Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Nikoiee v Marshalls Sydney Pty Ltd [2018] NSWCATCD 63 Hearing dates: 10 August 2018 Date of orders: 29 October 2018 Decision date: 29 October 2018 Jurisdiction: Consumer and Commercial Division Before: J A Ringrose, General Member Decision: (1) The applicant is to return her 2017 model Mercedes Benz C200 two door Cabriolet registered number DMZ 34N to the respondent and transfer ownership over to it within 14 days of the date of these orders. (2) Immediately upon return and transfer of the vehicle the respondent is to pay the applicant the sum of $70,000.00. (3) The respondent is to pay the applicant's costs on a party/party basis within 14 days after an agreement or assessment under Pt 4.3 Div 7 of the Legal Profession Uniform Application Act 2014. Catchwords: Australian Consumer Law – remedies for breach of consumer guarantees – whether a major failure has been established – failure to diagnose and rectify faults – award of costs – whether it is necessary to establish special circumstances where r. 38 applies. Legislation Cited: Australian Consumer Law 2010 Civil and Administrative Tribunal Act 2013 Competition and Consumer Act 2010 Cases Cited: Australian Rong Hua Fu Pty Ltd v Ateco Automotive [2015] VCAT Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at 50 Goldiwood Pty Ltd v ADL (Aust. Pty Ltd) [2014] QCAT 38 Lataudis v Casey [1990] HCA 58 Oshlock v Richmond River Council [1998] 193 CLR 72 Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSW CATAP 80 Category: Principal judgment Parties: Noshin Nikoiee (Applicant) Marshalls Sydney Pty Ltd (Respondent) Representation: Kazem Elkheir, solicitor of Birchgrove Legal appeared for the applicant Ms Codd appeared for the respondent File Number(s): MV 18/17088 Publication restriction: Nil REASONS FOR DECISION Application 1. By an application filed on 13 April 2018 the applicant sought an order that the respondent should repair or replace her faulty motor vehicle to the value of $86,500.00. She claimed that she purchased the new vehicle from the respondent on or about 9 April 2017 and the vehicle had a number of defects which the respondent had failed to rectify pursuant to the warranty. She sought to have her vehicle replaced with a new vehicle or like make and model without any defects. 2. The application was initially listed before the Tribunal on 24 May 2018 where the applicant was directed to provide all documents on which she wished to rely on by 22 June 2018 and the respondent was directed to supply all of its documents by 4 July 2018. 3. The matter was listed for hearing on 20 July 2018 but was adjourned on the basis that the applicant was to be overseas on the Hearing date. The matter was then listed for hearing on 10 August 2018 and at the conclusion of the Hearing directions were made for both parties to provide submissions on costs if so advised. Final submissions were received on 7 September 2018. Applicant's Evidence and Submissions 1. In an affidavit sworn 7 July 2018 the applicant proposed that on about 9 April 2017 she entered into a contract with the respondent with the purchase of a 2017 Mercedes Benz C200 motor vehicle at a price of $86,500.00. The contract of purchase shows that the vehicle price was $71,119.44 together with private registration and insurance, dealer delivery charges, stamp duty, GST and a luxury car tax which increased the amount payable to $86,500.00. 2. The applicant claimed that soon after the purchase she became aware that the vehicle had certain issues which she did not expect with a brand new car. Those issues included:- 1. Airbag lights activated indicating an issue with the airbag. 2. All the functions on the steering (telephone, Bluetooth etc) were not functioning. 3. The car horn was not working. 4. A notice was displayed indicating the vehicle's battery had been exhausted. 5. The steering wheel was making unusual sounds when turning. 1. The applicant states she approached the respondent concerning the defects in around June 2017 when works were undertaken under the warranty but the vehicle continued to show the same defects even after the steering wheel unit had been replaced. 2. The applicant advised the respondent of the recurring defects in about January 2018 and in February the vehicle was returned for fuel system software to be replaced with a further complaint made of problems with the operation of the steering column but the service personnel claimed that they could not reproduce the fault. There were further complaints, problems in the function of the navigation system and the radio and again it was claimed that these faults could not be reproduced. 3. In late February 2018 the vehicle was again returned with a notation that the airbag warning light was still causing a problem and the steering wheel noise had not been rectified. The applicant still had difficulties with the Bluetooth phone operations through the steering wheel and the battery warning alarm was also continuing to cause problems. 