Automotive Computer Diagnostic Centre (ACDC) Pty Ltd v Jeff Arenas & Sharyn Arenas (Civil Dispute)

[2010] ACAT 41

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

AUTOMOTIVE COMPUTER DIAGNOSTIC CENTRE (ACDC) PTY LTD & ANOR v JEFF ARENAS & SHARYN ARENAS (Civil Dispute) [2010] ACAT 41

AA 10 of 2010

Catchwords:              Contract for repair of vehicle – separate liability of director of repair company- terms of contract – whether customer allowed completion of the contract – whether contract price should be refunded.    

Tribunal:           Mr C G Chenoweth, Acting Presidential Member

Date of Orders:  20 July 2010
Date of Reasons for Decision:         20 July 2010

IN THE AUSTRALIAN CAPITAL TERRITORY         )

CIVIL & ADMINISTRATIVE TRIBUNAL                   )  AA 10 of 2010

BETWEEN:       AUTOMOTIVE COMPUTER DIAGNOSTIC
    CENTRE (ACDC) PTY LTD

Appellant

AND:                 GRAHAM PETER BATTISON

Appellant

AND:                             JEFF ARENAS & SHARYN ARENAS

Respondent

Tribunal:Mr C Chenoweth, Acting Presidential Member

Date:  20 July 2010

ORDERS

1. That the Second Appellant be removed from the proceedings as a separate party.

2. That order number 1 of the orders made on 19 March 2010 be set aside.

……………………………….
Mr C G Chenoweth
Acting Presidential Member

REASONS FOR DECISION

1. This is an appeal against a decision and order of Senior Member David made on 19 March 2010 in matter number XD 882 of 2009. The order made by the Senior Member was as follows:

(1)   The Respondents [who are the First and Second Appellants in this appeal] are to pay the Applicants the sum of $4,324.40 within 14 days.

(2)   Each party is to pay their own costs.

2. The Respondents in the original hearing are now the Appellants in this matter. For convenience, I will refer to the first Appellant as "the Company", the Second Appellant as "the Director" and the Respondents as "the Customers" when not referring to them by name.

3. Prior to the hearing of this matter, a directions hearing was held by the Tribunal on 21 June 2010. One of the orders made was that the Director and the Company pay to the Customers the sum of $700, resulting from the vacation of a hearing date. The Customers confirmed that this amount had been paid.

4. The notice of appeal dated 6 April 2010 set out a number of grounds. The first ground for the appeal to proceed was that the Director should not have been joined to the proceedings in his own right, as he was at all material times acting as an employee and agent of the Company.

5. The grounds of appeal then set out a number of matters on which the Appellants questioned the decision leading to the original order. It is not necessary in this decision to set out all of these in detail, beyond saying that the Appellants disputed the Senior Member’s interpretation of the contract for repair of the vehicle and the weight given to certain of the evidence.

6. The Director filed a further affidavit in the matter dated 9 July 2010. The Customers acknowledged that they had received a copy of the affidavit, they had read it and that they did not object to it being filed so close to the hearing of the matter. Accordingly, I admitted the affidavit as part of the evidence to be considered. The Customers also sought leave to provide verbal evidence from an expert engaged by them, to be given by telephone. Leave was given for this. The transcript of the evidence given at the earlier hearing was available to all parties and I had regard to that evidence.

JOINDER OF THE SECOND APPELLANT

7. Prior to consideration of the main grounds of appeal, I ruled on the question of whether the Director should have been joined as a party in his own right. Having perused the transcript of the original hearing and the reasons for decision, I am satisfied that there was no basis upon which the Director should have been so joined. Although the Director is the sole director and shareholder of the Company, this does not of itself mean that the normal contractual relationship between the Company and the Customers was altered to impose liability on the Director personally to carry out the terms of the contract. It was the Company that carried on the business and provided the services, albeit through the work of the Director and his staff. Unless there is clear evidence that both sides agreed that the "corporate veil should be lifted" and that the Director had agreed to be separately liable for the performance of the contract, there was in my opinion no basis for imposing a liability on the Director by joining him as a party. I ordered that he should be removed from the proceedings as a separate party.

