Berry v Auto Direct Group Pty Ltd [2020] QCAT 383

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Berry v Auto Direct Group Pty Ltd [2020] QCAT 383 PARTIES: NED CASSIDY BERRY (applicant) v AUTO DIRECT GROUP PTY LTD (respondent) APPLICATION NO/S: MVL052-20 MATTER TYPE: Motor vehicle matters DELIVERED ON: 6 October 2020 HEARING DATE: 1 October 2020 HEARD AT: Brisbane DECISION OF: Member Cranwell ORDERS: Ned Cassidy Berry is required to return the motor vehicle the subject of these proceedings (including the engine) to Auto Direct Group Pty Ltd within 14 days of the date of these orders. Auto Direct Group Pty Ltd is required to pay to Ned Cassidy Berry the amount of $18,950 within 28 days of the date of these orders. CATCHWORDS: TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – GUARANTEES, CONDITIONS AND WARRANTIES IN CONSUMER TRANSACTIONS – GUARANTEES, CONDITIONS AND WARRANTIES – whether motor vehicle of acceptable quality – whether failure to comply with consumer guarantee a major failure – whether goods rejected during the rejection period – whether consumer entitled to refund Competition and Consumer Act 2010 (Cth), Schedule 2 – Australian Consumer Law s 54, s 259, s 260, s 262, s 263, s 278, s 279 Fair Trading Act 1989 (Qld), s 50A Campbell v Caravan & RV Central Pty Ltd t/as Avan New South Wales & FCA Australia Pty Ltd [2016] NSWCATCD 90 Haisman v Drive (Aust) Pty Ltd [2020] QCAT 44 Medtel Pty Ltd v Courtney (2003) 130 FCR 182 -- 1 of 9 -- 2 Morphy v Beaufort Townsville Pty Ltd [2018] VCAT 1520 APPEARANCES & REPRESENTATION: Applicant: Self-represented Respondent: Self-represented REASONS FOR DECISION On 28 February 2020, Mr Berry (‘the applicant’) filed an Application – Motor Vehicle Dispute with the Tribunal. The respondent is Auto Direct Group Pty Ltd (‘the respondent’). The applicant is the owner of a 2010 Subaru Impreza (‘the motor vehicle’). The applicant purchased the motor vehicle from the respondent on 15 May 2019 for $18,950. The applicant seeks relief under the Australian Consumer Law, which is Schedule 2 to the Competition and Consumer Act 2010 (Cth). The relief sought by the applicant is a refund plus damages. Section 50A of the Fair Trading Act 1989 (Qld) vests the Tribunal with jurisdiction in relation to motor vehicles in respect of certain actions under the Australian Consumer Law. Pursuant to s 3(1)(b) of the Australian Consumer Law, a person is taken to have acquired goods as a consumer if ‘the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption’. This includes the applicant’s motor vehicle. Guarantee of acceptable quality Section 54(1) of the Australian Consumer Law provides that, where a person supplies goods in trade or commerce, the goods are guaranteed to be of ‘acceptable quality’. The time at which goods are to be of acceptable quality is the time at which the goods are supplied to the consumer: Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [64] and [70]. However, information available after the time of supply may be taken into account in deciding whether the goods were of acceptable quality at the time of supply. Sections 54(2) and (3) of the Australian Consumer Law define acceptable quality as follows: (2) Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and -- 2 of 9 -- 3 (c) free from defects; and (d) safe; and (e) durable; as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods. The Macquarie Dictionary defines the word ‘defect’ to mean ‘a fault’ or ‘imperfection’. The Macquarie Dictionary defines ‘durable’ as ‘having the quality of lasting or enduring of or relating to goods which will be good for some time, as opposed to those intended to be used or consumed immediately’. In Morphy v Beaufort Townsville Pty Ltd [2018] VCAT 1520 at [72], the Victorian Civil and Administrative Tribunal stated: [T]he context of the section clearly requires that the question of durability be determined by having regard to how long a ‘reasonable consumer’ would expect the goods to last, taking into account the price paid, the nature of the goods and the representations made about the goods. In Campbell v Caravan & RV Central Pty Ltd t/as Avan New South Wales & FCA Australia Pty Ltd [2016] NSWCATCD 90 at [57], the New South Wales Civil and Administrative Tribunal stated: A reasonable consumer would also be entitled to expect that such a high cost item would be durable, being capable of safe and effective use over a number of years (or at least many thousands of kilometres). Evidence The applicant gave the following evidence: (a) The applicant purchased the motor vehicle on 15 May 2019. The engine made a noise on the way home, and warning lights appeared that evening. (b) The applicant returned the motor vehicle to the respondent the next day, but was told that the cooling off period had been voided. The applicant was told to take the motor vehicle to a mechanic nominated by the respondent. -- 3 of 9 -- 4 (c) The motor vehicle spent three days with the mechanic. The applicant collected the vehicle on 20 May 2019. The engine lights were clear, but the engine still made