4. On 28 February 2018 the applicant wrote to the respondent complaining that the steering fault appeared to have continued notwithstanding repairs and at that time she sought to return the vehicle and claim a new car. She described the vehicle as being unsafe as the airbag lights were on and functions on the power steering were not working. She claimed that she had stopped driving her vehicle and had stopped making payments until the issues could be resolved. 5. By 13 April 2018 the applicant instructed solicitors to write to the respondent pointing out that since the vehicle's purchase it had suffered from a number of serious flaws and these had been raised with the respondent and attempts were made to repair the problems. It was claimed that despite a number of attempts to repair the vehicle there were still having problems with electrical faults and the steering wheel function did not work. This was regarded as a serious safety issue. A request was again made for replacement of the vehicle with a brand new vehicle or a new alternative or a return of the vehicle with the purchase price to be refunded. 6. On 18 June 2016 the applicant offered to return the vehicle in exchange for a payment of $75,000.00. The respondent replied to that proposal pointing out that should the applicant wish to engage in a discussion on a trade in to allow her to take delivery of a new vehicle a sum of $55,000.00 could be paid noting that the vehicle had travelled 17,075 kilometres and that it had sustained some damage to the front bar and rear bar as well as damage to the wheels which would cost an estimated $5,000.00 to repair. 7. An expert report from Mr Ramin Gilani, trading as Gilani Engineering was also included in the applicant's evidence. The report was prepared at the request of the applicant's solicitors. Mr Gilani appears to be an independent expert who has acknowledged that he is bound by the expert code of conduct. He concluded in his report that, according to requirements of the Road Transport (Vehicle Registration) Regulations 2017, the applicant's vehicle had failed to meet the requirements and had been assessed as posing an imminent risk to road safety. Details upon which he had reached this conclusion are to be addressed shortly. Respondent's Evidence 1. The material provided on behalf of the respondent alleged that during the ownership of the C200 Cabriolet the vehicle was only presented to the dealership twice with concerns and since the recent concern had been raised, all offers to repair had been denied. It is claimed further that the respondent offered to purchase the applicant out of her vehicle and provide market value to her, however this had also been declined. 2. The chronology of visits in summary noted that the vehicle was purchased on 9 April 2017 and delivered on 24 April 2017. It was presented to the dealership with concerns on 27 July 2017 after it had travelled 2,891 kilometres. At that point in time the steeling column module was totally replaced. 3. It was noted that the vehicle was presented again on 31 January 2018 when the vehicle had travelled some 10,671 kilometres and concerns were again addressed but no faults were found. In summary on 4 June 2018, in accordance with orders from the Tribunal, it was presented, having travelled 17,075 kilometres, for diagnosis. At that point it is alleged that the offer to repair was refused. 4. These allegations were supported by a statement from Mr Alex Ayeub who is a workshop foreman in the employ of the respondent, Marshalls Motors at Parramatta. In addressing the first referral he agreed that the vehicle was seen having travelled 2,891 kilometres with complaints of noise in the steering column. The steering column module was then replaced although the applicant had requested a new vehicle. 5. In relation to the second referral in January 2018 he noted that the vehicle had travelled 7,780 kilometres and indicated that it was checked by a Mr Reyes, automotive electrician, where the faults complained of could not be reproduced. 6. It is noted that the vehicle was referred back after a direction from the Tribunal and it was inspected by two other tradespersons in the employ of the respondent and it was conceded that certain repair work was required but this was not authorised by the applicant. 7. The service repair order from 23 January 2018 was produced and it is noted that the applicant complained of noise emanating from the steering column but that the serviceman could not reproduce the fault during test. The applicant made a further complaint about a malfunction of the navigation and radio equipment but again the fault could not be reproduced. The vehicle was returned on that occasion after a fuel system recall notice had been complied with. 8. The next service repair order dated 28 May 2018 noted that there were problems with the Bluetooth and phone options which were inoperable from the steering wheel. The steering wheel was noisy whilst turning and the offside airbag warning light came on as did the battery warning light in the dashboard. The job sheet indicated clearly that there was an internal malfunction of the steering column module again and that a further replacement was required. The investigations also verified that there was an internal malfunction of the buffer battery and that a new buffer battery was required. It is in relation to these findings, which were made following an order of the Tribunal, that the applicant refused to resubmit her vehicle for repair. 