8. In her reasons for decision, the Senior Member indicated in paragraph 12 (a) that she had some doubts about the authenticity of a signature on a document authorising repairs. The Appellants contended in the appeal notice that "the Member found, in paragraph 12 (a) of the judgement, that the Second Appellant had committed forgery, without factual basis." It should be noted that no-one in the decision under review, nor in the transcript of the matter, appears to have used the word "forgery". I do not take the decision of the Senior Member to have extended beyond an uncertainty as to the circumstances of writing the name of Mr. Arenas on the repair authorisation form, and certainly not a suggestion that the Director had forged the signature of Mr Arenas. It appears that the name of the customer was written by the Director as a point of contact and as a result of a telephone call from the customer authorising certain work. This is consistent with evidence given by the Director. It is not appropriate for allegations such as forgery to be made, whether in an appeal document or otherwise, without the clearest evidence.

BACKGROUND

9. The Customers were the owners of a second-hand Toyota Prado motor vehicle. It was used by them in the conduct of a contract painting business. The vehicle had been fitted with both petrol and gas fuel systems, allowing the driver to choose to use either petrol or gas at any particular time. The advantage to the Customers was that the cost of running the vehicle on gas was significantly cheaper than on petrol and accordingly they wished to use the gas system as often as they could.

10. One of the features of a vehicle operating a dual fuel system is that each year of the gas system must be installed by a qualified and licensed automotive gas fitter to check that the system is operating safely. The Director gave evidence that this check covers the high-pressure parts of the system such as the tank, fuel lines to the fuel intake system and protection of the tank and associated tubing from excessive heat or damage. The check does not extend to the condition of the tuning of the vehicle or how efficiently or otherwise the gas system is operating as part of the fuel intake system. It is a safety check. Unless the vehicle receives a certificate indicating that the system has been checked and is safe, it cannot be registered.
11. While all the automotive gas systems require a storage tank where the gas is held under pressure in a liquid form, and they have high-pressure pipes to the engine fuel intake system, there are differing types of fuel delivery systems that may be used. There are a number of proprietary systems available, operating on different principles. One of these is the air valve or negative vapour system and another is the fuel injected system. These fuel delivery systems are referred to as “front-end systems” to distinguish them from the gas storage system at the rear of the vehicle.

12. The difference in the temperature at which the vaporised petrol ignites is much lower than the ignition temperature for liquefied petroleum gas used in automotive gas systems. This means that there have to be adjustments within the vehicle's fuel control system to differentiate between the different fuels. This requires alterations to the fuel regulation system, and tuning in the vehicle to ensure that it works efficiently on both forms of fuel. From the evidence before the Tribunal both in the original hearing and on the appeal, the installation and tuning of these systems is a complex matter.

13. Modern motor vehicles have a number of operating systems within them, all of which must be operating properly to ensure peak performance. While the fuel delivery system may be operating satisfactorily, if the ignition system has faults in it, it will affect engine performance. Similarly, the system for delivery of the gas fuel may be operating satisfactorily but the separate system for the delivery of petrol when the engine is running on that fuel may be deficient and thereby cause a loss in performance. Where a vehicle has a separate air control system for the intake of oxygen, the efficiency of that system could affect performance as well.

HISTORY OF THE RELATIONSHIP

14. Both the Director and the Customers agree that the vehicle was brought to the Company workshop on 15 May 2009 for the testing necessary to obtain the registration certificate. In the proceedings under appeal, the Director gave evidence that the faults in that part of the gas fuel system that would be covered by the registration check were substantial. He told the Customers that the costs of repairing them were of the order of $800-$1000. He also advised them that deterioration to the "front-end" system, where the gas was delivered to the engine (and therefore not part of the safety check components) meant that substantial costs would be incurred in repairing this. He offered to replace the existing front-end air valve system with an injected system, supplied at cost. (Transcript, page 7/8.)

15. The Director gave evidence that he explained to Mr Arenas that the cost of the injection kit ($1680) was in addition to the costs of $800-$1000 to undertake the repairs necessary to procure the registration certificate. The Director gave evidence in the hearing below that these costs were approved by Mr Arenas, and repeated this in clause 10 (b) of his affidavit of 9 July 2010. 

16. There is some dispute between the parties as to exactly when conversations took place about the repair of the vehicle, whether and at what stage approval was given for different parts of the work to be done, and what promises or expectations there were about when the work was to be completed. Work was done to carry out the registration check repairs, the installation of the new injector front-end system and the repair to the intake manifold. The vehicle was still running badly. The Director suspected problems with the ignition system, and advised the Customers that the vehicle should have a Dyno test to check the capacity of the ignition system when the vehicle was running under load. The Customers agreed. The Dyno test was eventually undertaken on 30 June 2010.

17. The parties ceased their relationship on 30 June when there was an altercation at the Company workshop. The vehicle had completed the Dyno test. The test results were in evidence in this appeal.

