Bauer v Chain Reaction Bicycles; (Australia) Pty Ltd ACN 064 818 702; Mayer v Chain Reaction Bicycles (Australia) Pty Ltd ACN 064 818 702 (Civil Dispute)
[2024] ACAT 18
•15 February 2024
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
BAUER v CHAIN REACTION BICYCLES
(AUSTRALIA) PTY LTD ACN 064 818 702; MAYER v CHAIN REACTION BICYCLES (AUSTRALIA) PTY LTD ACN 064 818 702 (Civil Dispute) [2024] ACAT 18
XD 345/2023
XD 346/2023
Catchwords: CIVIL DISPUTE – sale of electric mountain bikes – problems with the rear axle and misalignment of the rear dropouts – whether the bikes are of acceptable quality – mountain bikes incorporate features designed to enhance their durability and performance in rough terrain – higher expectation of mountain bikes’ quality in light of the purpose – major failure found – the bike seller liable
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 22, 48
Australian Consumer Law ss 3(1), 54, 259, 260, 262, 263
Magistrates Court Act 1930 s 262
Cases cited:Wah & Imex Goods Network Pty Ltd Trading as Imex Motors [2017] ACAT 54
List of
Texts/Papers cited: Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No.2.) 2010
Tribunal:Member W Hawkins
Date of Orders: 15 February 2024
Date of Reasons for Decision: 15 February 2024
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 345/2023
BETWEEN:
JOHN BAUER
Applicant
AND:
CHAIN REACTION BICYCLES
(AUSTRALIA) PTY LTD ACN 064 818 702
Respondent
TRIBUNAL:Member W Hawkins
DATE:15 February 2024
ORDER
The Tribunal orders that:
Within 28 days, the applicant is to return the Merida eMTB to the respondent at the respondent’s costs.
Within 28 days, the respondent is to pay the applicant the amount of $9234.38 comprising:
(a)$8,399 for the purchase cost of the Merida eMTB;
(b)$509.98 for the purchase of a colour computer and shift switch upgrade parts for the applicant’s Merida eMTB;
(c)$49.95 for the purchase of the omitted electrical wire for the colour computer and shift switch upgrade parts for the applicant’s Merida eMTB;
(d)$80 for fuel costs for the trip to the respondent’s shop for the assessment of the Merida eMTB;
(e)$25.45 for the components to make test tools in order to conduct testing of the Merida eMTB; and
(f)$170 Tribunal filing fee.
Also, within 28 days, in addition to the amount payable in paragraph 2, the respondent is to pay interest on the cost of the Merida eMTB of $8,399 on and from 31 August 2022 to the date of this decision.
………………………………..
Member W Hawkins
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 346/2023
BETWEEN:
STEVEN MAYER
Applicant
AND:
CHAIN REACTION BICYCLES
(AUSTRALIA) PTY LTD ACN 064 818 702
Respondent
TRIBUNAL:Member W Hawkins
DATE:15 February 2024
ORDER
The Tribunal orders that:
Within 28 days, the applicant is to return the Merida eMTB to the respondent at the respondent’s costs.
Within 28 days, the respondent is to pay the applicant the amount of $8578 comprising:
(a)$8,399 for the purchase cost of the Merida eMTB;
(b)$170 Tribunal filing fee, and
(c)$9 company search fee.
Also, within 28 days, in addition to the amount payable in paragraph 2, the respondent is to pay interest on the cost of the Merida eMTB of $8,399 on and from 15 September 2022 to the date of this decision.
………………………………..
Member W Hawkins
REASONS FOR DECISION
In an application dated 29 March 2023, the applicant, John Bauer (Bauer), sought a monetary claim against the respondent, Chain Reaction Bicycles (Australia) Pty Ltd (Chain Reaction). In an application of the same date, the applicant, Steven Mayer (Mayer), also sought a monetary claim against the same respondent, Chain Reaction. It is convenient to refer to Bauer and Mayer as the ‘applicants’ and Chain Reaction as the ‘respondent.’
It is not in dispute that Bauer and Mayer are mountain bike riding companions and that each had purchased a Merida eONE SIXTY 700 eMTB electric mountain bike (eMTB or bike) on 18 February 2022 from the respondent for $8,399 each. Bauer’s bike was medium sized, and Mayer’s bike was large sized, but both bikes were otherwise identical, and the different sized bikes did not give rise to any factual or legal issues at the hearing.