9. The material submitted on behalf of the respondent includes a letter dated 2 March 2018 from the solicitors acting for the applicant in which it was claimed that the vehicle purchased in April 2017 had suffered from a number of serious flaws and that despite attempts to repair the vehicle it still suffered from serious electrical faults and the steering functions did not work. The dashboard lights did not turn on and there was a serious issue which had prevented the applicant from being able to drive the vehicle for an extended period. The letter went on to request that in view of the major defects a new replacement vehicle should be provided or in the alternative the purchase price should be refunded less payments made to date. 10. A reply from the respondent signed by Ms Codd pointed out that concerns with the vehicle had only been brought to the attention of the respondent on two separate occasions and that the concerns were raised and actioned. It was noted that around February 2018 the applicant spoke with a member of the dealership in relation to an additional concern and there was an offer made to collect the vehicle and provide a courtesy car. That offer was declined. A recall notice was apparently issued by Mercedes Benz requiring a checking of the steering column and re-grounding if required. That notice related to Mercedes Benz C and GLC passenger vehicles but there is no suggestion that the applicant actually received notice of that recall and it would appear that the respondent did not become aware of the recall until it was raised in correspondence with the applicant's solicitor in late May 2018. 11. The applicant's solicitor listed ongoing concerns with Ms Codd on behalf of the respondent on or about 28 May 2018 which included:- 1. All functions on the steering wheel (telephone, Bluetooth etc) were not working. 2. The steering wheel was making noises when turning. 3. The airbag light was on. 4. A notice pops up every now and again advising the battery had been exhausted. 1. It was following the receipt of that letter that Ms Codd advised that there was a factory recall for the steering column to check the mechanic column and rework if necessary. On 4 June 2018 the applicant authorised the release of her vehicle without completing the recall at that stage. 2. On 7 June 2018 the solicitors for the applicant proposed that the vehicle be returned and that it be purchased by the respondent less any depreciation and that each party should bear their own costs. It was pointed out that an engineer had been engaged to inspect the vehicle with a view to determining the nature of the defects and whether they amounted to major defects. A reply from Ms Codd on 15 June 2018 suggested that the vehicle had been evaluated and repairs were necessary on the front bar, rear bar and wheels at a total cost of $5,000.00. Taking into account those repairs, an offer was made of $55,000.00 inclusive of GST to purchase the vehicle. On 18 June 2018 a counter offer was made by the applicant's solicitors in a sum of $75,000.00 inclusive of GST. 3. A valuation certificate was provided based upon the red book valuations which were noted as $66,100.00 for a private sale in as new condition and $58,850.00 for a trade in as new. The valuations ranged down to a private sale at a sum of $58,700.00 in poor condition and a trade in of $51,250.00 in a poor condition. A valuation was also provided by Appraisal Solutions noting repairs being required for a sum of $5,000.00. That valuation less reconditioning costs was assessed in the sum of $55,000.00 which was equivalent of a private sale in fair condition from the red book. Decision 1. On about 9 April 2017 the applicant entered into a contract with the respondent for the purchase of a 2017 Mercedes Benz C200 motor vehicle at a cost of $86,500.00. Soon after she purchased the vehicle she became aware that the vehicle had issues with it which could be described as unusual with a new car. Some of the issues were experienced immediately after the vehicle was purchased including an airbag light coming on (indicating there was an issue with the airbag), functions in the steering column including telephone, Bluetooth etc were not responding correctly, the car horn was not working and the steering wheel was making unusual sounds whilst turning. 