DIRECTOR’S EVIDENCE

18. The evidence of the Director is that on 15 May, the Customers were told of the cost necessary to carry out repairs for the registration check, ($800 - $1,000) and the advisability of replacing the air valve system with an injected system because of deterioration and damage to the air valve system and incorrect fitting when it was first installed ($1680). It appears that the Customers thought that the repairs necessary for the registration check and the installation of the new injected system would all be undertaken for the figure of $1680. It is not clear whether they clarified this with the Director, but the Customers indicated that the work should proceed.

19. The Director gave evidence in the original proceedings that in order to install the new system, it was necessary for him to dismantle part of the intake manifold of the car to check for further damage. As a result of this inspection, he formed the view that there were significant problems of corrosion and leaking of air into the manifold, which would affect the performance of the system and should be rectified. The Director gave a quote of a further $1500 to undertake this work. The Director maintained that this additional cost to the repairs necessary for registration check and installation of the injector kit was made clear to Mr Arenas. Mr Arenas had attended at the workshop and viewed the vehicle before confirming that the work should go ahead.

20. All of this work including new sparkplugs amounted to the cost of approximately $4300. The Director maintains that he was at pains to inform the Customers about the necessary cost of repair and that they had approved each of these steps.

21. There may have been a difference between the explanation provided by the Director and the understanding of the Customers as to whether the additional work required to repair the manifold for $1500 was a cost on top of the original repairs to the system to obtain registration, and the cost of the new injection system. Whether or not there was confusion, when the vehicle was finally collected by the Customers they paid this amount and took the vehicle away.

22. In evidence in the original proceedings, the Customers stated as follows:

"Our issue is not with the quality of the work, it is not about anything like that. Our issue is that we have paid over $4500 to have everything done and as far as we were to understand that when we paid that money and handed it over to Mr Battison we should have had a gas system that worked and we don't. Which is why when we picked it up he said it still needs to go on the Dyno tune when we picked it up, but to me we had paid all that money and everything had been replaced, it should have been working." (Transcript page 31)

THE NEED FOR FINAL TESTING

23. The Director gave evidence that the ignition system of the car was a separate system which would require checking in order to make the vehicle operate satisfactorily. While the gas fuel system was properly installed, it would not work unless the electrical system was also operating properly. This was something which could only be checked by the Dyno test. The Director provided a copy of the Dyno June test output made on the vehicle on 30 July 2009. He said that the test results shown in Annexure C to his affidavit indicated that there were significant problems with one or more of the coils in the ignition system and that they were unable to deliver sufficient spark to ignite the gas properly when the vehicle was under load. They were probably breaking down at power loads, causing the poor running. Further steps that would need to be taken would be to replace one or more of the ignition coils, depending on further testing. Further, that additional testing would reveal whether it was the coils themselves or possibly the high tension leads which were deficient, and as a consequence there may need to be additional parts purchased to allow the gas and petrol systems to perform to maximum efficiency.

EVIDENCE OF THE CUSTOMERS

24. The Customers obtained reports from other automotive gas service centres. A report from Cuthbert Engineering dated 3 August 2009 for a quote on the new LPG air vapour system was produced. Annexed to it was an unsigned letter indicating the author's view that a negative air vapour system for the gas fuel was preferable to an injected system, as had been fitted by the Company. This report indicated that in the view of the writer, the original system should have been serviced and needed parts replaced but not the whole system removed. I find it difficult to place much reliance on this opinion, beyond its standing as a quotation to replace the front-end system for the gas fuel. While it indicates the writer's view about the merits of the respective systems, it provides no evidence as to the reason for the difficulties that the Customers had with the new system.

25. A report dated 12 August 2009 from Mitchell Service Centre was also produced by the Customers. It indicated that this garage was not familiar with the "Ultra-Gas" system that had been fitted by Company and expressed the opinion that with this system it would make it very difficult to create an LPG map that would work under all conditions, and that changes in altitude would create major problems for any programmed map. The opinion of Mitchell Service Centre was that the best option for the vehicle would be to return it to a conventional air valve system. Again, this opinion did not extend to particular criticisms of the installation or operation of the system in the Customers vehicle.

26. In his evidence in these proceedings, the Director was critical about the experience of the managers of this business, in dealing with this form of system.

27. On 22 December 2009, some six months after the front-end system had been installed by the Company, a report was given to the Customers by "Gas Tune" of Greenway. This report indicated that the front-end system required a new compliance plate and that the gas lights were flashing. Gas Tune tried various steps to overcome the flashing light problem about this did not work, and the vehicle was still "no go on gas."