a noise. The applicant again attempted to return the motor vehicle to the respondent. The respondent talked the applicant into purchasing a warranty to cover the faults. (d) The applicant reported to the respondent that the engine lights were on again on 21 May 2019. The applicant was advised to return the motor vehicle to the mechanic, Wayne Fairclough. The applicant left the motor vehicle with the mechanic for eight days. (e) The applicant picked the motor vehicle up on 3 June 2020. He was told the motor vehicle was still a bit smoky, but that it would clear up. (f) The applicant drove the motor vehicle for three days, and the engine warning lights came on again. The oil level was low. (g) The applicant took the motor vehicle to Kirra Mechanical, who was a recommended repairer under the warranty he had purchased. The applicant picked the motor vehicle up three days later. (h) A week later, the engine warning lights came on again. The applicant returned the motor vehicle to Kirra Mechanical, who advised that the turbo needed replacing. This took a further two weeks. (i) Four days after picking up the motor vehicle from Kirra Mechanical, the warning lights came on. The applicant returned the motor vehicle, and was told that a complete engine replacement was required. The applicant provided a letter from Benjamin Metcalfe, a mechanic at Sel’s Auto. He stated: 15/05/2019 I received a personal call from Ned’s sister, stating Ned had purchased a new car and it seemed to be making a noise from the engine, and with their concern I said I would look the following morning for them. 16/05/0291 835am Ned arrived at work for me to have a quick look and listen for the problem. On arrival I was informed that the engine warning light, the traction control warning light and cruze (sic) control light had illuminated as well. … Work carried out; placed on hoist to inspect underbody, LHF lower ball joint had loose nuts, rear diff mount leak and a power steering pump leak, brake light out on wing, dirty oil low fluids. Checked the fault costs and a list of history codes cleared the one showing up was the variable valve control system, road tested and under med load, engine/turbo made an unusual noise, safety cert appears altered? I could not identify the problem without further work, and advised Ned to return the vehicle to the dealership or to Subaru specialist. -- 4 of 9 -- 5 The applicant also provided a letter from Kirra Mechanical, which stated: Ned Berry presented with his Subaru Impreza … on 12 July 2019 with excessive smoke blowing out exhaust and engine sump oil level low. Previous to it coming here at (sic) had been with another mechanic known to the car dealer with no fixes sorted. After a long diagnosis it was found the turbo had an extreme amount of play and allowing engine oil to pass through it (customer has the turbo for evidence), Australian Warranty Network authorised to replace the turbo which was done. It still had some smoke coming out exhaust and that continued to be an ongoing issue. Customer returned on 8th August 2019 with engine blowing a bit of smoke and engine light on with a lack of power. An engine compression test was performed number two cylinder had low compression, perform a wet compression test finding still no improvement, perform a cylinder leak down test and could hear wind blowing through dip stick tube all which indicates damaged engine piston rings which is allowing oil to come past rings and burn. A reconditioned engine is required and half the fee is Authorised to be paid by Australian Warranty Network, the outstanding to be paid by vehicle owner. Jacob Ingram provided evidence on behalf of the respondent. Relevantly, Mr Ingram stated: (a) The replacement turbo was a second hand non-reconditioned part. Incorrect installation or replacing this component with a faulty or underperforming component would result in irreversible damage to the pistons and ultimately cause catastrophic engine damage. (b) Kirra Mechanical removed the entire engine from the vehicle, preventing the respondent from being able to undertake a reasonable diagnosis of the motor vehicle. The respondent also provided a letter from Wayne Fairclough of WF Automotive Services, which stated: I have been asked by Mr Ingram to write a letter with recollection to a Mechanical job I performed for one of his customers mid-2019, specifically Mr Ned Berry. I keep running job records as part of my business and remember this particular job specifically. On the Wednesday, the 20 th of May I inspected Mr Berry’s Subaru for Exhaust Smoke, the car was smoky when cold then gradually went away shortly thereafter. This is common in Subarus when the oil is wrong or needs flushing, in my experience this almost always fixes the issue. I have performed this duty on thousands of vehicles. I performed an engine flush on the vehicle and as expected, the exhaust smoke was noticeably better, I then advised the customer to drive the vehicle an extended distance to allow time for the oil to make its way around the engine and lubricate the internal seals. The customer was told explicitly that if he had any further issues to give me a call. I did not hear from him again. -- 5 of 9 -- 6 I have been told by Mr Ingram that some time after the customer had the turbo replaced in the vehicle with a second-hand part. As a qualified mechanic since 1992 I would not replace a turbo in a vehicle with a second hand non reconditioned part unless the customer signed a waver (sic) removing my business from liability. It is a well-known fact that a faulty turbo can result in major engine failure to which the cost of repair heavily outweighs the money from the job, which from at least my standpoint looks like what has happened here. I was incredibly surprised to hear this vehicle’s engine was needing replacement, as apart from the minor exhaust smoke the vehicle presented nicely and was free of any defects. There were certainly no engine noises or irregularities that were present at the time or the customer brought to my attention. I accept the applicant’s evidence that the motor vehicle displayed engine warning lights and made an unusual noise on the day he purchased it. This is supported by the evidence of Mr Metcalfe, and was not challenged by the respondent. I also accept that shortly thereafter the motor vehicle emitted smoke from its exhaust. This is supported by the evidence of Mr Fairclough. I also accept that the engine required a new turbo. This is supported by the evidence of Kirra Mechanical, and again was not challenged by the respondent. The respondent has challenged whether the requirement for a complete engine replacement arose from replacement of the turbo. Mr Ingram stated that the respondent was prevented from making a reasonable diagnosis due to the engine having been removed by Kirra Mechanical. I note in passing that QCAT Practice Direction No. 2 of 2019: Motor Vehicle List states (at paragraph 13): [T]he applicant may be required to give access to the motor vehicle (the subject of the application) to an expert engaged by the respondent. No application was made by the respondent for access to the motor vehicle. I have taken account of Mr Fairclough’s statement that a faulty turbo can cause a major engine failure. However, Mr Fairclough had not examined the vehicle after the replacement of the turbo. Kirra Mechanical did examine the vehicle after replacement of the turbo. Their diagnosis of damaged piston rings is not expressed to be related to the replacement turbo. I accept the evidence of Kirra Mechanical that the motor vehicle had damaged piston rings, requiring replacement of the engine. Further, the issues which the motor vehicle presented with, namely blowing smoke and engine warning lights, were the same issues that the motor vehicle had presented with previously. In these circumstances, I do not accept that the damaged piston rings were related to replacement of the turbo. Given that the issues with the motor vehicle arose shortly after purchase, including on the day of purchase itself, it is open to me to infer that the defects were present at the time of supply. I do so infer. -- 6 of 9 -- 7 The applicant gave evidence that he sought a refund from the respondent the day after purchase. I find accordingly. Based on the evidence before me, I find that a reasonable consumer fully acquainted with the state of the motor vehicle at the time of purchase, particularly having regard to: (a) the presence of defects which resulted in the motor vehicle requiring a new turbo and then a complete engine replacement within three months of the date of purchase; and (b) the purchase price of $18,950, would not regard the motor vehicle as free from defects and durable. Remedies The remedy available to the consumer against the supplier depends in the first instance on whether the failure is a ‘major failure’. That term is defined in s 260 of the Australian Consumer Law to relevantly mean: (a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or (b) the goods depart in one or more significant respects: (i) if they were supplied by description—from that description; or (ii) if they were supplied by reference to a sample or demonstration model— from that sample or demonstration model; 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 time, be remedied to make them fit for such a purpose; or (d) the goods are unfit for a disclosed purpose 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 time, be remedied to make them fit for such a purpose; or (e) the goods are not of acceptable quality because they are unsafe. The test of whether there is a major failure for the purposes of s 260 and the test for whether goods are of acceptable quality for the purposes of s 54 both adopt a ‘reasonable consumer’ benchmark. For the reasons already given, I find that the motor vehicle requiring a replacement turbo and then a complete engine replacement shortly after purchase is such that a reasonable consumer fully acquainted with the nature and extent of the failure, would not have acquired the motor vehicle. In order to obtain a refund, the consumer is required to reject