Bauer and Mayer claimed that, in about July 2022, they discovered issues with each of the bikes’ rear axles. In particular, it was claimed that the axles could not be removed or installed without force (and thereby likely damaged); that the supplied manufacturer’s removal tool was practically impossible to use for this purpose; and that, ultimately, the rear dropouts (that part of the rear frame where the axle of the wheel is attached) of each bike were significantly misaligned, thereby causing bending stresses upon the axle and causing the rear wheel to be misaligned in the bike frame, with the potential to lead to failure of the axle and cause serious injury or death to the rider.[1]
[1] Exhibit A2 Witness statement John Bauer filed 13 September 2023 (Exhibit 2), Attachment A Complaint to Retailer
Bauer complained to the respondent on 2 August 2022 by email and Mayer complained to the respondent on 9 September 2022, also by email. The bikes were taken, at the applicants’ expense, to the respondent’s shop in Cronulla, New South Wales to be examined. The respondent’s chief mechanic, Andrew Johnstone (Johnstone), conducted his own tests using a tool and determined that there were no issues with either bike. At the time of the respondent’s tests, the applicants were not informed what tool the respondent had used. In later communications between the applicants, the respondent and, at times, the Australian distributer of the eMTB, Advance Traders (Australia) Pty Ltd (Advance), the tool was identified as a Park Tool FFG-2 tool, and later communications and bike examinations proceeded on that basis. However, during the giving of his evidence, Johnstone said that he had used the earlier model Park Tool FFG-1 tool. The significance, if any, of this is discussed further below. At the applicants’ insistence, a warranty claim was made on each bike following the inspection. The respondent referred the claim to Advance. Advance then communicated with the applicants. Unfortunately, the applicants’ complaints were not able to be resolved and the applications were filed.
Each applicant claimed pursuant to the Australian Consumer Law (ACL), alleging that the defects in the bikes were a “major failure” and, as a consequence, the applicants claimed the purchase costs of the bikes; additional upgrade componentry costs previously expended; fuel costs to transport the bikes to the respondent for testing; material testing costs; assessment and report fees for their expert, Joel Rakali of Monkey Wrench Cycles (Rakali or Monkey Wrench); tribunal filing fees; search fees and interest. All up, as at the date of filing the applications, Bauer claimed $9,765.69 and Mayer claimed $9,050.
The respondent disputed the claims primarily upon the basis that the applicants were not able to demonstrate a major failure, or any failure at all, and further, that communications or requests from Advance for additional testing or evidence were not adequately responded to or at all by the applicants.
The applications were heard by me concurrently on 3 and 24 November 2023. Previously, on 24 July 2023, orders had been made that evidence or submissions provided in either application was to be taken as evidence or submissions in both matters. The applicants appeared in person and Mitchell Fletcher, the respondent’s store manager, appeared remotely.
The applicants’ evidence
The applicants tendered a number of documents including statements and reports; email communications with the respondent and/or with Advance; receipts; photographs; a bike diagram; and original submissions and submissions in reply. The respondent tendered a number of documents including statements; a timeline; additional email communications with Advance; and submissions. I do not intend to individually identify the tendered documents but will refer to them as necessary in these reasons.
Bauer provided a lengthy statement filed 13 September 2023 and was cross-examined. The statement’s length was due, at least in part, because Bauer is a senior mechanical engineer and has a number of mechanical involvement interests including the maintenance, repair and operation of bicycles, motorcycles and cars. He detailed his qualifications and experience including his work as an installation and commissioning engineer and as a testing and evaluation engineer. –His duties included the design and testing of mechanical and electronic products.[2] His statement, apart from providing his evidence of events and interactions with the respondent and others, also sets out in detail, his testing of the bikes and the conclusions made by him as a result of his testing. Bauer’s statement and oral evidence also serve as an expert’s opinion and, although Bauer is a party, his expert opinion cannot be disregarded. However, as a party, Bauer’s opinions cannot be considered in the same light as that of an independent expert, but ultimately, it is a question of what weight can be attributed to his opinions. Baur’s evidence will be considered further bellow. In essence, Bauer’s evidence was:
[2] Exhibit A2 at [1]-[5]; Transcript of proceedings dated 3 November 2023, page 9, line 46
(a)After the bike purchase, in about May 2022, he purchased an upgraded computer and switch upgrade from the respondent. A wire was missing from the computer, which he then purchased locally at a cost of $49.95. He does not appear to raise this issue with the respondent in his original complaint, but it was particularised in his application.