2. The applicant notified the respondent in or around June 2017 and rectification works, which involved the replacement of the steering unit, were undertaken in July 2017 under warranty. 3. Recurring defects were noted in January 2018 and when the vehicle was delivered for further investigation the respondent reported that no problems could be detected on inspection. 4. From about February 2018 to May 2018 a solicitor, on behalf of the applicant, communicated with the respondent and it was proposed by the respondent that any further problems would be repaired and that no replacement vehicle would be considered. 5. After the matter was listed in the Tribunal on 24 May 2018 the applicant delivered her vehicle to the respondent again with ongoing complaints that the Bluetooth and phone options were not functioning and that the steering wheel was noisy whilst turning. She also claimed that the airbag warning light was being activated on the dashboard and that a CS battery warning light was also showing. It was after this investigation that the respondent determined that the steering unit again required replacement. It was at about that time the respondent advised the applicant that there was a recall warning on some aspect of the steering unit which required investigation. 6. The respondent has at all times declined to offer a replacement vehicle but rather has insisted that any problems could be repaired under the new car warranty which extended for a period of three years. The parties were unable to reach any agreement as to a basis upon which the vehicle could be repurchased by the respondent or traded on a newer vehicle. 7. The claim by Ms Nikoiee is made under the Australian Consumer Law which is set out in Schedule 2 of the Competition and Consumer Act 2010 (CTH). 8. Subdivision 2A, Div 1 of Pt 3.2 of the Australian Consumer Law (NSW) provides for statutory guarantees in relation to the supply of goods. Section 54, so far as is relevant, provides:- 54 Guarantee as to accept all quality 1. If 1. a person supplies, in trade or commerce, goods to a consumer and, 2. the supply does not occur by way of sale by auction, there is a guarantee that the goods are of an acceptable quality. 1. Goods are of acceptable quality if they are:- 1. fit for the purposes for which the goods of that kind are commonly supplied; and 2. acceptable in appearance and finish; and 3. free from defects; and 4. safe; and 5. 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 subs (3). 1. The matters for the purposes of subs (2) are; 1. The nature of the goods; and 2. The price of the goods (if relevant); and 3. Statements made about the goods on any packaging or label on the goods; and 4. Any representation made about the goods by the supplier or manufacturer of the goods; and 5. Any other relevant circumstances relating to the supply of goods. 1. Part 5.4 of the Australian Consumer Law provides remedies for breach of the statutory guarantee. 2. Section 259(1) of the Australian Consumer Law (NSW) provides that a consumer may take action against a supplier if one of the guarantees that relate 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. 1. 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 failures so remedied or notify the supplier that the goods are rejected. 1. 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 value of goods below the price paid. 2. In the circumstances of the present case there is a dispute between the parties as to whether there was a "major failure" in compliance for the guarantee under s. 54 and it is necessary therefore to have regard for the provisions of s. 260 which provides:- 260 When a failure to comply with a guarantee is a major failure A failure to comply with a guarantee referred to in s. 259(1) that applies to a supply of goods is a major failure if; 1. the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or 2. the goods depart in one or more significant respects … 3. the goods are substantially unfit for a purpose for which the goods of the same kind are commonly supplied and they cannot easily and within a reasonable time be remedied to make them fit for such purpose. 4. … 5. the goods are not of acceptable quality because they are unsafe. 1. In the present instance it is noted that there is a dispute between the parties as to whether the steering failure and the battery failure as well as the airbag warning light failure constituted a major failure "within the meaning of the Australian Consumer Law (NSW)". 2. It is not disputed that the respondent arranged for repairs to be undertaken under warranty and there was no cost to the applicant when repairs were undertaken on the first occasion although the respondent claimed that no faults were evident when the vehicle was retuned in January 2018. There is no dispute that the applicant in May 2018 refused to allow the vehicle to be retained for repair work to again be undertaken but rather sought compensation representing the value of the vehicle after it had been returned to the respondent. 