Bellette v Serious Industries Pty Ltd [2017] QCAT 317

CITATION: Bellette & Anor v Serious Industries Pty Ltd [2017] QCAT 317 PARTIES: Tracey Bellette Danny Bellette (Applicants) V Serious Industries Pty Ltd (Respondent) APPLICATION NUMBER: MCDO39/17 MATTER TYPE: Other minor civil dispute matters HEARING DATE: 18 April 2017 HEARD AT: Southport DECISION OF: Adjudicator Mewing DELIVERED ON: 20 July 2017 DELIVERED AT: Southport ORDERS MADE: 1. The net result of the decision in this matter and the decision in MCDO 1366/16 is that the Respondent must pay to the Applicants $16,000.00 within 28 days of this Order. 2. Within two business days of receipt of the payment in Order 1, the Applicants must return the trailer (VIN 6159FEGFTRFS312006) to the Respondent's place of business during business hours, or if the Respondent has since relocated its business, to another address nominated by the Respondent within 50 km of its former place of business. CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – PENALTIES AND LIQUIDATED DAMAGES – GENERAL PRINCIPLES – whether liquidated sum – whether amount in excess of quoted price is liquidated sum – whether customer impliedly agreed to additional work – whether claim on quantum meruit -- 1 of 21 -- 2 CONTRACTS – BUILDING ENGINEERING AND RELATED CONTRACTS – OTHER MATTERS – whether purchaser of custom trailer able to claim compensation – whether trailer acceptable in appearance and finish – whether trailer fit for purpose – whether major failure – extent of loss claimable as compensation Competition and Consumer Act (Cth) 2010 Schedule 2 (Australian Consumer Law), s 2, s 7, s 54, s 55, s 56, s 60, s 61, s 62, s 236, s 259, s 260, s 267 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 3, s 11, Schedule 3 Queensland Civil and Administrative Tribunal Rules 2009 Qld), r 48(3) Air Great Lakes Pty Ld v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Coast Securities No 9 Pty Ltd v Albac Pty Ltd [1984] 2 Qd R 25 Coulls v Baggot’s Executor and Trustee Co Ltd (1967) 119 CLR 460; [1967] HCA 3 Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847 Glass v Pioneer Rubber Works of Australia Ltd [1906] VLR 754 Jelekainen & Ors v Frikton [2007] QSC 98 Medtel Pty Ltd v Courtney (2003) 130 FCR 182; [2003] FCAFC 151 Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5 Prestige Auto Traders Australia Pty Ltd v Bonnefin [2017] NSWSC 149 Thomas v Thomas (1842) 2 QB 85 APPEARANCES: APPLICANTS: Mr Danny Bellette Mrs Tracey Bellette RESPONDENT: Martin Fitzgerald, Director -- 2 of 21 -- 3 REASONS FOR DECISION Basis of Claims [1] In July 2016 Serious Industries Pty Ltd was engaged by Mr and Mrs Bellette to build a custom utility trailer for $16,000.00, which the Bellettes paid in two instalments. When the trailer was completed, Serious Industries invoiced Mr and Mrs Bellette an additional $11,970.00. Mr and Mrs Bellette refused to pay the invoice. Serious Industries seeks an order that Mr and Mrs Bellette pay the invoice plus costs. [2] The Bellettes have filed their own claim against Serious Industries.1 They say the trailer is unfit for the purpose for which they ordered it. They say it is unsafe and defective. They seek an order that Serious Trailers refund the $16,000.00 already paid plus compensation of $2,573.00 for additional items they purchased to have installed into the trailer. Dealing with this Application [3] Serious Industries’ claim is for a minor debt and the Bellettes’ claim is for breach of guarantee under the Australian Consumer Law (ACL), so each requires consideration of different law and legal principles. While the claims arise from the same transaction and factual history, r 48(3) of the Queensland Civil and Administrative Tribunal Rules 2009 (Qld) (QCAT Rules) prohibited the Bellettes from making a counter-application against Serious Industries’ minor debt claim. Their only recourse was to bring a consumer claim. [4] On 21 March 2017 the Tribunal made orders that Serious Industries’ claim in MCDO1366/16 be listed together for hearing with the Bellettes’ claim in MCDO39/17 given they involve the same facts.2 Each claim will remain separate but the two claims were heard together on 21 March 2017 and will decided together now. This pays heed to Tribunal’s objects under s 3 of the QCAT Act to have the Tribunal deal with matters in a way that is accessible, fair, just, economical and quick and is, in the Tribunal’s view, the most efficient way of deciding the parties’ discrete claims. [5] Accordingly, I will deal first with Serious Industries’ minor debt claim followed by the Bellettes’ consumer claim, and the Orders made will be the net result of the outcome in each. 1 MCDO39/17 filed at Southport Registry on 20 January 2017. 