(b)By early July 2022, he had only ridden the bike on a few occasions on sealed roads in his neighbourhood and it was still in immaculate condition. He wanted to practice routine maintenance, including the removal of the wheels to enable puncture repairs.[3]
[3] Exhibit A2 at [12]-[13]
(c)When unscrewing the rear axle with the supplied tool, he found the axle tight, and the tightness did not decrease as it was undone as he had expected. He believed that it was “jamming…throughout the entire length”.[4] Once the axel had been removed, he noticed metal shavings. The shavings caused him concern and, in his opinion, warranted further inspection to determine their cause. He examined the axle and determined that there was no issue with the thread or the axle. After considering the composition of the axle (and that it was the first time that he had removed the axle), he concluded that the shavings had come from somewhere else. He then unscrewed the front wheel and found the process to be “normal”, with no metal shavings, and in distinct contrast to the rear axle.[5]
[4] Exhibit A2 at [19]
[5] Exhibit A2 at [21]-[32]
(d)As a result of the foregoing, Bauer wanted to find out why the above rear axle issue had occurred. He consulted the bike manual and also an online Merida video. The video confirmed that both front and rear axles should be able to be easily unscrewed. To find out why he had experienced the issues that he had, he examined the rear axle and he determined that there were no issues with it. With the rear wheel removed, he checked the fit of the axle in the wheel hub and detected no issues. He found that when the rear axle is fitted to the bike, the rear axle screws into a removable round axle nut. The nut is installed within a recess in the bike’s right-hand dropout, located in the right-hand chain stay (the horizonal part of the rear frame closest to the chain of the frame). He removed the axle nut and its thread appeared to be undamaged. He concluded that this was not the source of the shavings. He then inspected the derailleur hanger for possible interference and concluded that it was not the cause. To ensure that the derailleur hanger (containing the derailleur which moves the chain between the bike gears) was not interfering with his investigation, he removed it. After his investigation, he concluded that there was no problem detected between the axle and the axle thread nuts when they were screwed and unscrewed when removed from the bike.[6]
[6]Exhibit A2 at [53]-[57]
(e)He then investigated the fit of the rear axle through both dropouts and the bike’s frame. He detected no issue. He then removed the axle and reinstalled the derailleur hanger onto the right-hand dropout, and again found that there was no issue.[7]
[7] Exhibit A2 at [60]-[61]
(f)Bauer concluded that there was no issue with the fit of the axle to the axle nut, the axle within the rear wheel hub, or the axle with the axle holes in the bike’s frame.[8]
[8] Exhibit A2 at [63]
(g)He then focussed upon the right-hand dropout of the bike’s frame. He inspected the axle hole within the right-hand dropout and observed what he concluded was “mechanical trauma” and concluded that the axle had been forced, with considerable side loading, into the damaged region of the hole as the axle was rotated.[9]
[9] Exhibit A2 at [64]-[71]
(h)He conducted further tests and concluded that both ends of the axle nut were square to the nut body. He then examined the axle nut retention screw and conducted a number of tests causing him to conclude that there was no issue with it.[10]
(i)Bauer then conducted testing on the alignment accuracy of the axle with respect to the axle nut recess and hence the alignment of the right-hand dropout.[11] He conducted a number of tests and concluded that there was thread misalignment between the axle and the axle nut, and this, in part, contributed to the excessive nut tightness and the “jamming” earlier described.[12]
(j)To test his conclusion, Bauer devised his own “dropout alignment verification tool” which he described as a “test mandrel.”[13] Bauer explained in detail how the test mandrel would operate. As a result of his tests (which he repeated six times and took photographs), he concluded that the deviation present between the test mandrel tip and the left-hand rear axle hole was 4 mm.[14] Bauer repeated the test on the left-hand dropout and axle hole and again found a deviation of 4 mm.[15] Bauer then inserted two 12 mm bolts into both dropouts from either side. This created a “dummy axle”, and he found that the bolts were not in alignment.[16]
(k)Bauer concluded that, due to his minimal riding of the bike, the alignment issue could only have been caused during the bike’s manufacture.[17]
(l)Having concluded that there was a misalignment, Bauer explained how the rear axle could fail without warning and cause significant injury or death to the rider. Bauer did not ride the bike again.[18]
(m)Bauer referred to his communications with the respondent concerning the alignment issues, culminating in his attendance with Mayer at the respondent’s shop in Cronulla. A number of persons were present at the meeting, including the manager, Mitch Fletcher (Fletcher), the head mechanic, Johnstone, a more junior mechanic, and a representative of Advance, Troy Petley (Petley.)[19] Bauer and Mayer explained the issues with their bikes and Bauer summarised how he had come to his conclusion of misalignment. Johnstone put each bike on a bike stand and then applied a workshop tool (later identified as a Park Tool Frame and fork dropout alignment tool or Park Tool FFG-2 tool and later as an FFG-1 tool) to the dropouts and said that there was no alignment issue on either bike.
