, no agreement was reached although offers were made. 39The Tribunal has considered the evidence and the submissions of the parties. The applicant bears the onus of proof and must satisfy the Tribunal on the balance of probabilities that it should make an order in his favour. The applicant has discharged that onus. 40Although the applicant affirmed the contract, he is not precluded from seeking damages for breach. 41The respondent argued that the applicant had lost the right to return the engine and obtain a full refund given the passage of time and his conduct. There is merit in that argument. 42The applicant is entitled to damages for misrepresentation. He did not get what he bargained for. In the Tribunal's opinion, the applicant has not taken reasonable steps to mitigate his loss. 43The Tribunal notes that it was a condition of the contract between the parties that once the exchange engine was fitted, the applicant had agreed to return to BMI the engine from his vehicle. At the date of the hearing, this had not been done. 44Accordingly, the Tribunal makes the following orders: 1. The applicant Colin Towe is ordered to deliver to the respondent JP & KM Murray Pty Ltd t/as Brisbane Motor Imports the original engine fitted to the applicant's Toyota Landcruiser within 14 days of the date hereof. 2. The respondent is ordered to arrange with the applicant for the delivery of the engine and pay the transportation costs. 3. Upon delivery of the engine to the respondent, the respondent is ordered to pay the applicant Colin Towe the sum of $3,000.00 within 7 days of the date of delivery of the engine to the respondent. (signed) G Kinsey General Member Civil and Administrative Tribunal of New South Wales 24 April 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar