Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Munday v Empire Auto Group Pty Ltd [2019] NSWCATAP 52 Hearing dates: 27 February 2019 Date of orders: 12 March 2019 Decision date: 12 March 2019 Jurisdiction: Appeal Panel Before: S Westgarth, Deputy President D Charles, Senior Member Decision: (1) The appeal is dismissed. Catchwords: Appeal – error of law – breach of guarantee of acceptable quality – Australian Consumer Law (NSW) Legislation Cited: Australian Consumer Law (NSW) Civil and Administrative Tribunal Act 2013 Fair Trading Act 1987 Cases Cited: Matumaini v Automobile Industries Pty Ltd [2017] NSWCATAP 93 Medtel Pty Limited v Courtney [2003] FCAFC 151 Texts Cited: Nil Category: Principal judgment Parties: Kayla Munday (Appellant) Empire Auto Group Pty Ltd (Respondent) Representation: Solicitors: K Wu (Appellant) Legal Aid NSW Other: N Kitnar (Administration Manager – Respondent) File Number(s): AP 18/51885 Publication restriction: Unrestricted Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: Not applicable Date of Decision: 25 October 2018 Before: G Kinsey, General Member File Number(s): MV 18/32389 REASONS FOR DECISION Introduction 1. This is an appeal from a decision made in the Consumer and Commercial Division of the Tribunal published on 25 October 2018. The effect of the decision was to dismiss the applicant's application. The applicant has appealed by a Notice of Appeal filed 29 November 2018. We will refer to the decision under appeal as "the Decision", to the applicant/appellant as "the Consumer" and to the respondent as the "Supplier". Summary of the Decision 1. It is helpful to a better understanding of this appeal if we summarise the essential findings and reasons contained in the Decision. This summary is as follows: 1. The Consumer applied for an order that the Supplier pay her the sum of $3,089.80 as compensation arising out of her purchase of a Ford Territory SY TX Wagon (the vehicle) from the Supplier on 27 February 2018. The Consumer alleged the vehicle was not of acceptable quality in breach of s 54 of the Australian Consumer Law (NSW) (ACL); 2. The vehicle had been driven 145,700.00km prior to the purchase and had been manufactured in 2006. The sale price was $8,995.00; 3. On or about 27 February 2018, the Consumer took delivery of the vehicle. Thereafter it was driven on a regular basis (about three to four times per week) from Mount Colah to Newcastle and no issues with the vehicle were experienced until 20 May 2018. On that date, the vehicle was being driven when it started skipping gears and became overheated; 4. The vehicle was towed to Berowra Car Care and it appears that the odometer reading as at 29 May 2018 showed that the vehicle had travelled 154,056.00km. Accordingly, since purchase, the vehicle had travelled 8,335.00km; 5. The Consumer obtained quotations to have the vehicle repaired and now claims for the costs of the repairs and associated expenses; 6. The Consumer alleged that the vehicle was not of acceptable quality in breach of the ACL. The Supplier asserted that there had been no failure by the Supplier to comply with the ACL, and that the issues with the vehicle (which concerned the gear box) were the result of normal wear and tear; 7. The Tribunal identified the question to be addressed was whether there had been a failure by the Supplier to comply with the consumer guarantee of acceptable quality set out in s 54 of the ACL. The Tribunal stated that the question to be considered and answered is whether, at the time of sale, the vehicle was of acceptable quality as that phrase is defined in s 54(2) of the ACL. The Decision stated that it is not necessary for the Consumer to prove that at the time of sale there was a particular identified defect which caused the vehicle not to be of acceptable quality; 8. The Consumer bears the onus of proof and must produce evidence which satisfies the Tribunal on the balance of probabilities that it is sufficient to make the orders sought in the application. The Consumer must prove that there was a failure by the Supplier to comply with the consumer guarantee under s 54 of the ACL: 9. There was no claim by the Consumer that there had been a major failure (as that term is understood in the ACL) and the Consumer did not reject the goods. The Consumer relied on s 259(2) of the ACL asserting that the Supplier failed to remedy the failure of the vehicle within a reasonable time and therefore failed to comply with the guarantee. As a consequence the Consumer arranged for the repairs to be done at her expense and sought to recover the amount from the Supplier; 10. The Tribunal found on the evidence that the vehicle was of acceptable quality. The vehicle satisfied the criteria in s 54(2) of the ACL. At the time of sale, the vehicle was fit for all purposes for which goods of that kind are commonly supplied. It was acceptable in appearance and finish, was free from defects, 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 s 54(3) of the ACL; 11. In reaching the above conclusion, the Tribunal stated that it had considered the relevant matters in s 54(3) of the ACL. The purchase price of the vehicle was $8,995.00. The Consumer submitted that the price was a premium price relying on a print out from the "Red Book Website" which indicates a price guide of $4,200.00 - $5,800.00 with average km of 165,000.00 to 275,000.00. The Supplier argued that the vehicle had travelled 145,700.00km which was below the average and therefore the vehicle was worth more than the quoted figure. The Tribunal stated that it did not accept that evidence as