3. There is no doubt that the jurisdiction for the applicant to bring her claim previously existed under the former Consumer Claims Act and now exists under provisions of the Fair Trading Act. The statutory limit under the Fair Trading Act is extended beyond the sum of $40,000.00 because the present claim relates to a new motor vehicle. 4. Section 260 of the Australian Consumer Law (NSW) sets out the test for when a failure to comply with a consumer guarantee will be a "major failure" and in the present instance the applicant relies on s. 260(a) which provides that a failure to comply with a consumer guarantee of acceptable quality is a major failure if "the goods would not have been acquired by a reasonable consumer fully equated with the nature and extent of the failure". 5. Although s. 260 of the Australian Consumer Law (NSW) sets out five measures against which non-compliance is to be assessed, for the purposes of determining whether there is a "major failure", as observed by the Magistrates Court of Victoria in Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at 50 for there to be a major failure it is not necessary for the claimant to establish each of the matters set out in s. 260 and establishing one is sufficient. 1. Subsection 260(a) applies to a generic "reasonable consumer" who acquires goods. It has the broadest and most general application (see Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSW CATAP 80). 2. Subsections 260(c) and 260(e) detailing where goods are "substantially unfit" or where they are "unsafe" directs specific attention to the nature and extended failure. 3. In Cary Boyd v Agrison (supra) the Court accepted that a major failure might be constituted by a series of specific or individual defects which, when taken as a whole, constitute a major failure. This construction is not controversial and the approach has been taken in a number of other Australian Tribunals. 4. In Goldiwood Pty Ltd v ADL (Aust. Pty Ltd) [2014] QCAT 38 the Queensland Civil and Administrative Tribunal considered a scope of s.260 when determining a claim for refunding in respect of financial planning software. The Tribunal appeared to accept the notion that non-compliance with s. 54 will invariably amount to a major failure although the New South Wales Appeal Panel in Safi (supra) expressed the view that this would be going "too far". 5. In Australian Rong Hua Fu Pty Ltd v Ateco Automotive [2015] VCAT the Victorian Civil and Administrative Tribunal observed that a reasonable consumer would expect teething problems with a new vehicle and observed:- Returning to s. 260(a) again it cannot be said that a truck would not have been acquired by a reasonable consumer fully equated with the nature and extent of failures taken as a whole. I say the reasonable consumer takes risks when purchasing goods which are most often addressed by repair of goods. A reasonable purchaser would take the risk of teething problems, a period of use and then misfortune of further teething problems most addressed under warranty. 1. The principals referred to must be evaluated in the present case in the light of a failure of a significant component which could affect safety, followed by failure of the respondent to recognise the ongoing symptoms of the same nature and thereafter a further investigation of the vehicle showed a recurrence of problems complained of and the need to replace the same steering components again. It could be said that the applicant, having reported failures of a similar nature with a new vehicle on three occasions would be entitled to refuse to allow a further attempt to rectify problems which had been initially reported shortly after the purchase of the vehicle. The Tribunal is satisfied that the repeated failure of the steering components constitutes a major failure within the meaning of s.260 of Australian Consumer Law (NSW). 2. The vehicle is now some 17 months old and has travelled 17,075 kilometres as at the date of a recent valuation prepared by the respondent. It is difficult to understand the report that both front tyres are down to half tread while rear tyres are down to three quarter tread after this limited mileage and this may constitutes a further component failure in the vehicle. The respondent has estimated the cost of repairs to paintwork and wheels at $3,500.00 and a further registration at an estimated cost of $1,500.00. These figures were used to provide an estimated value of the vehicle in the sum of $55,000.00 or a total of $60,000.00 less estimated reconditioning expenses. The sum offered by the respondent to buy back the vehicle in late June of 2018 represents little more than a trade in valuation for the vehicle in average condition. The vehicle had only travelled just over 17,000 kilometres in a total of 14 months and the red book valuation certificate described the vehicle as being in as new condition. This would attract a private sale valuation as referred to in the red book of $65,000.00. 