(n)Bauer said that his attempts to explain his testing procedure and findings were not engaged with by the mechanic or by the others present. An exception was the junior mechanic, who Bauer said witnessed him repeat the test he had designed and replicated the 4 mm misalignment. Mayer’s bike was also tested by Johnstone and, although there was a non-alignment of 1.6 mm, Johnstone did not consider it to be an issue and considered that it was within tolerance.[20] The applicants pressed their complaints of the misalignments and the other issues, and the respondent recorded each of the applicants’ warranty claims.[21]
(o)Upon his return to Canberra, Bauer communicated with Fraser from Advance. Fraser advised him of a link and, as a result, Bauer identified the respondent’s testing tool as a Park Tool FFG-2 tool and that his (Bauer) testing was not acceptable. Fraser asked for video evidence of the “excessive” force required to move the rear axle, but Bauer did not do so. As a result, Bauer assumed that the warranty claims had been declined. [22]
(p)Following the identification of the respondent’s testing tool as a Park Tool FFG-2 tool, Bauer communicated with Park Tool concerning the tool and its proper use. As a result of receiving information from Park Tool, Bauer believed his concerns were justified and he pressed the complaint process. He sought out an independent expert opinion from Rakali, a bike repairer, and from Nicholas van der Meer (van der Meer), who had managed bike stores and had other expertise.[23] Bauer obtained an FFG-2 tool and communicated with Park Tool to conduct an assessment of the FFG-2 tool, first by himself, and then with Van der Meer and with Rakali. As a result of his assessment and those with Rakali and van der Meer, Bauer concluded that the FFG-2 tool should not have been used on his and Mayer’s bikes, and in any event, the tool had been incorrectly used.[24]
(q)Bauer undertook further enquiries as to whether there had been other rear misalignment issues with Merida bikes and concluded that there had been four.[25] He also communicated with Rakali concerning a suggested solution suggested by Advance and was advised that, although it would address rear axle stiffness, it would not address the rear axle misalignment.[26]
[10] Exhibit A2 at [77]-[86]
[11] Exhibit A2 at [87]
[12] Exhibit A2 at [88]-[104]
[13] Exhibit A2 at [106]-[108]
[14] Exhibit A2 at [109]-[124]
[15] Exhibit A2 at [125]-[132]
[16] Exhibit A2 at [132]-[140]
[17] Exhibit A2 at [141]-[142]
[18] Exhibit A2 at [143]-[157]
[19]Exhibit A2 at [158]-[168]
[20] Exhibit A2 at [169]-[178]
[21] Exhibit A2 at [179]-[187]
[22] Exhibit A2 at [192]-[194]
[23] Exhibit A2 at [190]-[236]
[24] Exhibit A2 at [246]-[249]
[25] Exhibit A2 at [254]-[255]
[26] Exhibit A2 at [257]-[259]
During cross examination or in response to questions from me, Bauer stated the following:
(a)He conceded that he did not have video evidence of the “excessive” force required to move the rear axle that had been requested by Fraser of Advance.[27] He agreed that the bike operated perfectly when riding, shifting gears and braking.[28]
(b)He explained the difference between the older style quick release dropouts and the more recent design development of through axle dropouts (as was the situation here). In the through axle frame, there is a bolt that passes through a hole in one side of the frame and then closes through a hole on the other side of the frame, thereby ensuring a more secure wheel.[29]
(c)When asked about whether the removal of the derailleur on the rear frame had any effect or consequences for the rear frame alignment, he said that it would not.[30]
(d)In response to questions about using a torsion wrench, he said that, in lay terms, a torsion wrench measures how tight a fastener is tightened and that reference is usually to newton metres (Nm). He also said that a torsion wrench was not used during the visit to the respondent’s shop, but they did not use the supplied bike tool.[31]
(e)When asked to account for the discrepancy between his test results and that of the respondent, he said that it came down to the validity of the tests and that the FFG -2 tool used by the respondent was not appropriate.[32]
(f)Later during the evidence of Mayer, Bauer indicated that if a bolt is tight, it should only feel tight for about a quarter of a turn, and that he was also basing this opinion on his experience with other bike axles and with bolts in general, unless there is an issue of some sort and that could be a mechanical problem with the thread or a misalignment.[33]
[27] Transcript of proceedings dated 3 November 2023, page 48
[28] Transcript of proceedings dated 3 November 2023, page 50
[29] Transcript of proceedings dated 3 November 2023, page 53
[30] Transcript of proceedings dated 3 November 2023, page 54-55
[31] Transcript of proceedings dated 3 November 2023, pages 56-57
[32] Transcript of proceedings dated 3 November 2023, pages 58-59
[33] Transcript of proceedings dated 3 November 2023, page 72
Mayer also provided a statement dated 12 September 2023 and was cross- examined. In essence, Mayer’s evidence was:
(a)Following delivery of his bike, he only rode it on a few occasions on sealed bike paths. This was because he was waiting for Bauer to upgrade his bike’s computer so they could ride on trails together.
(b)He confirmed that, in early July 2022, he had discussions with Bauer concerning Bauer’s discovery of the issues with removing the rear axle and the misalignment of the rear frame of Bauer’s bike.
(c)Similar investigations to those done by Bauer to his bike were done on Mayer’s bike with similar results. As his bike had the same issues as Bauer’s, Mayer stopped riding his bike as well.[34]
(d)Mayer otherwise agreed with Bauer concerning the communications with the respondent and the history in Bauer’s statement more generally. Mayer communicated with the respondent concerning his complaint on 9 September 2022.[35]
[34] Exhibit A8 Applicant’s index of documents including Witness statement of Steven Mayer dated 12 September 2023 (Exhibit 8) at [1]-[10]
[35] Exhibit A8 at [11]-[14]
Mayer, in cross examination or in response to questions from me, stated the following:
(a)That, when his bike’s misalignment was measured at the respondent’s bike shop in Cronulla, it was 1.6 mm and that another bike on the respondent’s shop floor was 1.8 mm.[36]
(b)He did not agree that he knew at the time that the respondent used the FFG‑2 tool to check the alignment as the tool and its purpose was not explained to him. He agreed that the tool was not used to straighten the through axle dropout.[37]
(c)He conceded that he did not have video evidence at the hearing of the “excessive” force required to move the rear axle but said he had taken some film on his mobile phone.[38] He also agreed that when he rode the bike that it operated “perfectly” when riding, shifting gears and braking.[39]
(d)He also said that he had not experienced similar issues with any of his other bikes and therefore had no need to subject them to tests similar to those tests conducted by him and Bauer on the subject bikes.[40]
(e)He said that the testing duration of Bauer’s bike at the respondent’s shop was about five minutes. He also said that he was surprised when the respondent said that there was no misalignment as he had been present when Bauer had conducted his original tests.
(f)He then had a discussion with Troy from Advance about the tightness of the axle and the use of a torque wrench and said that he did not receive a response when he asked whether he was required to take a torque wrench with him when riding.[41]
[36] Transcript of proceedings dated 3 November 2023, pages 61-62
[37] Transcript of proceedings dated 3 November 2023, page 62
[38] Transcript of proceedings dated 3 November 2023, page 63
[39] Transcript of proceedings dated 3 November 2023, page 64
[40]Transcript of proceedings dated 3 November 2023, pages 65-66
[41] Transcript of proceedings dated 3 November 2023, pages 67-68
Nicholas van der Meer provided a statement dated 12 July 2023 and was cross-examined. In essence, van der Meer’s evidence was:
(a)He has worked in various positions in bicycle shops including sales, mechanic, team leader, workshop team leader, and area trainer and has sold and serviced Merida bicycles including the model the subject of the applications and had assessed and lodged warranty claims on behalf of customers.[42]
(b)In August 2019, he handled a customer complaint and warranty claim concerning a different model Merida eMTB specifically concerned the rear wheel alignment of the bike. As part of the warranty process, he consulted with Fraser of Advance. The complaint had been ultimately resolved by the replacement of the bike’s complete frame.[43]
(c)He examined Bauer’s bike in June 2023, initially screwing the rear axle in and out of the bike using the bike’s provided tools. He said that “considerable force” was needed. He then worked on the front axle and found it easier to remove than the rear axle, notwithstanding that he had expected that the “forces” required would have been similar to that required for the rear axle,[44]
(d)He said that Bauer had demonstrated the FFG-2 tool to him in order to show the rear misalignment of the rear dropouts. Van der Meer opined that in his experience, the FFG-2 tool is not suitable to measure alignment on the subject bikes because the tool is designed for use on drop out rather than through axle frames. When assessing the tool, van der Meer found that it was easy to produce varying and inconsistent measurement results.[45]
(e)He then conducted some research on the FFG-2 tool, including searching the Park Tool website. He said that the site advised that the FFG-2 tool is not suitable for through axle frames or forks.[46] A through axle frame or fork is different to a dropout frame or fork as the dropouts have closed off circular openings rather than an open or U-shaped dropout. As a result, to remove a through axle wheel from the frame or fork, one would have to unscrew the whole through axle and remove it before the wheel can be taken off the bike.[47]
(f)He used Bauer’s measurement tools and agreed generally with Bauer’s findings and found a 4 mm misalignment of the rear frame and that such a misalignment is excessive.[48]
[42] Exhibit A2 Witness statement of Nicholas van der Meer dated 12 July 2023 (Exhibit A2) at [1]-[7]
[43] Exhibit A2 at [8]-[24]
[44] Exhibit A2 at [27]-[32]
[45] Exhibit A2 at [34]-[36]
[46] Exhibit A2 at [37]-[38]
[47] Transcript of proceedings dated 3 November 2023, page 77
[48] Exhibit A2 at [40]-[44]
In cross examination or in response to questions from me, van der Meer stated as follows:
(a)He opined that the removal of the derailleur had no effect upon the alignment of the rear dropout during the testing process.[49]
(b)When asked to account for the difference in test results of the rear dropout alignment between what the applicants had found and what the respondent had found, he said that the respondent’s use of the FFG-2 tool according to the Park Tool website was not endorsed for use with through axle bikes but rather for use with quick release dropouts.[50]
(c)When asked about the respondent’s conclusion that Mayer’s bike was 1.6 mm out of alignment and whether this was within accepted industry tolerances, he said that he was not aware of what the industry standard was for rear dropout rear axle alignment, but in his opinion, 1.6 mm was “outside of tolerance”.[51]
(d)He referred to a previous warranty claim for a customer with a Merida eMTB and a complaint of misalignment of the rear frame. He said that he had replicated the tests by the customer and also devised his own test using an Allen key of the same diameter as the hole and then measured the distance to a known point in the centre of the frame such as the centre of the cranks (the drive chain component of the bike). He did not use the frame alignment gauge as it was not suitable for through axle bikes and that ultimately there was a discrepancy between the two sides. The warranty claim was ultimately approved and the rear frame was replaced.[52]
(e)He said that although the applicants’ bikes were a later generation of the Merida eMTB, the rear frame on their bikes could be replaced and that an estimate of the costs to a customer might be $400 to $500 and that labour costs would be about $100 to $200.[53]
(f)He said that Mayer had been his first customer at 99 Bikes in Mitchell and since then he had ridden with and become friends of both applicants. [54]
[49] Transcript of proceedings dated 3 November 2023, page 77
[50] Transcript of proceedings dated 3 November 2023, page 78
[51] Transcript of proceedings dated 3 November 2023, pages 80-81
[52] Transcript of proceedings dated 3 November 2023, pages 86-96 and also see Exhibit A9 Hand drawn Diagram of front and rear suspension bike showing front suspension forks, front frame or triangle and rear frame or triangle
[53] Transcript of proceedings dated 3 November 2023, page 97
[54] Transcript of proceedings dated 3 November 2023, page 98
In re-examination, van der Meer stated as follows:
(a)When asked about whether the tool supplied with the bike was satisfactory to tighten the rear axle to the appropriate tightness, he said that it was not. He said that he did not believe that the tool could provide the appropriate level of force of 10 Nm, and that in any event, it would not be able to release or tighten the grub screw holding the nut in place as it required a 2 or 2.5 mm Allen key and the Allen key supplied with the bike was 5 mm.[55]
[55] Transcript of proceedings dated 3 November 2023, pages 99-100
Joel Rakali, the co-owner of Monkey Wrench provided a statement dated 5 March 2023 but was not available to be cross-examined. At the time of the hearing, I informed the parties that as he was not available for cross examination, it would be a matter of what weight I would place upon Rakali’s evidence and opinion.[56] In essence, Rakali’s evidence was as follows:
(a)He had worked as a bicycle mechanic for over 15 years. His business was an independent service and repair business and he had no commercial affiliation with bicycle sales. He had been informed by Bauer that his and Mayer’s bikes had problems with alignment of the rear dropouts and Rakali arranged to inspect the bikes.[57]
(b)Following his visual inspection, he observed that the left dropout did not sit parallel to the right dropout on either bike and as a result, the “bore for the through axle is not in line with the nut recess in the right dropout, or perpendicular to the right dropout face”.[58] As a result, the through axle was very hard to install and remove and was causing damage to the axle thread and right dropout bore. He opined that there was an increased risk of the hub axle breaking with prolonged use.[59] He believed that the alignment issue was a manufacturing issue and that because the frames were made of aluminium, they were not able to be bent beyond its “deformation point without significantly weaking the piece”.[60] As a result, there should be no attempt to straighten the frames and “[a]t the very least”, there should be “replacement of the seat stay and chain stay assemblies…to rectify these issues.”[61]
Respondent’s evidence and submissions
[56] Transcript of proceedings dated 3 November 2023, page 102
[57] Exhibit A4 Statement of Joe Rakali dated 5 March 2023 (Exhibit A4) at [1]-[3]
[58] Exhibit A4 at [3]-[5]
[59] Exhibit A4 at [6]
[60] Exhibit A4 at [5]-[8]
[61] Exhibit A4 at [8]
Christopher Fraser provided a statement dated 6 October 2023 and was cross-examined. In essence, Fraser’s evidence was as follows:
(a)He was employed by Advance, the Australian importer of Merida bicycles and a number of other bicycle brands. He provides technical assistance to bike mechanics across Australia and communicates with manufacturers concerning any issues. He has visited the Merida factory a number of times and has owned one of each generation of the eMTB model purchased by the applicants. He described himself as the “leading expert in Merida bicycles technical data in Australia.”[62]
(b)He said that there had previously been no warranty cases in Australia for misalignment of the through axle dropouts on the particular model of Merida bikes that are the subject of the claims. He was familiar with the earlier claim made by a customer of van der Meer discussed above. He disputed the circumstances of the claim, and also said that it was resolved as a “good will” gesture and that ultimately, the customer retracted the claim and in any event, the frames are different and made in different factories to that of the applicants’ bikes.[63]
(c)He identified the Park Tool as an FFG-2 tool, and the tool can be used to identify alignment issues but not to be used for correcting or straightening dropouts, and the correct tool for correcting the applicants’ bikes would be a Sputnik tool.[64]
(d)He maintained his opinion that the rear axle nut retaining screw needs to be loosened to assist in installing and removing the rear axle.[65] He was critical of the lack of photographic evidence by Rakali or by the applicants in relation to removing the rear axle. As a result, he contended that there was no evidence of the alleged excessive force required of greater than 10 Nm. If there was misalignment (which was denied), then there should be damage to the thread and no such evidence has been provided. The misalignment would also mean that the rear brake rotor would drag on the brake pads and this was not claimed here.[66]
[62] Exhibit R2 Witness statement of Christopher Fraser dated 6 October 2023 at [1]-[8]
[63] Exhibit R2 Witness statement of Christopher Fraser dated 6 October 2023 at [9]-[17]
[64] Exhibit R2 Witness statement of Christopher Fraser dated 6 October 2023 at [18]-[19]
[65] Exhibit R2 Witness statement of Christopher Fraser dated 6 October 2023 at [20]-[23]
[66] Exhibit R2 Witness statement of Christopher Fletcher dated 6 October 2023 at [24]-[35]
In cross examination or in response to questions from me, Fraser stated as follows:
(a)He conceded that he did not have any engineering or stress analysis qualifications. He also conceded that only the alleged gap complained of by the applicants and the photographs taken by the respondent were passed on to Merida but not the photographs taken by the applicants or the applicants’ testing methods.[67]
(b)He did not agree that the FFG-2 tool could not be used to check for alignment on the applicants’ bikes.[68]
(c)He conceded that there could be accuracy issues when using the FFG-2 tool to test misalignment, but he did not agree that the tool was not reliable to measure the alleged misalignment complained of by the applicants.[69]
(d)He agreed, when it was put to him, that correct centring of the FFG-2 tool when it was being used was necessary for its accuracy. He also agreed that if the tool was incorrectly used and measurement was rushed, the results could be inaccurate.[70]
(e)He opined that it was possible to tighten the rear axle beyond 10 Nm with the tool supplied with the bike and this could explain why the rear axle was harder to undo than the front.[71] He was also said that the removal of the axle nut and the derailleurs allowed a much greater hole to float and be able to twist as it is being installed and tightened, which allows the testing procedure to be manipulated.[72] Any testing in the respondent’s store that might have showed a tolerance of 1.6 mm is within acceptable limits but could start to cause problems if there was an actual misalignment.[73]
(f)He conceded that there may be a more accurate tool than the FFG-2 tool by the manufacturer, but it was not available in Australia and needed to be imported.[74] To properly use the FFG-2 tool should take about five minutes.[75]
(g)He said that the retail cost to replace the rear frame or triangle of each bike would be about $500 to $600 and about one hour labour which he estimated would cost about $50. He also said that the Allen key to release the axle nut is about 2.5 to 3 mm and is in the tool kit.[76]
(h)He stressed that he had not declined the warranty claim but had asked for more information which was a video of the force used to undo the rear axle showing that it was more than 10 Nm.[77]
[67] Transcript of proceedings dated 3 November 2023, pages 108-111
[68] Transcript of proceedings dated 3 November 2023, page 116
[69] Transcript of proceedings dated 3 November 2023, pages 118-119
[70] Transcript of proceedings dated 3 November 2023, pages 126-127
[71] Transcript of proceedings dated 24 November 2023, page 153
[72]Transcript of proceedings dated 24 November 2023, page 158
[73]Transcript of proceedings dated 24 November 2023, pages 161-165
[74] Transcript of proceedings dated 24 November 2023, page 166
[75] Transcript of proceedings dated 24 November 2023, pages 166-168
[76] Transcript of proceedings dated 24 November 2023, pages 171-174
[77] Transcript of proceedings dated 24 November 2023, page 176
Mitchell Fletcher, the store manager of the respondent, provided a statement dated 6 October 2023 but did not give evidence. The respondent took the view that as Fletcher was not a mechanic and as the matter concerned mechanical or engineering issues, there was minimal or no point in Fletcher giving evidence. At the time of the hearing, I informed the parties that it would be a matter of what weight, if any, I would place upon Fletcher’s statement.[78] Given that Fletcher appeared pursuant to an authority for the respondent and elected not to give evidence, I have not considered the content of his statement.