determinative of the price and expressly stated that the Tribunal made no finding about the price paid for the vehicle; 12. The Tribunal made findings as to the extent of the Consumer's usage of the vehicle, namely that in approximately three months, the vehicle had travelled 8,335.00km and during that period no problems had been experienced with the vehicle. The vehicle was a 2006 model and therefore twelve years old. The Tribunal found that there was evidence (i.e. from a report by Automedics tendered by the Consumer) to suggest that the gear box had "simply worn out and the problem was consistent with the age of the vehicle"; 13. There was no evidence upon which the Tribunal could conclude that as of the date of sale that there was either a latent or patent defect in the transmission. The Member stated that in fact the evidence would suggest otherwise, "particularly given the distance travelled by the vehicle immediately after purchase"; 14. Having regard to the age of the vehicle, the price paid, the distance travelled in the first three months of ownership, the absence of any evidence that there was a defect at the date of sale and the use of the vehicle the Tribunal found that the vehicle was of acceptable quality. The Tribunal found there was no failure by the Supplier to comply with the consumer guarantee set out in s 54 of the ACL; and 15. The Tribunal referred to s 79U of the Fair Trading Act 1987 (FT Act) which requires the Tribunal to make orders that are fair and equitable to all parties and found that the Supplier should not be required to pay the Consumer the amounts claimed, and that the proposed orders dismissing the application are fair and equitable to all parties. The Notice of Appeal 1. The Notice of Appeal set out the Grounds of Appeal. The grounds were that the Decision contained errors of law in the following respects: 1. The Tribunal asked the wrong question by failing to apply the correct legal test: 1. The test was not on the balance of probabilities whether the Consumer could establish that at the date of sale there was either a latent or patent defect in the transmission of the motor vehicle in question, so as to precisely identify a "defect"; 2. Rather, the question was whether the vehicle was: fit for the purpose in which goods of that kind are commonly supplied and acceptable in appearance and finish and free from defects and safe and durable etc. The balance of this ground quotes the provisions of s 54 of the ACL. 1. Ground 2 alleged that the Tribunal erred in failing to take into account a relevant consideration, namely the durability of the vehicle. Reply 1. The Supplier has filed a Reply to Appeal which opposes the appeal and submitted that the Decision should stand. Consumer's Submissions 1. The following summarises the Consumer's submissions: 1. The Tribunal made errors of law as it asked itself the wrong question by failing to apply the correct legal test in relation to whether the vehicle was of acceptable quality. The Tribunal considered the relevant test was whether the Consumer could establish a defect in the vehicle at the date of sale. However, s 54 of the ACL makes clear that the correct question for the Tribunal to ask was whether the vehicle was fit for the purpose for which goods of that kind are commonly supplied, and free from defects, and was durable having regard to the nature of the goods, the price and any representation made about the goods; 2. Merely being free from defects at the date of sale (being the fact which the Tribunal held could not be identified on the evidence) is not sufficient to make the vehicle of acceptable quality. The Consumer relied upon a statement made by the full Federal Court in Medtel Pty Limited v Courtney [2003] FCAFC 151 where it is said "the fact that it is known at the time of the trial that goods had not failed...", does not compel a conclusion that they were of merchantable quality; 3. The price of the vehicle was $8,995.00 and was a premium price in comparison with the Redbook vaulations in which the price guide was from $4,200.00 to $5,800.00. The unchallenged evidence was that the dealer had taken the price down from $13,999.00 to $9,000.00 but the Tribunal failed to make a finding as to price; 4. The Suppliers' sale person had, at the time of the sale, represented to the Consumer that the vehicle was "reliable" and "should last for five years". The Tribunal did not make a finding or take into account the unchallenged evidence as to these representations; 5. The Consumer referred to the Tribunal's findings that the gearbox was simply worn out and that the problem was consistent with the age of the vehicle. The Consumer submitted that this factor alone does not absolve the Supplier from its statutory obligations under s 54 of the ACL. It is therefore insufficient to support the finding that the vehicle was of acceptable quality. The main purpose of adducing that evidence was to rebut allegations made by the Supplier that the use of the vehicle by the Consumer caused the transmission problems or affected its durability. Mechanical breakdown within three months due to the aging of the parts clearly indicates that the vehicle was not durable for the purposes of s 54 of the ACL; 6. The vehicle which cost nearly $9,000.00 (noting initially priced for $13,999.00) and which according to the Supplier should last at least five years but failed within twelve weeks is not fit for its purpose or durable under the ACL; 7. It is not necessary for the Consumer 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 (see: Matumaini v Automobile Industries Pty Ltd [2017] NSWCATAP 93). Matumaini is highly relevant to this case: see in particular [75] to [79]; and 8. Because the Tribunal asked itself the wrong questions and applied the incorrect tests, the Tribunal failed to take into account the relevant considerations such as durability, fit for purpose, defect, price and representations made prior to the sale. Supplier's Submissions 1. The Supplier's submissions may be summarised as follows: 1. The Tribunal deemed the vehicle of acceptable quality and the Tribunal rightfully took into account the correct basis of the test for acceptable quality; 2. There was an absence of any evidence that there was a defect in the vehicle at the date of sale. The vehicle had passed a full road worthy inspection and the vehicle thereafter drove over 8,000km in three months. These factors were taken into account; 3. The Redbook contains price estimates and expressly states that the price represents what you may expect to buy or sell a vehicle privately. It may vary from a dealers retail price because the dealer prepares the vehicle more thoroughly, both mechanically and aesthetically and provides a consumer warranty; 4. The Supplier challenges the evidence that the price had been $13,999.00 and was reduced to $9,000.00; and 5. This Supplier disputes the quantum of the claim, alleging that the Consumer could have had the repair work to the vehicle undertaken at a cheaper price. Decision 1. Appeals from decisions made in the Consumer and Commercial Division of the Tribunal are regulated by s 80 of the Civil and Administrative Tribunal Act 2013 (NCAT Act) and by cl 12 of Sch 4 of the NCAT Act. Section 80 effectively provides that an appeal from a decision of the kind under appeal may be made as of right on any question of law or with the leave of the Appeal Panel on other grounds (s 80(2)(b). Clause 12 of Sch 4 provides that leave may only be granted in the circumstances set out in that clause. This appeal was confined to an assertion that there had been errors of law. Accordingly, there is no need for us to consider cl 12. 2. We are of the view that the Decision displays no error of law. Accordingly, we propose to dismiss the appeal. Our reasons are set out in the following paragraphs. 3. We agree with the Consumer's contentions as to the correct approach in relation to a consideration of whether the Supplier breached s 54 of the ACL. However, in our view, the Decision displays that that approach (i.e. correct approach) was undertaken. The Decision is contained in five pages but the paragraphs are not numbered. The statements made in the second last and last paragraphs on page 4 in our view constitute a correct description of the approach required by the Tribunal in a consideration of whether there has been a breach of s 54 of the ACL. In particular, the Decision states that it is not necessary for the Consumer to prove that at the time of sale there was a particular identified defect. That statement is consistent with the decision of the Appeal Panel referred to by the solicitor acting for the Consumer, namely Matumaini. In that decision, the Appeal Panel said 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. 1. In our view, the Decision displays that the Member took the same approach as found by the Appeal Panel in Matumaini to be the appropriate approach. On page 5 of the Decision, the Tribunal made the following findings: 1. The vehicle was of acceptable quality; 2. The vehicle satisfied the criteria in s 54(2) of the ACL. At the time of sale the vehicle was fit for all purposes for which goods of that kind are commonly supplied, was acceptable in appearance and finish, was free from defects, 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 s 54(3) of the ACL; 3. In reaching the above conclusion, the Tribunal considered the relevant matters in s 54(3) of the ACL. The purchase price was $8,995.00. The Consumer argued that the price was a premium price having regard to the Redbook. The Supplier argued that the vehicle had travelled a distance (145,700.00km) below the average referred to in the Redbook and therefore the vehicle was worth more than the range quoted in the Redbook. The Tribunal found that the evidence as to price was not determinative and no finding about the price was made; and 4. In the first three months of ownership there were no problems experienced with the vehicle which travelled 8,335.00km. The vehicle was a 2006 model and twelve years old. The evidence from Auto Medics suggests that the gearbox was simply worn out and the problem was consistent with the age of the vehicle. 1. In our view, the above approach is consistent with the approach in Matumaini and we reject the contention made by the Consumer that the effect of the Decision was to require the Consumer to establish that the vehicle had a defect at the date of the sale. 2. In the Decision, the Tribunal found (at the foot of page 5) that there was no evidence to enable a conclusion that at the date of sale there was either a latent or patent defect. In our view, that was a finding of fact in support of the primary finding that the vehicle was of acceptable quality within the meaning of s 54 of the ACL. The Decision does not, in our view, state that it was a necessary precondition for the Consumer to have adduced evidence justifying a finding of the existence of a defect. 3. In Matumaini the Appeal Panel upheld the appeal on the basis that the Tribunal had incorrectly required the Consumer to prove what the defects were and as a consequence of a lack of sufficient evidence, the Tribunal could not make a finding that the repairs required were as a result of a defect which would render the vehicle not being of an acceptable standard at the time of sale. The Appeal Panel then went on to substitute its decision for the Tribunal's decision and found on the available evidence that the vehicle was not of acceptable quality because it failed to satisfy the requirements of s 54(2)(a)(c) and (e) of the ACL. This was tantamount to a finding that the vehicle in that case was not fit for all of the purposes for which goods of that kind are commonly supplied (subsection (a)), a finding that the vehicle was not free from defects (subsection (c)) and a finding that the vehicle was not durable (subsection (e)). The supporting evidence in that case was that the engine would not work after less than eight weeks use necessitating the replacement of the engine in order for the vehicle to operate again. The Appeal Panel found that the failure to comply with the consumer guarantee of acceptable quality was in that case a major failure. 4. The features of this case which distinguish the above features of the Matumaini case are as follows: 1. In this case there was no contention by the Consumer that there was a major failure; 2. In Matumaini the Appeal Panel found that the engine would not work necessitating its replacement. Here, the evidence was that the transmissions had "worn out" consistent with the age of the vehicle; and 3. Here, the vehicle travelled considerably further and for a longer period than in the Matumaini case (here, 8,335.00km over three months versus 5,133.00km over less than eight weeks in the Matumaini case). 1. In our view, the facts and conclusions of the Appeal Panel in Matumaini demonstrate much more serious findings as to the short comings in the performance of the vehicle than is the case in this appeal where the Tribunal, following the appropriate analysis, found that there was no breach of s 54 of the ACL, no defects and that the problems with the transmission were consistent with the age of the vehicle. 2. We reject the submission that the initial asking price of the vehicle was $13,999.00 and that that price should be a relevant factor. Firstly, the Supplier disputed that that was the initial price, but secondly, and relevantly, it is our view that the actual price for which the vehicle was sold is the relevant benchmark. 3. We refer to the submission that merely establishing that the vehicle was free of defects is not sufficient to make the vehicle of acceptable quality and the citation in support from Medtel. The Medtel case concerned facts which the parties agreed were now known (i.e. revealed in the course of the proceedings) but were not known at the time of supply (see [34]). The Court held that it is necessary to consider all the facts in considering whether the goods were of merchantable quality (see [45]). We are of the view that the Tribunal did not err by ignoring some facts. The Tribunal considered the facts known at the time of supply as well as the facts knowledge of which was acquired after the Consumer had had the vehicle inspected. 4. We refer to the ground of appeal that the Tribunal failed to take account of the durability of the vehicle. In our view, an analysis of the Decision does not support that contention. There was an express finding that the vehicle was as durable as a reasonable consumer fully acquainted with the state and condition of the vehicle would regard as acceptable. It is clear that the Tribunal accepted the evidence of Automedics that the vehicle's gear box was worn out and consistent with the age of the vehicle. 5. We refer to Ground 2 of the appeal, namely the submission that the Supplier had represented that the vehicle was reliable and should last at least five years. This alleged representation contains two elements: that the vehicle was reliable and that it should last at least five years. The Consumer did not contend that the alleged representation that the vehicle was reliable was a representation in addition to and separate from the assertion that the vehicle was not of acceptable quality as required by s 54 of the ACL. In our view, the Tribunal having found that the vehicle was of acceptable quality, the Tribunal was correct in making those separate findings as to the reliability of the vehicle, particularly as a component of the finding that the vehicle was of acceptable quality concerned a findings as to the vehicle's durability. 6. In respect of the alleged representation that the vehicle should last at least five years, the Tribunal did not specifically refer to that evidence. In our view, the representation (assuming it occurred) did not constitute a promise nor representation that the vehicle would last five years. It should only be seen as the opinion of the representative of the Supplier that the vehicle should (i.e. could be reasonably expected to) last for at least five years. That representation does not say that the vehicle was represented to have parts or components which would not require repair or replacement within five years. In our view, the fact that the Tribunal did not consider separately the alleged representation does not display any error of law because in our view the representation does not make a promise to the Consumer more generous or more beneficial than that required by the provisions of s 54 of the ACL. 7. For the above reasons, the appeal is dismissed. Orders 1. The Appeal Panel makes the following order: 1. The appeal is dismissed. ********** 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: 12 March 2019