28. The proprietor of Gas Tune Mr Joseph Fister gave evidence by telephone. He said that when the system installed by the Company was checked by them it "didn't work." He had tested the coils and leads on the vehicle and they were satisfactory. He removed the system installed by the Company, and replaced it with a new system using the existing coils and leads.

DISCUSSION OF EVIDENCE

29. The Director's evidence was that the Company had carried out all of the approved work satisfactorily, but that the misfiring and lack of power that was apparent after the vehicle was driven indicated that there was a problem with the ignition system. In order to check that, the vehicle needed to be put on the Dyno and run under load. Had the altercation not occurred and the Customers allowed all necessary to be undertaken, any problems with the coils and/or leads would have been disclosed. While the initial part of the Dyno test had been completed, resulting in the test results produced at this hearing, further tests were necessary to be sure about the nature of the problem affecting performance. Any necessary parts identified by these test would have been replaced at cost. The ignition system was a separate system to the gas and fuel systems and any problem with the ignition system would not be revealed until the gas and petrol fuel systems had been properly installed.

30. The altercation that had occurred between the Director and Mr Arenas when the vehicle was being Dyno tested led to an immediate breakdown in relations and the Company was therefore not prepared to complete the testing. The fact that the testing had not been completed was not a reflection on the quality of the work that had been approved by the Customer and undertaken by the Company.

31. The Customers maintained that they had paid for the work that had been agreed, although they were unhappy that the costs had increased beyond their original expectations. They maintained that they should have received back a vehicle in proper working order. They were not prepared to concede that they had received value in the work done by the Company (for example rectifying the leaking high-pressure components in the gas system as required for the registration check, or the rectification of corrosion and air leakage problems with the intake manifold) and maintained that they should be refunded the whole of the amount of money that they had paid. As they had had the front-end injector system replaced with an alternative air vapour system, the amount that they had paid to get the vehicle on the road in proper working order greatly exceeded the amount they had paid to the Company.

32. Having considered the evidence given in the earlier proceeding and in the appeal, I am satisfied that the contract between the Company and the Customers was one which had three distinct elements -- the repair to the high-pressure gas system for the registration check, the installation of a new injector front-end kit in place of the air vapour system that had been installed and which had substantially deteriorated because of poor tuning and misfires, and the rectification of corrosion and air leaks in relation to the intake manifold. I find that the cost of these stages of the work had been notified to the Customers, and that they had agreed to them, albeit unhappily.

33. I accept the evidence from the Director that if the Company had been able to complete the Dyno testing and install any necessary new parts to the ignition system, then it is likely that the vehicle would have run satisfactorily on both petrol and gas fuel systems. While the system installed by the Company was removed and replaced with an alternative system on 8 May 2010 by Gas Tune, I am not satisfied that the evidence shows that this was due to faulty installation of the injector system by the Company.

34. I am satisfied that the contract for repairs and replacement of the gas fuel system, made in three separate parts, was undertaken by the Company in accordance with the contract’s terms, and that the reason for the failure of the vehicle to perform properly after it had been removed by the Customers from the Company was because the Company had not had the opportunity to investigate and resolve potential problems with another of the car's systems, namely the ignition system. The contract between the Company and the Customers did not, and could not, reasonably have been construed to extend to include rectifying any faults with that system without further cost.

35. The decision of the Tribunal is that the order of 19 March 2010 should be set aside. The consequence of this decision is that the Company has no further liability to the Customers except as may arise from any warranty given under the terms of the contract itself.

..............................................

Mr C G Chenoweth

Acting Presidential Member

PUBLICATION DETAILS

TO BE PUBLISHED

To be completed by Tribunal Staff

PART A  FILE NO:          AA 10 of 2010

APPLICANT:                AUTOMOTIVE COMPUTER DIAGNOSTIC CENTRE (ACDC) PTY LTD & ANOR

RESPONDENT:            JEFF ARENAS & SHARYN ARENAS

SOLICITORS:               APPLICANT:      MR R BARNETT
  RESPONDENT:   N/A

TRIBUNAL MEMBER/S:        Mr C G Chenoweth, Acting Presidential Member

DATE/S OF HEARING:       12 July 2010                 PLACE: CANBERRA

DATE/S OF DECISION:       20 July 2010                 PLACE: CANBERRA

PART B

RECOMMENDATION:

FULL REPORT ( )        CASE NOTE ( )        UNREPORTED DECISION ( )

COMMENTS: