Decorative Imaging Pty Ltd v Stewart Homes Pty Ltd [2018] QCATA 36

CITATION: Decorative Imaging Pty Ltd v Stewart Homes Pty Ltd [2018] QCATA 36 PARTIES: Decorative Imaging Pty Ltd (Appellant) v Stewart Homes Pty Ltd (Respondent) APPLICATION NUMBER: APL057-17 MATTER TYPE: Appeals HEARING DATE: 26 July 2017 HEARD AT: Brisbane DECISION OF: Member Allen DELIVERED ON: 14 March 2018 DELIVERED AT: Brisbane ORDERS MADE: 1. The application for leave to appeal is allowed. 2. The appeal is dismissed. CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – RIGHT OF APPEAL – WHEN APPEAL LIES – ERROR OF LAW – where sale of unascertained goods – where consumer alleged goods did not match colour requested – where Tribunal at first instance found goods not of suitable quality or not fit for purpose – whether Tribunal correctly applied Australian Consumer Law – whether test should have been whether a reasonable person would find the variation in colour unacceptable – whether test should have been whether goods corresponded to description TRADE AND COMMERCE – COMPETITION – FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – GUARANTEES, CONDITIONS AND WARRANTIES IN CONSUMER TRANSACTIONS – GUARANTEES, CONDITIONS AND WARRANTIES – where sale of unascertained goods – where consumer alleged goods did not -- 1 of 10 -- 2 match colour requested – whether goods corresponded to description in contract Australian Consumer Law (Cth), s 3, s 54, s 55, s 56, s 259 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 142, s 146 Arcos v Ronaasen [1933] AC 470 Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 Varley v Whipp [1900] 1 QB 513 APPEARANCES: APPLICANT: Mr Ross Doonan, Director, appeared for Decorative Imaging Pty Ltd RESPONDENT: Mr Iain Henry, Director, appeared for Stewart Homes Pty Ltd REASONS FOR DECISION Decorative Imaging Pty Ltd is a supplier of sublimated powder coated aluminium products. Using this process it can, for example, create an aluminium product with a woodgrain finish. Stewart Homes Pty Ltd describes itself as a high-end homebuilder and engaged Decorative Imaging to supply, over several orders, quantities of aluminium product to match a wood finish, which became known as American Oak. These orders were for a specific house being built by Stewart Homes and there was an interior designer involved who signed off on the colour to be used on the aluminium. Decorative Imaging supplied Stewart Homes with approximately 4115m of American Oak finished aluminium in 2013 and 2014 in respect of that job. Two further orders were placed in September 2014 in respect of aluminium to be supplied for the same job and the same colour of American Oak was specified. When the product reached its destination Stewarts Homes contacted Decorative Imaging to advise that the colour of the product did not match the colour of the previous product supplied and that they would not be able to install it in and on the house. The interior designer stated that the colour was a mistake and the evidence of Stewart Homes was that the homeowner would not accept the product and refused to pay the final instalment in regard to the house building contract until the product was rectified. Decorative Imaging responded by email of 6 November 2014 and said that they would investigate the issues. Various attempts were made by Decorative Imaging to change the colour of the product to match the -- 2 of 10 -- 3 previous product. This included representatives of the company coming to Brisbane from Sydney and hiring a powder coating factory for a day in an attempt to alter the colour of the product to that of the previous shipments. There was also liaison with the Italian supplier of the powder coating ingredients. Ultimately, Decorative Imaging acknowledged that they were not able to resolve the issue. Stewart Homes then found another powder coating company, which was able to recoat the product at a cost of $15,447.50. The recoated components were then installed in and on the home. Stewart Homes issued a demand to Decorative Imaging that it pay the cost of having the aluminium recoated, which Decorative Imagining did not pay. An application was made by Stewart Homes to the Tribunal in its Minor Civil Disputes jurisdiction in regard to the amount demanded. Decorative Imaging filed a response and counter-application in respect of the costs it said it had incurred in trying to resolve the issue with the aluminium product. The matter was heard by an adjudicator and an order was made that Decorative Imaging pay to Stewart Homes the amount of $11,433.96 in respect of the claim and the filing fee of $315.70, a total of $11,749.66. Decorative Imaging have appealed against the learned adjudicator’s decision. An appeal against a decision in the Minor Civil Disputes