within the ‘rejection period’. That term is defined in s 262(2) of the Australian Consumer Law to mean: -- 7 of 9 -- 8 (2) The rejection period for goods is the period from the time of the supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to: (a) the type of goods; and (b) the use to which a consumer is likely to put them; and (c) the length of time for which it is reasonable for them to be used; and (d) the amount of use to which it is reasonable for them to be put before such a failure becomes apparent. In Nesbit v Porter [2000] 2 NZLR 465 at [39], the New Zealand Court of Appeal held that the rejection period was one that: …suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of breakage or malfunction is not apparent, the consumer can be expected to do by taking the goods to someone, usually or preferably the supplier, for inspection. In this context, therefore, a defect is not ‘apparent’ until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial. I have accepted that the applicant first sought a refund the day after purchase. In these circumstances, I am satisfied that the applicant rejected the motor vehicle within the rejection period. In Haisman v Drive (Aust) Pty Ltd [2020] QCAT 44 at [24], I found that the Tribunal has jurisdiction to make an order requiring the supplier to pay to the consumer a stated amount of money, namely the amount of the refund payable under s 263(4)(a). In this case, the applicant has notified the respondent that the goods have been rejected in accordance with s 263(1) of the Australian Consumer Law. I will give effect to the requirement in s 263(2) that the goods be returned by so ordering. My order requiring return of the motor vehicle will also include return of the engine, which is to be installed back into the vehicle prior to return. Upon the return of the motor vehicle, the applicant will be entitled to a refund pursuant to s 263(4). Damages The Tribunal is vested with jurisdiction in respect of actions under s 259(4) of the Australian Consumer Law, which provides: The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. The applicant provided a tax invoice for $180 from Kirra Mechanical for the replacement of a battery. I am not satisfied that this item was caused by the respondent’s failure to comply with the guarantee of acceptable quality. This appears to be unrelated to the engine issues, and is a routine expense associated with operating a motor vehicle. -- 8 of 9 -- 9 The applicant claimed the cost of the warranty he purchased. The documentation provided by the applicant indicated the warranty cost a total of $1,480, and was to be paid over 20 instalments. I have no evidence as to how many instalments were paid by the applicant. In these circumstances, I am unable to quantify any damages that might be available to the applicant in this regard. The applicant also claimed the costs of insuring the motor vehicle. He stated that the motor vehicle was insured in his mother’s name, but did not provide any evidence as to the premiums paid. In these circumstances, I am unable to quantify any damages that might be available to the applicant in this regard. The applicant also claimed the costs of financing the motor vehicle with Pepper Finance. There is a live issue as to whether Pepper Finance is a linked credit provider for the purposes of s 278 and s 279 of the Australian Consumer Law, and whether damages for loss or damage are recoverable in circumstances where proceedings were not commenced jointly against the supplier and linked credit provider as required by s 279(2). Ultimately, it is unnecessary for me to resolve this issue as the applicant has not provided evidence from Pepper Finance as to the total amounts paid by the applicant and the payout figure on the loan. In these circumstances, I am unable to quantify any damages that might be available to the applicant in this regard. Costs The applicant has claimed the filing fee of $345.80. Section 50C of the Fair Trading Act 1989 (Qld) provides that the Tribunal may make a costs order against the respondent in the amount of the prescribed filing fee paid by the applicant. This power is subject to s 102(1) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld), which provides that the Tribunal may make a costs order if the interests of justice require it. The applicant has been substantially successful in the proceedings. However, the applicant inflated his claim by including items which I have found not to be recoverable, such that the matter could otherwise have been dealt with by an adjudicator as a matter under $25,000. In these circumstances, I do not consider that it is in the interests of justice to order the respondent to pay the filing fee of $345.80. Orders The orders of the Tribunal are: 1. The applicant is required to return the motor vehicle the subject of these proceedings (including the engine) to the respondent within 14 days of the date of these orders. 2. The respondent is required to pay to the applicant the amount of $18,950 within 28 days of the date of these orders. -- 9 of 9 --