2 Pursuant to the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act), s 55(1)(a). -- 3 of 21 -- 4 MCDO1366/16 – Serious Industries v Bellette & Anor Serious Industries’ Submissions [6] Serious Industries is a designer and manufacturer of fibreglass custom utility trailers. Its director, Mr Fitzgerald, dealt with the Bellettes and represented Serious Industries at the hearing. [7] Mr Fitzgerald says that the Bellettes engaged him on 4 July 2016 to build a custom utility trailer for $16,000.00. This price was to include modifications the Bellettes had requested to Serious Industries’ basic standard retro styled fibreglass utility trailer, which was priced at $8,990.00. [8] Mr Fitzgerald issued invoice 1624 on 4 July 2016 for $8,000.00 with the following details: Build Custom trailer to requirements Painted Red and fitted out As [sic] instructed Deposit of 50% to be paid $8,000.00 Thank you for your business Balance due on Completion [9] The Bellettes paid the $8,000.00 and Mr Fitzgerald commenced work soon after. Mr Fitzgerald says the Bellettes attended his workshop over the next few weeks to view progress on the trailer. He says Mr Bellette requested “numerous additional items” during those visits. [10] Mr Fitzgerald says the Bellettes attended his factory on 25 August 2016 when they inspected and approved the trailer. [11] On 3 September Mr Fitzgerald issued invoice 1629 (dated 4 July 2016, which I suspect was an error) with the following details: Build Custom trailer to requirements Painted Red and fitted our As [sic] instructed Balance of original Quotation $8,000.00 Invoice for additional work on Completion of Trailer Thank you for your business Balance due on Completion. [12] Mr Fitzgerald said the Bellettes had “requested and required” the “additional work” referred to on invoice 1629. He says the words “invoice for additional work on completion of trailer” on that invoice, together with a detailed list of additional work which accompanied the invoice by email was acknowledged and agreed by the Bellettes, and that they impliedly agreed to a pay further invoice by replying: “thank you from both of us for your help and understanding of what we are trying to achieve, it is all appreciated.” -- 4 of 21 -- 5 [13] The Bellettes paid the further $8,000.00 on 5 September 2016. [14] Mr Fitzgerald says that the Bellettes visited the factory multiple times to view the progress of their trailer and repeatedly indicated satisfaction with Mr Fitzgerald’s work, the progress of additions they had requested and the extra expenses. [15] Mr Fitzgerald says that he emailed invoice 1631 for $11,970.00 to the Bellettes on 18 September 2016, together with a message which read in part: … Danny and I have spoken about the extra costs for materials, parts and labour. I have attached a list again with all itemised. I did do more than 150 extra hours on the trailer, I told Danny I would only charge for 120 hours as I did learn plenty, the rear door took me 8 days to get it right, how can I charge for things like that? For my time I only will charge $40 an hour plus rent and GST. That works out $55 an hour, if you think that is unreasonable, let me know. … [16] The details of invoice 1631 were: Build Custom trailer to requirements Painted Red and fitted out As [sic] instructed Parts and Components for trailer Upgrade Modifications 5190.00 Labour for Additional work 144 Hours 6600.00 [17] Mr Fitzgerald says Mr Bellette collected the finished trailer on 19 September 2016. Mr Fitzgerald says Mr Bellette expressed satisfaction with it. [18] Mr Fitzgerald says no work was done to the trailer without authorisation from the Bellettes. Mr Fitzgerald says he is therefore entitled to payment of the additional invoice for $11,790.00. Mr and Mrs Bellette’s Response [19] The Bellettes deny that they are liable to pay the invoice for $11,790.00. They say they engaged Serious Industries to build a trailer for $16,000.00 to the specifications set out in an email to them from Mr Fitzgerald dated 30 June 2016 (the price of which was amended in an email dated 1 July 2016). -- 5 of 21 -- 6 [20] The Bellettes paid the $16,000.00 in two instalments, but concede that they were expecting to pay an additional $2,000.00 on completion for the following changes they expressly authorised during the build of the trailer: a) Stronger struts on doors; b) A key lock on the entry door; c) Installation of solar panels; d) Upgrade to a larger battery; e) Installation of rooftop air conditioner (supplied by the Bellettes); f) Manufacture of an additional two wings over a door; g) Installation of a hanging bar at the front of the trailer; and h) Welding of hooks on internal mesh. [21] The Bellettes say they never requested nor authorised the construction or installation of shelves, cutting and installation of internal grid mesh, or strengthening of the fibreglass shell. They say that Mr Fitzgerald is not entitled to charge for this. They say that Mr Fitzgerald is also not entitled to charge for the additional 144 hours of labour in invoice 1631. [22] The Bellettes refute Mr Fitzgerald’s assertion that they were given invoice 1631 before they collected the trailer. They say they collected the trailer on 16 September 2016, and received invoice 1631 on 18 September 2016 so could not have impliedly agreed to pay the invoice by taking the trailer. [23] The Bellettes also state that Mr Fitzgerald originally gave a quote for their trailer at $26,000.00, only to state a day later that it was a typographical error that should have read $16,000.00 after they said it was too expensive would go elsewhere. They say this is significant because it indicates Mr Fitzgerald always knew this trailer might have cost more than $16,000.00 to build. Relevant Law [24] This Tribunal has jurisdiction to hear and decide a minor civil dispute,3 which is defined to include a claim to recover a debt or liquidated demand of money.4 [25] A debt or liquidated demand is an ascertained amount of money with two essential characteristics: it is fixed by contract; and it is due for payment by the party from whom it is claimed.5 3 QCAT Act, s 11. 4 QCAT Act, Schedule 3, definition of ‘minor civil dispute’. 5 Coast Securities No 9 Pty Ltd v Alabac Pty Ltd [1984] 2 Qd R 25. -- 6 of 21 -- 7 [26] For a debt to be fixed by contract, there must a clear offer by one party (‘the offeror’) of a willingness to be bound by certain terms accompanied by an unqualified assent to that offer communicated by the other party (‘the offeree’) to the offeror (‘acceptance’). Acceptance must be unequivocal, with nothing further left to be negotiated between the parties. There must be consideration from the offeree,6 and an intention to create legal relations.7 [27] The formation of a contract may be inferred from the conduct of the parties.8 Sometimes there may be no identifiable offer and acceptance because the parties have not expressly discussed the formation of the contract, but have indicated by their conduct that they did in fact intend to contract.9 [28] In circumstances where a technical mistake or impediment prevents enforcement of a contract, and there is no implied contract,10 a claim may nevertheless be possible on the basis of quantum meruit. Success in a quantum meruit claim depends not only on the plaintiff proving the work was done, but also on the defendant's acceptance of the work without paying the agreed remuneration.11 [29] For Serious Industries to be successful in its claim, it must establish that its demand for payment is based on a contract, or that it has a quasi- contractual claim based on quantum meruit. Discussion [30] Evidence submitted to the Tribunal by the Bellettes shows that between 27 June 2016 and 4 July 2016 Mr Fitzgerald and the Bellettes exchanged emails and met on at least one occasion in an effort to negotiate a price for their custom trailer. [31] I find that by 5 July 2016 the parties had reached agreement at a price of $16,000.00, evidenced by payment of $8,000.00 by the Bellettes for invoice 1624. [32] I find that the agreed specifications were largely as described in an email from Mr Fitzgerald to the Bellettes on 30 June 2016. [33] There was evidence the Bellettes knew extra costs might be incurred with respect to the battery upgrade, upgrade of door struts, installation of solar 6 Thomas v Thomas (1842) 2 QB 851, 859; Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847; Coulls v Baggot’s Executor and Trustee Co Ltd (1967) 119 CLR 460. 7 Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, 336. 8 Jelekainen & Ors v Frikton [2007] QSC 98, [79] (Muir J), citing Glass v Pioneer Rubber Works of Australia Ltd [1906] VLR 754. 9 Glass v Pioneer Rubber Works of Australia Ltd [1906] VLR 754. 10 Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221, [10] (Mason and Wilson JJ). 11 Ibid. -- 7 of 21 -- 8 panels, installation of an air-conditioner (supplied by the Bellettes), fixing of door wings, installation of a hanging bar and welding of four hooks. [34] There was no evidence that Mr Fitzgerald provided a quote nor obtained approval for these additional items. An email from Mr Fitzgerald to the Bellettes on 3 September 2016 states inter alia that “[w]e will work out the cost of extras on completion and discuss. List to date attached”, and is followed by a page and a half description of, presumably, the components and work that comprise the Bellettes’ custom trailer. [35] Under the heading “Additional Work Requested”, Mr Fitzgerald lists 14 items he says the Bellettes asked for in addition to the $16,000.00 custom trailer. The Bellettes say they asked for or approved seven items on that list. Mr Fitzgerald has no evidence that the Bellettes asked for or approved any of the additional items beyond what the Bellettes have acknowledged. [36] Accordingly, Mr Fitzgerald has no basis for demanding payment for other than the seven items the Tribunal finds the Bellettes agreed to. [37] The Tribunal accepts the Bellettes’ submission that they collected the trailer on Friday 16 September before receiving invoice 1631 from Mr Fitzgerald on 18 September. This is supported by an email dated 19 September 2016 from Mrs Bellette to Mr Fitzgerald in which she notes the trailer had been collected the previous Friday. [38] Accordingly, Mr Fitzgerald’s assertion that the Bellettes impliedly agreed to pay invoice 1631 by taking the trailer knowing the extent of that additional invoice they were yet to be presented with is without basis. [39] The Bellettes say they expected to pay about $2,000.00 for extra items. Mr Fitzgerald’s list titled “Parts and Components” attached to his 3 September email includes the following for the items the Bellettes agreed to: Struts for Rear door ? Front Hanger rail $100 Heavy Duty Battery – upgrade ? Solar Panel to Recharge Battery $150 [40] Under the heading “Work needed to suit Additional requests”, it notes “Install Solar Panel” and “Install Air Conditioner”, both of which the Bellettes approved. There are also 16 other items of additional work the Bellettes did not approve. There is no quoted price next to the additional work, but the final line of the page and a half list concludes: Do [sic] date I’ve done 120 hours out side [sic] the quote There is rent to account for as well -- 8 of 21 -- 9 [41] The