jurisdiction requires the leave of the Tribunal.1 The Tribunal will ordinarily only grant leave to appeal where there is some question of general importance upon which further argument, and a decision of the Appeal Tribunal, would be to the public advantage; or, there is a reasonably arguable case of error in the primary decision and a reasonable prospect that the applicant would obtain further substantive relief. Another question sometimes asked is whether leave is necessary to correct a substantial injustice to the applicant, caused by some error. If leave to appeal is granted the Tribunal may confirm or amend the decision or set aside the decision and substitute its own decision or set aside the decision and return the matter to the Tribunal for reconsideration.2 Decorative Imaging’s ground of appeal is that the test for “fitness for purpose” was wrongly applied by the Tribunal. That test is whether a reasonable person in the circumstances would consider the variation of colour to be unacceptable. The Tribunal was said to have erred in its consideration of the issues of law in that: 1 Queensland Civil and Administrative Tribunal Act 2009, s 142(3). 2 Ibid, s 146. -- 3 of 10 -- 4 a) There was no evidence that the contract required that the colour of the final product must match precisely, with exactitude, the colour which had previously been delivered; b) No weight at all was given to the fact that different materials display different colour characteristics; c) There was no evidence or consideration as to how such colour would appear in situ; d) The colour supplied was not so widely at variance with the previously supplied colour that a reasonable person would not consider that it was fit for purpose. There were further written submissions in regard to the grounds of appeal and oral submissions at the hearing. The learned adjudicator stated the following in regard to the evidence from Stewart Homes in his oral decision: Now this claim is from Stewart Homes Pty Ltd who describe themselves as an upmarket builder. Everything had to be spot on, as Mr Henry put it, and they ordered in May 2013, a substantial amount of material. I’m sorry, it might have been September 2014 – that particular date does not matter much – but in any event they ordered 4115 metres and they were generally very happy with that order and the results of that order. Then in September 2014, there were two further orders put and they had to pay before the items left Sydney. They’d paid and then when they unpacked it in Brisbane they noticed there’s a difference in the colour which, to their minds – this is the applicants minds – was a material difference. They’d ordered the same American oak on both – all the sets of orders, but the final two orders were different in colour.3 The client would not accept the – this subsequent or this later product and evidence has been received by the tribunal from ultraspace, the interior designer, which says in conclusion that a colour variation was unacceptable, making it look a different species of timber and a mistake. It could not be used in the project. As a result, the builder was faced with his final payment of $330,000 being withheld. It was probably withheld he says for about six months. And then there were a number of attempts to remedy the problem because he had – because the builder had discussed this problem with Mr Doonan and Mr Doonan spent time and effort, including talking to the manufacturer or the people in Italy – if not the manufacturer, the designer of the product or the system or the process in Italy – about the issues involved.4 But at the end of the day the builder went with Ridgewood Powder Coating and discovered a way that a Sunshine Coast – this is – I’m looking at paragraph 14 – effectively the statement of claim - that in June 2015, the applicant engaged the Sunshine Coast powder coater to alter the colouring 3 Transcript of hearing 1-25 lines 20 – 33. 4 Transcript of hearing 1-25 lines 32 – 44. -- 4 of 10 -- 5 at a cost of $14,678.26. There have been invoices produced for that, together with two invoices for the transportation of the materials, which sum up to – which come up to $440. And according to the applicant, the remedial work was successful and the applicant was able to install the relevant items to the applicants customer’s satisfaction.5 The learned adjudicator then made the following statement in regard to the law: The question – the principal question in this case is was this material of acceptable quality or – sorry of unacceptable quality or not fit for purpose pursuant to the relevant sections of the Australia Consumer Law.6 The learned adjudicator summarised Decorative Imaging’s defence as follows: The defence by Mr Doonan were words to the effect that his organisation could not perform – not miracles, but could not perform outside the laws of physics, and that what he was effectively requested to do is unachievable and, indeed his Italian person behind the process didn’t really want the process to be interfered with. But on the other hand, as was said by Mr Doonan in an email dated 6th of November 2014, from him to Mr Henry in the fifth paragraph 2 of that email: … We do know, however, that there is a different chemical composition between aluminium sheet and aluminium extrusion and we do know we have to be careful when matching sheet to extrusion.7 Mr Doonan said, in some situations he produced a brochure about their work. In some situations, the clients were extremely happy to have slightly different variations or variations – and he’s produced one of his photographs, which shows a shopping centre which has different colours and apparently, according to Mr Doonan, the clients are very happy.8 The learned adjudicator then noted that: But in this particular case the client was not happy because it altered the colour and, according to the applicant wasn’t fit for the purpose or wasn’t of acceptable quality.9 The learned adjudicator then found: While this is a finely argued case, it does seem to the tribunal that there was a problem with this material and the consumer did request a remedy within a reasonable time. And indeed Mr Doonan did attempt to remedy; however, on the evidence – and one must look at the whole of the evidence – there was essentially a failure by the respondent to remedy, as it turned out. Mr 5 Transcript of hearing 1-25 line 45 – 1-26 line 5. 6 Transcript of hearing 1-26 lines 6 – 9. 7 Transcript of hearing 1-26 lines 10 – 25. 8 Transcript of hearing 1-26 lines 26 – 31. 9 Transcript of hearing 1-26 lines 31 – 34. -- 5 of 10 -- 6 Doonan said he wasn’t consulted as to the fact that the powder – the alternative powder coating people were being involved, but on the other hand Mr Henry was faced with a final payment being withheld and the pressures from the client to have the job done. The tribunal isn’t making any comment about that other than saying that they may well have been the business realities. And so the consumer, that is – or the trader consumer, Mr Henry’s company, did their remedy and obtained a different organisation, Ridgewood powder Coating, to procure the remedy at the cost that he has maintained.10 The learned adjudicator assessed the damages as follows: It is hard for the tribunal to assess damages when there are no invoices or details. I mean, we do have to operate on proof here, On the one hand, the tribunal could look in this case and ay, well, $15,433 plus $4,180 is $19,542.46, part of which is unproven, of course, in terms of detailed invoices. But then, offset against that is the counter-claim of some $20,000- odd. Again, all unproven in terms of the requirements of the tribunal.11 Perhaps, the better way, bearing in mind the questions of evidence, would be for the tribunal to accept as evidence – and there is proof of this evidence – the sum of $15,433.96 and the dismiss the other claims of – this is the quantum of the claims – of $4,108.50 and also the quantum of the claim of $20,000. But then, in terms of an assessment of damages, which is what the tribunal has to do, the applicant should then receive all reasonable cost to the remedy, subject to – in the tribunal’s mind – the fact that the respondent had entered into some degree of effort and response to attempt to remedy the situation, but without success.12 So bearing all those things in mind and doing the best I can on the evidence, I would reduce the sum of $15,433.96 by $4000. So therefore, the order I’ll make is that the respondent pay to the applicant the sum of $11,433.96 for the claim.13 (With an additional amount for the filing fee). The learned adjudicator framed the legal question in this matter in terms of the product being of unacceptable quality or not fit for purpose pursuant to the Australian Consumer Law (ACL). The primary ground of appeal is that the test for “fitness for purpose” was wrongly applied and it should be in terms of a reasonable person. Stewart Homes replied that they submitted evidence that the colour finish was not fit for purpose. As is sometimes the case in the minor civil dispute jurisdiction the learned adjudicator had little time to set out the law. He did not set out the provisions of the ACL which he considered applicable. There are various guarantees which the ACL implies into contracts for the supply of goods, in particular, s 54 (Guarantee as to acceptable quality) and s 55 (Guarantee as to fitness) for any disclosed purpose. These are the ones which the learned 10 Transcript of hearing 1-26 lines 35 – 45. 11 Transcript of hearing 1-27 lines 1 – 6. 12 Transcript of hearing 1-27 lines 7 – 16. 13 Transcript of hearing 1-27 lines 17 – 21. -- 6 of 10 -- 7 adjudicator alluded to in his reasons. There is another relevant guarantee, that is the guarantee relating to supply of goods by description at s 56 of the ACL. In accordance with s 56 of the ACL, where a person supplies goods by description there is a guarantee that the goods correspond with the description. Having regard to the facts of this case, I consider that it would have been appropriate for the learned adjudicator to consider them in accordance with s 56 of the ACL, that is whether the goods supplied by Decorative Imaging matched the contract description. There is therefore an error of law in the decision of the learned adjudicator and leave to appeal should be allowed and the grounds of appeal raised by Decorative Imaging should be considered in terms of s 56 of the ACL. The term “sale of goods by description” must apply in all cases where the purchaser has not seen the goods, but is relying on the description alone.14 Therefore the guarantee set out in s 56 of the ACL is implied in this case by operation of law. The question then is what forms part of the contract description. It has been held that this is limited to statements identifying the goods and not ones going to their quality.15 In this case the contract was for aluminium sheeting or extrusion of a specified finish, American Oak. I note that the business of Decorative Imagining was to apply a range of finishes to aluminium and, for example, their catalogue at page 46 asks customers to select their finish and colour. The evidence relevantly shows an email trial in relation to this order and it was stated in the initial email of 3 September 2014 from Ian Henry of Stewart Homes to Ross Doonan of Decorative Imaging that: On my drawing I have marked in yellow hilite the surfaces that will be visible, these surfaces need to be coated in the American Oak deco finish. Ian Henry’s email of 22 September 2014 in response to the quote of 19 September 2014 stated: Coating all with Deco American oak finish as per Ross’s quote below. The invoice for the order dated 29 August 2014 states “Finish American Oak”. I am satisfied as was the learned adjudicator that the colour, American Oak forms part of the description of the goods supplied by Decorative Imagining. The question then is whether or not the goods supplied corresponded with the description. Decorative Imaging has submitted that the appropriate test should be whether or not a reasonable person would consider that the 14 Varley v Whipp [1900] 1 QB 513. 15 Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441. -- 7 of 10 -- 8 colour matched. The test though is much stricter. It was stated in Sales and Consumer Law,16 in regard to the equivalent provision under the Sale of Goods legislation, that: If the goods do not fit the contractual description then, unless the discrepancy is of a trivial character as to justify it being disregarded by the court, the buyer is entitled to reject the goods as failing to conform to the description even though the goods are merchantable and “commercially” within the contract (Arcos v Ronaasen [1933] AC 470) Much of what has been raised by Decorative Imaging goes to the fact that the goods were otherwise fit for purpose and of merchantable quality and/or questioning how they were not fit for purpose. Stewart Homes acknowledged that this was never the issue and the whole issue revolved around the colour supplied. The guarantee here is that “the goods correspond with the description”. The issue is solely whether the goods corresponded to the description in terms of being of the correct colour, that is American Oak. Not in regard to their fitness for purpose or whether they are of merchantable quality. Whether or not the goods were fit for purpose in terms of being able to be used as building material or whether they were of merchantable quality are not relevant. The learned adjudicator considered all of the evidence including photographs and samples of the product and found that the colour had been altered and that there was a problem with this material. He noted that the consumer requested a remedy and Mr Doonan of Decorative Imagining did attempt to remedy. This is very important because the email of 6 November 2014, in response to the email from Stewart Homes of 5 November 2014 which stated “the delivery I have just received is a different colour to what I already have on site”, states: I called a meeting of our production and quality people today and reviewed the issue that you raised with us yesterday, and set out below are our initial findings” which includes: Following the processing of your initial order, we all liked the colour, so we made a decision to call it American oak, and incorporated it into our standard finish offer. When you placed orders for the additional items that were delivered to you on Monday, these were all finished using our stock Class 2 polyester powder, which should be the same colour. 16 KCT Sutton, 4th Edition (Law Book Co of Australasia, 1995), 231. -- 8 of 10 -- 9 To summarise your original orders for batons were all done in class 2 polyurethane powder, and all of the material delivered to you this week were all done in Class 2 polyester powder. Having said that, this does not explain the colour variation because there should be no difference between the same powder colour in PU or PE, unless there is something we do not understand about processing this colour. We do know that there is a different chemical composition between sheet and aluminium extrusion. And we do know that we have to be careful when matching sheet to extrusion. I apologise for the problem that you now have and we are all very concerned, because we do work very hard on delivering the highest quality standards to our customers. We will of course work with you to replace any material that you are unable to use. It was submitted by Stewart Homes that this email showed that Decorative Imaging knew that the product was not fit for purpose. I take what was said in that email as an acceptance by Decorative Imaging that the colour of the product supplied did not match the American Oak finish, in which case it is an admission that the product did not match the description in the contract. Decorative Imaging later raised the difference in the chemical compositions of the aluminium sheeting and aluminium extrusion as a reason why the colour may differ. Stewart Homes rightly submitted that this should have been raised at the time the contract was entered otherwise they had a right to expect the finish would be American Oak as described in the contract and as had been previously supplied to them. I agree with the submission of Stewart Homes that they were entitled to expect the same colour as they had not been made aware at the time of placing the order that it may differ. I am satisfied the learned adjudicator was correct in his finding that the colour of the goods supplied did not match the specified one. In applying the correct test of whether the goods supplied corresponded to their description Stewart Homes were entitled to their remedy. It was not only Stewart Homes and those associated with them who considered that the colour did not match; Decorative Imaging itself acknowledged this was the case. The remedy that Stewart Homes was entitled to was to require Decorative Imagining to remedy the failure within a reasonable time and if Decorative Imaging failed to comply then Stewart Homes may otherwise have the failure remedied and by action against Decorative Imagining recover all reasonable costs incurred in having the failure remedied.17 17 ACL, s 259(2). -- 9 of 10 -- 10 Stewart Homes did request Decorative Imaging to remedy the failure and Decorative Imaging attempted to do so but ultimately after some time they were unable to comply. Stewart Homes then engaged another party to remedy the failure and applied to the Tribunal to recover their costs of the remedy. The learned adjudicator awarded Stewart Homes the amount that they had paid for the goods to be remedied, less an amount for the work which Decorative Imaging had performed in attempting to remedy the goods. I am satisfied that this corresponds with a finding as to the reasonable cost of having the failure remedied in accordance with s 259(2) of the ACL. Decorative Imaging raises various issues in regard to the quality of the work performed by Ridgewood Powder Coating in remedying the work. It was submitted by Stewart Homes this is of no concern to Decorative Imaging as the work was accepted by the interior designer and client and if there were any issues with it later that was a matter for Stewart Homes. The issue that required remedying was the colour of the goods supplied. The company which performed the rectification work was able to match the colour to the satisfaction of Stewart Homes and their associates. The goods therefore matched their description and the failure had been remedied. I am satisfied that the costs incurred by Stewart Homes in remedying the work were reasonable costs. The learned adjudicator allowed those costs less an amount for the effort put in by Decorative Imaging for their attempts to rectify the work. There has been no appeal against the allowance made in regard to the work performed by Decorative Imaging and will not disturb that part of the decision. The decision of the learned adjudicator is confirmed and the appeal is dismissed. -- 10 of 10 --