Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Ross Hereford v Automobile Direct Wholesale Pty Ltd [2015] NSWCATCD 58 Hearing dates: 12 March 2015 Decision date: 10 April 2015 Jurisdiction: Consumer and Commercial Division Before: G.J. Sarginson General Member Decision: 1. The respondent, Automobile Direct Wholesale Pty Ltd is to conduct repairs to the applicant's vehicle, at no cost to the applicant, in a proper and workmanlike manner, as follows: i. Eliminate oil leaks at front of motor; ii. Replace or repair faulty timing belt tensioner; iii. Conduct all necessary repairs to eliminate water in oil of the vehicle, and repair all damage to the motor caused by the internal water leak from the cylinder heads of the engine. 2. The repairs in order 1 above are to be completed on or before 2 May 2015. The vehicle is to be collected by the respondent and returned to the applicant's premises after being repaired. The parties are to agree on a suitable date for when the vehicle can be collected. Catchwords: Motor vehicles-Consumer guarantees-Acceptable quality-Major failure-Remedies Legislation Cited: Consumer Claims Act 1998 ss 3, 3A, 7, 8, 13 Australian Consumer Law 2010 ss 18, 54, 259, 260, 262 Motor Dealers Act 1974 Motor Dealers and Repairers Act 2013 Cases Cited: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]-[29] Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211 at [77] Category: Principal judgment Parties: Ross Herford (applicant) Aubomible Direct Wholesale Pty Ltd (respondent) Representation: Applicant in person Respondent: Ms T Bakhos, Manager File Number(s): MV 14/52745 Publication restriction: Nil REASONS FOR DECISION 1. The matter was listed for hearing at the Tribunal in Liverpool on 12 March 2015. The applicant appeared and gave sworn evidence. Ms Bakhos, manager, of the respondent, appeared and gave sworn evidence. BACKGROUND 1. The applicant commenced proceedings in the Tribunal on 30 October 2014. The matter was listed before the Tribunal on 17 December 2014, when the Tribunal set the matter down for a special fixture hearing, and made orders regarding the filing and service of documentary evidence. The orders for the filing and service of evidence were varied during the course of the proceedings. 2. The dispute involves a 2006 model Honda Legend which the applicant purchased from the respondent on 5 September 2014 for the sum of $15,500.00. The vehicle had travelled 128,279 klms when sold. The vehicle was sold with a Form 4 dealer warranty under Section 24 of the Motor Dealers Act 1974 (as it then was). The vehicle was also sold with a further warranty by National Warranty Company. The vehicle had been advertised by the respondent on the internet. Prior to purchasing the vehicle, the applicant had a Motor Traders Association of NSW Pre Purchase Inspection report performed on 21 August 2014. He did not personally inspect the vehicle prior to purchase. 3. The applicant resides at Ocean Shores on the far north coast of NSW. He travelled to Sydney to take delivery of the vehicle. On the drive back to his residence (approximately 900 klms from Sydney), he noticed a noise in the motor. On 7 September 2014, the applicant took the vehicle to Mr Lang, mechanic, of Chicogan Mechanical in Mullumbimby NSW. Mr Lang diagnosed the vehicle as having a faulty timing belt tensioner, and a water leak from the cylinder heads. 4. The parties then engaged in correspondence (both orally and by email) regarding repair of the vehicle, which is discussed below. The applicant complained to NSW Fair Trading. An automotive inspector, Mr Galea, attempted to arrange a meeting with the respondent between 29 October 2014 and 7 November 2014. The report of the NSW Fair Trading Automotive Inspector, Mr Galea, dated 11 November 2014, states that attempts were made to meet a representative of the respondent who had authority to make decisions for the respondent, but the meeting was changed by the respondent and when Mr Galea attended the respondent's premises, no one was present who had authority to make decisions for the respondent. Mr Galea informed the applicant of his option to commence proceedings in the Tribunal. 5. According to the applicant, the vehicle remains at the premises of Chicogan Mechanical. THE CLAIM 1. The applicant originally claimed a full refund of the purchase price of the vehicle, and various costs of registration and travelling to Sydney to drive the vehicle back to Ocean Shores. 