Tribunal finds that the 3 September list of work and components was not agreed to by the Bellettes and was not sufficiently certain to bind them to pay invoice 1631 for $11,970.00. [42] Indeed, it is difficult to determine what, if anything, the Bellettes should pay for other than the front hanger rail and the solar panel by referring to the 3 September list. [43] Nevertheless, the Tribunal finds that Mr Fitzgerald is entitled to receive some compensation for the additional work on a quantum meruit basis. In the absence of anything ascertainable from Mr Fitzgerald’s submissions, the better amount is that which the Bellettes conceded they should pay: $2,000.00. [44] Accordingly, the Tribunal finds that Danny and Tracey Bellette are liable to pay Serious Industries $2,000.00 in full satisfaction of Serious Industries’ claim MCDO1633/16 filed 4 October 2016, subject to the outcome in MCDO39/17. MCDO39/17 – Bellette & Anor v Serious Industries The Bellettes’ Submissions [45] Danny and Tracey Bellette wanted a trailer that could transport (and from which they could display and sell) clothing apparel at trade shows in various locations around Australia. They sought a trailer that would allow customers to enter and browse apparel displayed inside. [46] In June 2016 they saw an advertisement placed by Serious Trailers for a trailer that appeared to have features similar to the kind they were seeking. The advertised price was $8,800.00. [47] The Bellettes responded to the advertisement, requesting a quotation for a customised version of the advertised trailer which would suit their requirements. [48] Mr Fitzgerald responded to the Bellettes’ request, quoting “$12,000.00 to $15,000.00, depending on requirements.”12 [49] The Bellettes met Mr Fitzgerald at Serious Trailers’ workshop on 28 June 2016 to view the advertised trailer and further discuss their specific requirements and the possibility of obtaining their desired trailer. [50] The Bellettes say they told Mr Fitzgerald their specific needs. Among those were that: a) The internal height be 2 metres to allow standing room inside; 12 Applicants’ Exhibit 1: Email from Martin Fitzgerald to Tracey Bellette dated 27 June 2016. -- 9 of 21 -- 10 b) The length of the “workable area” be 4.5 metres (i.e. excluding the draw bar); c) The trailer be strong enough to hang clothing racks; and d) The trailer be completed before 3 September 2016. [51] The importance of the 4.5 metre length was emphasised in a follow-up email from Mrs Bellette to Mr Fitzgerald where she asked whether the trailer could be extended to 4.5 metres,13 a request conditionally acknowledged by Mr Fitzgerald when he replied: [t]he front will … also be extended 600mm to increase the trailers [sic] length to around 4.2 metres and possibly 4.5 metres.14 [52] The Bellettes say that when they met with Mr Fitzgerald again on 1 July 2016, they further emphasised the 4.5 metre length requirement and the need for the trailer to be strong enough to accommodate panels of grid mesh for hanging clothing. [53] By 4 July 2016 the Bellettes believed they had reached agreement on the specifications of the custom trailer and agreed to pay $16,000.00 as quoted by Mr Fitzgerald. [54] The Bellettes say that over the next few weeks Mr Fitzgerald took it upon himself to make two extra door wings, cut and install grid mesh racks (which they say they had supplied to him for measurement purposes only) and make and insert shelves. The Bellettes say this work was done without their authority and without informing them of any extra cost. [55] The Bellettes say that they did agree to pay for other items (discussed at [20]) which are not specifically relevant to the present claim. [56] On 1 September the Bellettes attended the workshop to inspect the trailer. They say they noted the following: a) Shelves added to the internal rear of the trailer looked cheap and unprofessional; b) The rear of the trailer had not been extended; c) The grid mesh had been cut incorrectly and poorly installed; d) The storage bin was narrower than requested and its lids were too small; e) Entry steps were too small and consequently dangerous; 13 Applicants’ Exhibit 2: Email from Tracey Bellette to Martin Fitzgerald, 29 June 2016. 14 Applicants’ Exhibit 3: Email from Martin Fitzgerald to Tracey Bellette, 30 June 2016. -- 10 of 21 -- 11 f) The trailer was not 4.5 metres long; g) It did not have fold-out steps as requested; h) A power inlet is unusable because it was installed too close to a door opening; i) A hanging rail was incorrectly installed; and j) The rear door was incorrectly configured and protruding struts take up internal space. [57] The Bellettes say when they asked Mr Fitzgerald why he hadn’t lengthened the trailer as they’d requested, he said he couldn’t do so at such a late stage, but they could obtain extra length by using the rear door as a roof and filling in the sides with an annex. [58] The Bellettes say they were unhappy with the trailer, but continued to give instructions to Mr Fitzgerald about the remaining work in an effort to try to make the trailer fit their needs.15 [59] The Bellettes collected the trailer on 16 September 2016. [60] On 19 September 2016 the Bellettes informed Mr Fitzgerald the trailer was not the requested length and asked how it could be modified to fit their specifications,16 to which Mr Fitzgerald replied: [Y]ou knew how big it was before it went for paint. You approved the work and the size. … As to the size, you were happy with it. … Please drop it off and I’ll attend to any alterations you would like.17 [61] The Bellettes say they could never properly determine – so could not have approved – the length before paint because it was hanging from chains at the workshop each time they inspected it. [62] Mrs Bellette asked for a refund of the $16,000.00 they had paid.18 Mr Fitzgerald has not provided a refund, and refused to do any further work until the Bellettes pay him $11,970.00. 15 Detailed submissions were made by the Bellettes in relation to payment and presentation of invoices, and work undertaken without authority but invoiced by Serious Industries. These submissions are not relevant to this claim, so I do not address them here. 16 Applicants’ Exhibit 18: Email from Tracey Bellette to Martin Fitzgerald, 19 September 2016. 17 Applicants’ Exhibit 19: Email from Marin Fitzgerald to Tracey and Danny Bellette, 19 September 2016. 18 Applicants’ Exhibit 18: Email from Tracey Bellette to Martin Fitzgerald, 19 September 2016. -- 11 of 21 -- 12 [63] The Bellettes say they have since discovered the trailer is defective in several other respects, including: a) Protruding bolts next to the tyres, which make the trailer unsafe; b) Bubbling and scratch marks in the paintwork; c) Absence of protective paint on the timber underneath the trailer; d) The tare weight of 980kg noted on the compliance plate and obtained by Mr Fitzgerald on 6 September is incorrect because he took it to the weighbridge before installing the rooftop air conditioning unit when he knew the unit was to be installed. A weighbridge receipt obtained by the Bellettes on 8 February 2017 shows the actual tare weight with the air conditioner is 1,120kg;19 e) The aggregate trailer mass (‘ATM’) noted on the compliance plate is 1,400kg. Given the tare weight is 1,120kg, it leaves only 280kg payload, which is far less than they require to transport apparel;20 f) The trailer is not roadworthy because the tyres have a maximum combined carrying capacity of 1,120kg so will not carry the stated ATM of 1,400kg; g) There is a crack in the upper left hand front frame of the trailer, which raises roadworthiness concerns; h) The trailer is not compliant with Queensland Transport VBS1 Trailer and HVRAS Assessment Guidelines because: i) The tyres have insufficient carrying capacity; ii) The true tare weight of the trailer is 1,120kg, while the compliance plate notes that it is 980kg; i) A dual axle should have been used rather than a single axle to minimise pressure of the tow ball of the car and better distribute weight; and j) The trailer is not vermin proof nor water proof.21 19 As verified by the Bellettes at Molendinar weighbridge on 8 February 2017: Applicants’ Exhibit 1 (tendered at hearing on 1 April 2017). 20 Applicants’ Exhibit: Report from Greg King, Authorised Vehicle Examiner, dated 11 February 2017 (tendered at hearing on 21 April 2017). 21 References to additional defects of a cosmetic nature (including black rather than chrome roof racks, exposed screws, and a galvanised pipe) were also detailed in submissions. -- 12 of 21 -- 13 [64] The Bellettes submit that these defects show that Serious Industries failed to comply with consumer guarantees related to acceptable quality, fitness for purpose and supply by description prescribed by the ACL. [65] They further submit that Serious Industries has breached the ACL guarantees with respect to providing services with due care and skill, providing services that are fit for a particular purpose and providing services within a reasonable time. [66] They say these failures are major failures, because: a) The Bellettes informed Mr Fitzgerald they wanted a specific result but the services and the resulting product were not of a standard that would reasonably be expected to achieve that result; b) The trailer is unfit for the disclosed purpose that was made known to Mr Fitzgerald and cannot be made fit for that purpose; c) The trailer is unsafe; d) The trailer departs from the description supplied by Serious Industries; and e) The trailer would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure. [67] Accordingly, the Bellettes say they are entitled to seek a refund and damages totalling $18,573.00 from Serious Industries. Serious Industries’ Submissions [68] Mr Fitzgerald for Serious Industries denies he has failed to comply with any of the ACL guarantees, and therefore denies any liability to the Bellettes. [69] Mr Fitzgerald says he provided a quote and description of a basic trailer, and any changes and upgrades were inspected and approved by the Bellettes.22 He says Mr Bellette attended the factory on numerous occasions throughout the build of the trailer when his approval was sought and provided before Mr Fitzgerald moved on to the next step. [70] He says the Bellettes knew the size before it was painted and were happy with it. He says Mr Bellette expressed satisfaction with the finished trailer when he collected it. [71] He says the trailer is roadworthy. 22 Applicants’ Exhibit 21: Email from Martin Fitzgerald to Tracey and Danny Bellette, 22 September 2016. -- 13 of 21 -- 14 [72] Mr Fitzgerald also says that the grid mesh chosen and provided by the Bellettes adds significant additional weight and therefore is the real cause of the payload deficiency. [73] He says he was always willing to make touch-ups and fix any cosmetic issues (e.g. cutting the protruding bolts), provided the Bellettes pay what they owe him. Relevant Law [74] The ACL23 provides consumers of goods with guarantees in addition to any provided by the seller of those goods in certain circumstances. [75] Specifically, a ‘consumer’ is protected by the ACL guarantees if the goods they have acquired: a) Cost $40,000.00 or less;24 or b) Are for personal, domestic or household use; or c) Are a vehicle or trailer acquired for use principally in the transport of goods on public roads. [76] The consumer guarantees are enforceable against suppliers and manufacturers of goods. ‘Supplier’ has its ordinary meaning, and includes a person or entity who sells goods or provide services.25 A ‘manufacturer’ includes a person or entity who holds himself or itself out as the manufacturer or goods.26 [77] The consumer guarantees are in Part 3-2 of the ACL. To the extent relevant to this claim, the ACL provides guarantees in relation to the supply of goods that encompass acceptable quality, fitness for purpose, and supply by description.27 [78] The ACL also provides guarantees that suppliers of services will use due care and skill, will supply services that are fit for purpose and in a reasonable time.28 [79] In the event that a supplier or manufacturer breaches a consumer guarantee, the consumer may request remediation or, if that is not possible, request a refund.29 In circumstances where the breach of guarantee is 23 Competition and Consumer Act 2010 (Cth), Schedule 2. 24 Subject to a regulation prescribing a greater amount: ACL, s 3(1)(a)(ii). 25 ACL, s 2. 26 Ibid, s 7. 27 Ibid, s 54, s 55, s 56. 28 Ibid, s 60, s 61, s 62. 29 Ibid, s 259, s 267. -- 14 of 21 -- 15 deemed to be a ‘major failure’, the consumer may also seek damages for loss exceeding the cost of the goods or services.30 Discussion [80] The Bellettes acquired a trailer costing less than $40,000.00 intended for transporting apparel to various destinations via public roads. Accordingly, they are ‘consumers’ under the ACL. [81] Serious Trailers is both a supplier and manufacturer of the trailer. [82] Accordingly, the supply of the trailer to the Bellettes is subject to the consumer guarantee provisions in Part 3-2 of the ACL. [83] The Bellettes’ submissions made reference to allegations of breach of guarantee as to supply of services but did not elaborate on those submissions, save to say that they relied on Mr Fitzgerald’s skill and judgement. [84] The definition of ‘services’ in the ACL31 includes a contract for performance of work, with or without the supply of goods. [85] The Bellettes’ claim for a refund and compensation is based on three primary grounds: a) The trailer was not of acceptable quality pursuant to s 54 ACL; b) The trailer was not fit the purpose they had disclosed to Serious Industries, in contravention of s 55 ACL; and c) Mr Fitzgerald had failed to exercise due care and skill in provision of his services in designing and construction of the trailer, in contravention of s 60 ACL. Was the trailer of acceptable quality? [86] Section 54 of the ACL relevantly provides: (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; There is a guarantee that the goods are of acceptable quality. (2) Goods are of acceptable quality if they are as: 30 Ibid, s 236, s 259(4), s 260. 31 Ibid, s 2. -- 15 of 21 -- 16 (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance or finish; and (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 by 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. [87] Goods do not fail to be of acceptable quality if the consumer examined them before purchase, and that examination ought reasonably to have revealed any defects or other problems.32 [88] Whether goods are of acceptable quality on the bases listed in s 54(2) of the ACL requires the Tribunal to undertake an objective assessment of what the typical “reasonable person” who purchased a trailer made to their custom specifications for $16,000.00 would regard as acceptable quality at the time of supply.33 [89] The Bellettes complaints about quality range from cosmetic issues such as bubbling paint, through to more serious allegations about safety, including tyres being incorrect for the stated ATM weight, cracking, protruding bolts and slippery stairs. [90] On review of photographs provided by the Bellettes and oral submissions made by both parties, I find that the bubbling paint, protruding bolts, slippery stairs, absence of protective paint on the underside and presence of gaps allowing potential ingress of water and rodents indicate a failure to comply 32 Ibid, s 54(7). 33 Medtel Pty Ltd v Courtney [2003] FCAFC 151; Prestige Auto Traders Pty Ltd v Bonnefin [2017] NSWSC 149. -- 16 of 21 -- 17 with the guarantee as to acceptable quality as they are not acceptable in appearance and finish as prescribed by s 54(2)(b) ACL. However, I find that these issues are more than likely capable of being remedied. [91] I accept the report from Greg King34 that the incorrect tyres were fitted to the trailer, and find that the fitting of incorrect tyres is a breach of the guarantee as to acceptable on the basis of safety under s 54(2)(d) ACL. [92] Mr King does not suggest that the axel is insufficient, merely that the tyres can carry a maximum of 1,120 kg on a single axel. Presumably, therefore, the tyres could be replaced with more appropriate tyres for the stated ATM. Again, the fitting of incorrect tyres can be remedied. [93] Mr King also mentions cracking in the upper left-hand frame, but his comments do not, without more, persuade me that it makes the trailer unsafe. Again, the Tribunal finds that this is a cosmetic issue capable of remediation. Was the trailer fit for the disclosed purpose? [94] Section 55 provides a guarantee that the trailer made and supplied to the Bellettes will be fit for the purpose they disclosed to Serious Trailers they intended it for, or fit for any purpose for which Serious Trailers disclosed that it would be reasonably fit. [95] A “disclosed purpose” is defined as a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that the consumer makes known to the supplier and/or manufacturer.35 [96] The fitness for purpose guarantee as is not available if the Bellettes did not rely on, or if was unreasonable for them to rely on, the skill and judgment of Mr Fitzgerald.36 [97] It was not in dispute that the purpose of the trailer sought by the Bellettes was for use as a mobile shop from which to sell apparel, and which would be transported from place to place on public roads across Australia. Mr Fitzgerald did not deny that he knew this before quoting and starting production of the trailer. [98] There was, however, no evidence before the Tribunal that the Bellettes told Mr Fitzgerald what the total weight of their intended cargo would be. This detail does not appear in the email correspondence between them. It is possible that they did not know the precise weight. 34 Applicants’ Exhibit: Report from Greg King, Authorised Vehicle Examiner, dated 11 February 2017 (tendered at hearing on 21 April 2017). 35 ACL, s 55(2). 36 Ibid, s 55(3). -- 17 of 21 -- 18 [99] The Bellettes say that, having told Mr Fitzgerald what the trailer would be used for, they relied on his skill and judgment as a manufacturer of custom trailers to allow an appropriate difference between the tare weight and ATM to allow for the carriage of clothing. Mr Fitzgerald made no direct submission in defence of this, but he did suggest that the heavy grid mesh chosen by the Bellettes was the reason for the low payload. [100] No evidence was tendered by either party about the weight of the grid mesh. Photographs of the interior of the trailer tendered by the Bellettes show some panels of grid mesh installed, but there is no indication as to its weight. [101] It can be assumed the grid mesh has some weight. That said, whether the aggregate weight of all mesh panels is 10kg or 100kg, which of these two parties should be responsible for the failure to factor in that weight? [102] The Bellettes say that installation of the grid mesh was not a component of the $16,000.00 Mr Fitzgerald quoted them to build their trailer. They say it was understood they’d source the grid mesh and install it themselves. They say they only provided Mr Fitzgerald with a panel of the mesh for measurement purposes. They say Mr Fitzgerald installed the grid mesh without their authority. [103] It is the Tribunal’s view that the Bellettes knew or ought to have known Mr Fitzgerald was installing the grid mesh as early as 12 July 2016 or just thereafter when they placed the order for five panels,37 which was the second order after their initial order of one panel on 5 July 2016. The Tribunal accepts their submission that their first order for one panel was to aid Mr Fitzgerald’s internal measurements, but with the second order they should have been aware that the panels were being installed. They went on to place two additional orders for a further eight panels over the following weeks, which they personally took to Serious Industries’ workshop. In the Tribunal’s view these actions show that the Bellettes gave implied authority between 12 July and 30 August 2016 at latest for Mr Fitzgerald to continue installing the panels. [104] Nevertheless, only Mr Fitzgerald could have known the effect the installation of the grid mesh could have on the weight of the trailer. He installed the panels using brackets and screws, so he knew or should have known they were permanent fixtures and would ultimately affect the trailer’s tare weight. [105] There was no evidence he mentioned this likely effect to the Bellettes. As a person holding himself out as a manufacturer of custom trailers, it was incumbent on Mr Fitzgerald to make this known. The Bellettes were entitled 37 Applicants’ Exhibit 6: Tax invoice FA0712-092926 dated 12 July 2016, issued by Shopfittings Store to Wicked Magic. -- 18 of 21 -- 19 to rely on his skill and judgment to warn them if this would impact on their ability to transport the trailer filled with apparel. [106] With an ATM of 1,400kg (assuming the correct tyres can be fitted to allow carriage of 1,400kg ATM) and a tare weight of 1,120kg, the trailer is fit for transportation of a maximum of 280kg of cargo. If proper tyres cannot be fitted, the maximum payload is 140kg. [107] The Bellettes say they need to be able to carry 1,000kg of apparel and ancillary items (chairs, cash register, mirrors, etc). No documentary evidence was tendered to support that they mentioned 1,000kg to Mr Fitzgerald, but I accept the Bellette’s oral evidence that they told him Fitzgerald at their first meeting that the purpose of the trailer was to transport clothing apparel to large trade shows and events, which on a conservative estimation would be likely to weigh more than 280kg. [108] That the length of the trailer is not 4.5m as requested by the Bellettes is also not in dispute. Mr Fitzgerald said they knew it was less than 4.5m before it was completed. By the time the Bellettes knew it was less than 4.5m long, Mr Fitzgerald told them it was too late to lengthen it. This does not amount to acquiescence by the Bellettes. [109] Accordingly, the Tribunal finds that Mr Fitzgerald’s failure to build a trailer with sufficient payload for the Bellettes’ stated purpose, and his failure to build the trailer to a 4.5m length in accordance with their contractually agreed specifications is a failure of the guarantee as to fitness for purpose under s 55 ACL. Remedy [110] Section 259 of the ACL provides that consumer may take action against a supplier of goods if a consumer guarantee has not been complied with. As the Tribunal has found that guarantees in s 54(2) and s 55(1) have not been complied with, the Bellettes are entitled to a remedy which is dependent on whether the failure to comply falls under s 259(2) or (3). [111] Section 259(2) and (3) provides: (2) If the failure to comply with the guarantee can be remedied and is not a major failure: (a) The consumer may require the suppler to remedy the failure within a reasonable time; or (b) If such a requirement is made of the supplier but the supplier fails or refuses to comply with the requirement, or fails to comply with the requirement within a reasonable time—the consumer may: (i) Otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or -- 19 of 21 -- 20 (ii) Subject to section 262, notify the supplier that the consumer rejects the goods and the ground or grounds for the rejection. (3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) Subject to section 262, notify the supplier that the consumer rejects the goods and the grounds for the rejection; or (b) By action against the supplier, recover compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods. [112] The more appropriate remedy of s 259(2) or (3) turns on whether or not the failure to comply with a consumer guarantee is a ‘major’ failure. To the extent relevant to this claim, s 260 provides that a failure to comply with a consumer guarantee is a ‘major failure’ if: (a) The goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or (b) … (c) … (d) The goods are unfit for disclosed purpose that was made known to ... the supplier … 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. [113] As previously stated at [90] to [93], the Tribunal finds that the failures to comply with s 54(2) ACL are capable of being remedied so are not major failures under s 260 ACL. [114] The Tribunal further finds that the failure to comply with s 55(1) ACL is a major failure under s 260 ACL because: a) It is accepted that the Bellettes would not have acquired the trailer from Serious Industries if they knew they would receive a trailer of less than 4.5m length and a maximum of 280kg payload;38 and b) The trailer is substantially unfit for the purpose made known to Mr Fitzgerald and cannot, easily and within a reasonable time, be remedied to make it fit for that purpose.39 [115] Given this finding, the Bellettes are entitled to reject the trailer and the Tribunal finds that they did so as early as 19 September 2016. 38 ACL, s 260(a). 39 Ibid, s 260(d). -- 20 of 21 -- 21 [116] The consequence is that the Bellettes are entitled to return the trailer and be refunded $16,000.00. [117] The Bellettes also claim an additional $2,573.00 for the grid mesh panels and air conditioner. While the ACL provides that consumers may also claim for any reasonably foreseeable loss suffered as a result of a supplier’s failure to comply with consumer guarantees,40 the Tribunal finds that these amounts are not claimable by the Bellettes because: a) The Bellettes could remove the grid mesh from the trailer and repurpose it or on-sell it. It is trite to say that it cannot be used because it was cut, as the Bellettes knew Mr Fitzgerald was cutting the mesh in July, but still proceeded to provide him with more mesh; and b) The Bellettes could remove the air conditioner and on-sell it to recoup their expense. [118] Given the Tribunal’s findings on the Bellette’s consumer application and the Orders made below, the Bellettes are relieved from any obligation that may have otherwise arisen to pay Serious Industries $2000.00 as a result of this Tribunal’s findings at [44]. Orders [119] Accordingly, I make the following orders: (1) The net result of the decision in this matter and the decision in MCDO 1366/16 is that the Respondent must pay to the Applicants $16,000.00 within 28 days of this Order. (2) Within two business days of receipt of the payment in Order 1, the Applicants must return the trailer (VIN 6159FEGFTRFS312006) to the Respondent's place of business during business hours, or if the Respondent has since relocated its business, to another address nominated by the Respondent within 50 km of its former place of business. 40 Ibid, s 259(4). -- 21 of 21 --