3. As the Tribunal is satisfied that the major failure of the warranty would entitle the applicant to seek a return of the vehicle with the reimbursement of losses it is appropriate to consider whether a simple valuation as a trade in or as a private sale price would represent appropriate compensation. 4. The applicant had at all times sought to return the vehicle and the first request was made well within the time limit for a return to be made. It would seem that the appropriate way of assessing the loss is to accept that on immediate return the applicant would have been entitled to a refund of all monies paid including taxes and stamp duty. It is appropriate in such circumstances to assess the loss by reducing the amount paid by factor which takes into account monetary deductions for the kilometres travelled in the vehicle together with any necessary repairs. 5. Applying these principles if the purchase price of $86,500.00 is reduced by the sum of $11,560.00 representing 17,000 kilometres travelled at a reimbursement rate of 68 cents per kilometre, then the compensation would be assessed at $74,940.00. If that sum is reduced by the cost of repair of $5,000.00 then that would give rise to a compensation figure of $69,940.00. That sum is rounded to $70,000.00 because the allowance for registration of $1,500.00 has not been made out with the precise figures and because it appears to be somewhat excessive. 6. In the circumstances it is appropriate to direct that the applicant may return her vehicle to the respondent and take such steps to sign over the ownership of the vehicle to the respondent. As soon as that is completed the respondent is to pay the applicant the sum of $70,000.00 by way of compensation for a breach of the warranty under s. 54 of the Australian Consumer Law (NSW) which is determined to be a major failure. 7. The applicant and the respondent were invited to make submissions in relation to costs. 8. Ms Codd, on behalf of the respondent, relied upon the general principal in s. 60(1) of the Civil and Administrative Tribunal Act 2013, each party should bear their own costs and she noted that the respondent would not be submitting an application for costs. 9. Mr Elkheir, solicitor, on behalf of the applicant submitted that, in the event the applicant was successful in her claim, she would seek an order for payment of costs by the respondent either on an indemnity basis or in the alternative, on a party/party basis as agreed or assessed. He referred to r 38(2) of the Civil and Administrative Tribunal Rules 2014 which enabled the Tribunal to award costs if the amount claimed or the amount in dispute exceeded $30,000.00. Reference was made to a decision of the High Court in Oshlock v Richmond River Council [1998] 193 CLR 72 wherein the Court noted that a successful party has a reasonable expectation of being awarded costs against an unsuccessful party although he conceded that this position was subject to s. 60(1) of the Civil and Administrative Tribunal Act 2013. 10. Mr Elkheir referred to a letter dated 7 June 2018 in which the applicant made a "Calderbank" offer to settle the matter for a sum of $75,000.00 but the compensation now awarded by the Tribunal does not exceed that sum. 11. In the alternative reference was made to the decision of McHugh J in Lataudis v Casey [1990] HCA 58 where His Honour said:- Any order for costs indemnifies the successful party or a party in the proceedings in respect of liability for professional fees and out of pocket expenses reasonably incurred in connection with litigation … the rationale of this order is that it is just and reasonable that a party who has caused the other party to incur the cost of litigation should reimburse that party with a liability incurred. The order is not made to punish the successful party, its function is compensatory. 1. Reference was then made in the submissions to the definition of special circumstances having regard in particular to the provisions of s. 60(3)(c) of the Civil and Administrative Tribunal Act 2013. Mr Elkheir referred to the reluctance of the respondent to engage in meaningful discussions with the applicant with the result that she was required to engage representation and commence proceedings which not only incurred legal expenses but which also incurred the expense of obtaining an expert report from Guilani Engineering. He argued that the applicant was ultimately denied the benefit of having a new vehicle or any vehicle that she could effectively use while having to keep the financial burden of the vehicle which had been sold to her. 2. Taking into the account the respective arguments the Tribunal is satisfied that it is appropriate to order the respondent to pay the applicant's costs to be agreed or assessed on a party/party basis under Pt 4.3 Div 7 of the Legal Profession Uniform Law Application Act 2014. ********* 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: 24 January 2019