2. On 6 March 2015, the applicant wrote to the Tribunal to amend the claim as follows: 1. A full refund for purchase price of the vehicle; or 2. All faults with the vehicle be repaired, at the nearest Honda dealership, at the expense of the respondent; and 3. A new 3 month statutory warranty be issued with the vehicle and the 12 month after market warranty be re-started once the repairs are completed; and 4. A further 3 months registration be placed on the vehicle at the respondent's expense. APPLICANT'S DOCuMENTS, EVIDENCE, AND SUBMISSIONS 1. The applicant relied on the following documents: 1. Reports of Mr Lang, of Chicogan Mechanical, dated 6 January 2015 and 10 October 2014; 2. MTA Pre Purchase Inspection report dated 21 August 2014; 3. Report of Redsen Auto Spares & Repairs dated 29 August 2014 (in respect of a service of the vehicle obtained by the respondent); 4. Report of Mr Galea, NSW Fair Trading Vehicle Inspector, dated 11 November 2014; 5. Various emails between the parties, both prior to the purchase of the vehicle, and subsequent to the purchase of the vehicle; 6. The internet advertisement for the vehicle; 7. Summaries of text messages between the parties; 8. Phone records of the applicant evidencing phone calls and texts to the respondent. 1. The applicant's evidence and submissions can be summarised as follows: 2. The internet advertisement for the vehicle advertised the vehicle as being in excellent condition for its age and kilometres; 3. The applicant obtained a pre-purchase inspection report by an Motor Traders Association mechanic prior to the decision to purchase the vehicle; 4. After negotiations with the respondent, the respondent sent the vehicle to Redsen Auto Spares & Repairs to have issues raised in the MTA Pre Purchase Inspection Report dealt with. Not all of the issues of the vehicle were adequately repaired; 5. After agreeing to purchase the vehicle, the applicant flew to Sydney and drove the vehicle back to Ocean Shores, a distance of approximately 900 klms and 10 hours driving time; 6. On the drive back, the applicant noticed a noise in the motor; 7. The applicant took the vehicle to Mr Lang. In respect of the motor, Mr Lang said there was a major fault with the motor, due to water being in the engine oil from a leak in the cylinder heads. Mr Lang informed the applicant that the only way to diagnose the cause and extent of the problem with the motor was to remove the cylinder head, which would cost $1,900.00; 8. The applicant spoke to the respondent (dealing at all relevant times with Ms Bakhos). The respondent had agreed to take the car back to Sydney and have it repaired. There had also been discussions in respect of the vehicle being repaired by Mr Lang. However, after delays; the respondent not agreeing to extend the dealer warranty and aftermarket warranty; and the respondent not meeting with the NSW Fair Trading Vehicle Inspector, the applicant had "lost faith" in the respondent, and did not believe the respondent would adequately repair the vehicle; 9. The vehicle was sold with a "major fault" under Section 259 of the Australian Consumer Law 2010, and the applicant is entitled to return the vehicle and obtain a full refund; 10. The Tribunal should draw the inference that the engine had an internal water leak with significant damage when it was sold; 11. The respondent had a reasonable opportunity to repair the vehicle, and the applicant has no faith that any repairs of the vehicle by the respondent or a mechanic organised by the respondent would be conducted adequately; 12. There would be inconvenience to the applicant if the vehicle was repaired in Sydney. 13. The applicant is moving to New Zealand for a long period of time in early May 2015. 14. Two key pieces of evidence are the MTA Pre Inspection Report dated 21 August 2014 and the reports of Mr Lang. MTA Pre Inspection Report 1. The MTA Pre Inspection Report states that the vehicle was taken for a road test at speeds of up to 80 klms per hour. The road test comments were "ABS and cruise control operated correctly. Vehicle drove well. Detected a vibration at low rpm (1,500 rpm) when coating at low speed". In respect of the engine, the report comments "Engine was warm upon arrival-recommend cold test to confirm valve seal condition. Engine runs and sounds good with no internal running faults at the time of inspection. The engine and its components appear in good order at the time of inspection. Engine passed CO2 leakage test. Oil evident at timing cover and front of sump. Clean and reassess/repair as required. Oil seepage at top rear of engine consistent with rocker cover gasket leak. Needs degrease and wash to confirm". The report describes the overall condition of the engine as "Good". 2. In respect of the cooling system, the report comments "Cooling system has passed pressure test. Engine is running at normal temperature. The cooling system and its components appear in good order of service at the time of inspection". The report describes the overall condition of the cooling system as "Good". 3. The report contains a number of disclaimers on page 2. The report states that it is "largely a visual and/or check operation inspection"; there is no compression check of the engine; and "the report is not to be relied upon to determine if internal problems exist in the engine, transmission, or any other operational component; general operational checks are carried out only". Reports of Mr Lang 1. The applicant's documents contained 2 reports of Mr Lang, but the applicant stated the second report was simply an elaboration of the first report. The report of 10 October 2014 states: "Vehicle brought to workshop indicating a leaking water pump. Parts were removed and found that water pump was in fact new and was not leaking. It appears that the water is coming from a cylinder head/heads, however unable to ascertain the problem until the heads are removed and is not known what repairs will need to be carried out to fix the problem. Noise from timing belt tensioner and oil leak at front of engine". 1. The report of 6 January 2015 states: "On 7 September 2014, 2006 Honda Legend…was brought into this workshop for a noise at front of the engine. An inspection was made and appeared to be a leaking water pump. A new water pump was ordered and when the repairs were being carried out it was found that a near new water pump had been fitted. It was found that the noise was coming from a faulty timing belt tensioner. A further inspection was made and it was found that there was a water leak from the cylinder heads. This leak is a major fault and means extensive repairs would have to be carried out. It is not possible to determine the extent of the damage/repair until the cylinder heads are removed. According to Honda, the removal of the cylinder heads alone requires approximately 19 hours labour, which could cost $1,900.00. In addition to the removal of the cylinder heads, machining or replacement of the heads may be required. Additional parts required will include cylinder head gasket set, timing belt kit, water pump, thermostat, coolant, the radiator will require servicing, oil, and filter. It is possible additional parts may be required at the time the repairs are carried out. It is not possible to make an accurate estimate of the cost of repairs until the cylinder heads are removed. However, could be approx. $6,000.00. The vehicle should not be driven." RESPONDENT'S DOCUMENTS, EVIDENCE, AND SUBMISSIONS 1. The respondent had not filed and served documents in accordance with Tribunal directions. The documents were not admitted into evidence. The respondent brought documents to the Tribunal. Most of the documents that the respondent sought to tender were documents that the applicant had tendered in any event. 2. The respondent's submissions can be summarised as follows: 3. The vehicle was sold in a roadworthy condition, and was of acceptable quality for its age, kilometres and price; 4. The respondent was not aware, and could not have been reasonably aware, of any fault by way of water in the engine when the vehicle was sold; 5. Any damage to the engine may have occurred on the trip from Sydney to Ocean Shores; 6. The evidence from the applicant does not establish exactly what is wrong with the motor, other than there being evidence of water in the engine oil. The cause of that problem is not established, nor what precisely what needs to be done to repair the vehicle. The vehicle may not have substantial damage to the engine; 7. The respondent is prepared to repair the vehicle under warranty, but repairs should be organised by the respondent, including taking the car back to Sydney. JURISDICTION 1. The applicant is a "consumer" with the meaning of Section 3 of the Consumer Claims Act 1998, and the claim is a "consumer claim" within Section 3A of that Act. Proceedings have been brought in the Tribunal within the relevant limitation period in Section 7 of the Consumer Claims Act 1998. The Tribunal has jurisdiction in this matter. RELEVANT LEGISLATION AND LEGAL PRINCIPLES 1. Under Section 18 of the ACL, a person "must not, in trade or commerce, engage in conduct that is misleading or deceptive, or likely to mislead or deceive". The conduct (by words, actions, or in certain circumstances, silence) must lead, or be likely to lead, persons to whom it is directed into error, and there is no requirement for an intention to mislead or deceive (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198). However, any misleading or deceptive conduct, or conduct likely to mislead or deceive, must cause the other party to sustain loss or damage, in the sense that there was reliance on the conduct (Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]-[29]; Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211 at [77]) 2. Under Section 54(1) of the ACL, there is a guarantee that goods supplied in trade or commerce are of "acceptable quality". Section 54(2) and (3) of the ACL states: "(2) Goods are of acceptable quality if they are: fit for all the purposes for which the goods of that kind are commonly supplied; and acceptable in appearance and finish; and free from defects; safe; and durable as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects) 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; (d) any representations 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." 1. Pursuant to Section 54(7) of the ACL, goods do not fail to be of acceptable quality if the consumer acquiring the goods examines them before purchase, and the examination ought reasonably to have revealed the goods were not of acceptable quality. 2. Under Part 5-4 Division 1 of the ACL (relevantly, Sections 259-263 of the ACL) a consumer has a right of refund if failure to comply with a consumer guarantee "cannot be remedied or is a major failure" ("major failure" being defined under Section 260 of the ACL); the consumer has notified the supplier that the goods have been rejected and the grounds for rejection (as defined in Sections 259(3)(a) and 262 of the ACL); and the consumer has returned the goods (as defined in Section 263 of the ACL). A number of decisions of the Tribunal have considered Section 259 of the ACL (e.g. Paul Masden v Agricon Pty Ltd [2014] NSWCATCD 79; Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72). 3. Relevantly, Section 260 of the ACL defines "major failure" as: "(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure: 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 period of time, be remedied to make them fit for such a purpose; or (d) the goods are unfit for a disclosed purpose and 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 period of time, be remedied to make them fit for such a purpose; or the goods are not of acceptable quality because they are unsafe." 1. If the applicant proves breach under Sections 18 and/or 54 and/or 259 of the ACL, the Tribunal must determine an appropriate remedy. The remedies available are set out in Section 8 of the CCA. Such remedies include an order that goods be repaired. Under Section 13(1) of the CCA, the Tribunal "must make such orders as, in its opinion, will be fair and equitable to all the parties of the claim". 2. When the vehicle was sold, it was sold with a 3 month or 5,000 kilometre warranty pursuant to Section 24 of the Motor Dealers Act 1974 (repealed on 1 December 2014 by the Motor Dealers and Repairs Act 2013). APPLICATION OF LEGAL PRINCIPLES TO FACTS 1. The Tribunal is not satisfied to the requisite standard of proof that the advertisement of the vehicle as being in excellent condition for its age and kilometres constitutes a breach of Section 18 of the ACL. The applicant had the vehicle inspected prior to purchase by a mechanic, and made his decision to purchase the vehicle after such an inspection occurred. The Tribunal is not satisfied that the advertisement was misleading or deceptive, or likely to mislead or deceive, and in any event the applicant has not relied upon such a representation, because he has made his own independent inquiries about the condition of the vehicle before deciding to purchase the vehicle. 2. For the applicant to succeed under Section 259 of the ACL, he must establish that the vehicle was sold with a "major failure". In this matter, the central issue is the condition of the motor, and in particular, the water leak in the motor from the cylinder heads. For the Tribunal to be satisfied there is a "major failure" the Tribunal must be able to identify what the nature and extent of the failure is. The applicant's expert evidence is deficient in this regard. The expert report of Mr Lang only identifies that there is a water leak in the cylinder heads of the motor, and that further investigations will have to occur to determine the cause of the water leak and any damage. Although Mr Lang speculates as to what the cost of repairing the damage "might" be (up to $6,000.00), there is no evidence as to what exactly is the damage to the motor; nor the precise cause of the damage; nor the precise measures necessary to repair the damage. 3. The report of Mr Lang does not indicate that the fault with the timing belt or oil leak at the front of the motor cannot be easily repaired, or that the fault with the timing belt tensioner is so significant that it is a major fault with the vehicle. As discussed above, the report of Mr Lang is that it is the water leak which is the salient fault with the motor of the vehicle. 4. Importantly, the report of Mr Lang does not exclude the possibility that the water leak in the cylinder heads of motor occurred when the applicant was driving the vehicle from Sydney to Ocean Shores. The report of the MTA Pre Inspection mechanical report makes reference to the condition of the motor, and presumably the mechanic who conducted the inspection checked the oil of the vehicle. There is no mention in the MTA Pre Inspection mechanical report of water being in the oil of the motor. Mr Lang's report does not indicate whether he found water in the oil when he checked the dipstick of the vehicle, or until he removed the water pump and made some inspection of the internal components of the engine. Further, Mr Lang's report does not indicate how much water he found in the engine, state the possible causes of the water leak, such as a blown head gasket. 5. The applicant submitted that the Tribunal should draw an inference that, because water was found in the oil of the engine, and that it may cost $1,900.00 to ascertain the cause of the damage and the extent of the damage that the vehicle was sold with a "major failure" under Section 259 of the ACL. However, in the absence of more extensive expert evidence, the Tribunal is not satisfied to the requisite standard of proof that such an inference be drawn. 6. Further, under Section 262(1) (c) of the ACL, a consumer is not entitled to reject goods under Section 259 of the ACL if "the goods were damaged, after being delivered to the consumer for reasons not related to their state or condition at the time of supply". In circumstances where the MTA Pre Inspection Mechanical report indicated the condition of the motor was "Good"; and there is no mention in the report of water being in the motor oil, there is a real possibility that the engine did not have a water leak from the cylinder heads when the vehicle was sold. It is possible the water leak developed on the trip from Sydney to Ocean Shores by reason of natural wear arising from the age and kilometres the vehicle had travelled when purchased, rather than because there was an inherent defect in the motor when it was sold. Again, the report of Mr Lang does not deal with this issue. 7. Pursuant to Section 259(1)(b) of the ACL, a consumer may reject goods (subject to the provisions of Section 262 of the ACL) in circumstances where the failure is not a "major failure" but the supplier has "refused" or "failed" to comply with a requirement by the consumer that goods be repaired "within a reasonable period of time". In this matter, the applicant initially requested the respondent repair the vehicle, and there were negotiations between the parties as to how and when this was to occur. However, the Tribunal is not satisfied the applicant has proved to the requisite standard that the respondent breached Section 259(1)(b), as the applicant stated that he did not want the mechanic who had previously worked on the car before it was sold by the respondent to again work on the car (email from applicant to respondent dated 13 October 2014) and also placed other conditions on the vehicle being repaired by the respondent, such as that the statutory warranty period be extended, and details be provided of "what warranty will come with the mechanical work" (email of the applicant to the respondent dated 16 October 2014). 8. The Tribunal is also not satisfied the applicant has proved to the requisite standard of proof that the vehicle was not of acceptable quality in breach of Section 54 of the ACL when sold. As discussed above, the expert evidence of the applicant is insufficient for the Tribunal to conclude that the engine of the vehicle was defective when sold. Further, pursuant to Section 54(7) of the ACL, 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". The MTA Pre Inspection mechanical report made no mention of water in the oil of the vehicle, and if there was any significant amount of water such a defect would likely to have been revealed when the dipstick of the vehicle was checked. 9. In any event, the report of Mr Lang does not explain why water in the oil was not apparent to the mechanic who performed the MTA Pre Inspection report. A possible reason is that the water in the oil could only be found after the water pump was removed, not by checking the dipstick. However, it is also possible that there was no water leak from the cylinder heads when the vehicle was sold, and there is no evidence to indicate that if there was a water leak from the cylinder head that such a defect could reasonably have been known by the respondent. 10. Although the applicant has failed to prove to the requisite standard of proof that the respondent breached Sections 18, 54, and 259 of the ACL, the problem with the motor of the vehicle occurred during the statutory warranty period under the Motor Dealers Act 1974. Accordingly, the applicant is entitled to have the vehicle repaired by the respondent under the statutory warranty. Under the statutory warranty, it is the respondent who must repair the vehicle, or cause for the vehicle to be repaired. The respondent may decide to use a local mechanic so the vehicle does not have to be transported to Sydney. As it is the respondent who has the obligation to repair under the statutory warranty, it is inappropriate for the Tribunal to direct that such repairs must be carried out by the "nearest Honda dealership" as the applicant seeks in the amended application. However, as the dispute has been ongoing while the matter has been before the Tribunal, and the applicant is going overseas in the near future, the Tribunal directs that such repairs be performed expeditiously. 11. As the Tribunal is not satisfied that the applicant has proved to the requisite standard of proof the respondent breached Sections 18, 54 and 259 of the ACL, the applicant is not entitled to the further remedies he seeks in respect of extension of the dealer warranty or the cost of further registration of the vehicle. 12. For the above reasons, the Tribunal orders that the respondent repair the vehicle. G J Sarginson General Member Civil and Administrative Tribunal of NSW 10 April 2015 ********** 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: 08 July 2015