[78] Transcript of proceedings dated 24 November 2023, pages139, 203-204
Andrew Johnstone provided a statement dated 6 October 2023 and was cross-examined. In essence, his evidence was as follows:
(a)He was the lead mechanic of the respondent and had been in the bicycle industry since 2003 and had been in his present role since 2016. When he became aware of the applicants’ complaints, he suggested that the bikes be brought into the respondent’s shop to be assessed. Also present at the assessment on 31 August 2022 was Troy Petley - a representative from Advance.[79]
(b)Johnstone inserted the “industry alignment tools” into the frames to assess the alleged misalignment but found no issues and both bikes were well within tolerance.[80]
(c)He said that the applicants had a “homemade tool” which was of incorrect dimensions and the applicants had inserted it on the incorrect side of the frames. As a result, the applicants were unable to make use of the captive nut system. He believed that the applicants had overtightened the captive nut which caused the difficulty when tightening the rear axle and once this was rectified, there was no issue.[81]
[79] Exhibit R2 Witness statement of Andrew Johnstone dated 6 October 2023 at [1]-[4]
[80] Exhibit R2 Witness statement of Andrew Johnstone dated 6 October 2023 at [5]
[81] Exhibit R2 Statement Andrew Johnstone dated 6 October 2023 at [6]-[7]
In his oral evidence, he said that the alignment of the bikes was tested with the derailleur hanger and captive nut still attached. He said that without either of them, one cannot obtain an accurate result.[82] He found that both bikes were “well within tolerance”, the first had no variance and the second had under “half a millimetre”.[83]
[82] Transcript of proceedings dated 24 November 2023, page 183
[83] Transcript of proceedings dated 24 November 2023, page 183
In cross examination or in response to questions from me, Johnstone stated as follows:
(a)He conceded he had no engineering qualifications but did have 20 years of practical experience. It was put to him that at the meeting held on 31 August 2022, he had found that there was a misalignment of 1.8 mm, but he said that this was a “comparative remark” only and that Mayer’s bike by comparison was 1.6 mm but he did not measure apart from the “alignment gauge.”[84]
[84] Transcript of proceedings dated 24 November 2023, pages 184-185
(b)When asked what Merida considered the maximum permissible rear dropout misalignment to be on the applicants’ model bike, he said that he was not certain, but believed it to be within “0.5 of a mil.”[85] He also agreed that if verified, a misalignment of 4 mm might “possibly” be unsafe.[86]
[85] Transcript of proceedings dated 24 November 2023, page 185
[86] Transcript of proceedings dated 24 November 2023, page 185
(c)When asked about which tool he had used, he said it was Park Tool FFG-1 tool and not the Park Tool FFG-2 tool (which was a later model). He was also asked whether either tool is specified by Merida to verify dropout alignment of the applicants’ bikes and he said that he was “unaware”, but that it is widely used in the industry. He said that the FFG-1 tool could be used for measuring but not for straightening through axle frames. He based this opinion upon his experience and also from attending courses and that he had seen affirming interactive interfaces between Park Tool and bike mechanics concerning the issue.[87]
(d)In response to questions as to why the rear wheel axle was harder to remove than the front wheel axle, he said that there were probably two reasons. The first was that the tool is easier to use on the front fork than the rear and the second was due to the floating nut which is on the left side. He also thought that the retaining bolt on the floating nut was “probably over torqued slightly” so that it was pushing on the floating nut on the driver’s side which captures the threaded portion of the rear axle.[88]
(e)He said that the removal of the derailleur has an effect on the test result, as the axle goes through it and then the captive nut on the other side, resulting in both the derailleur and the captive nut being integral to the frame. Without them in place, you will not be able to have a correct alignment.[89]
(f)That when the applicants attended the respondent’s shop, the process of measuring whether there was a misalignment took about 5 minutes. Although he did not know one of the applicants was an engineer at the time of the test, if he had known, it would have made no difference as “Once that tool was inserted from the wrong side of the frame, I basically knew that the test wouldn’t actually be accurate.”[90]
(g)That if the rear frame or triangle was to be replaced, the retail price might be from $400 to $600 and labour costs would be $110 per hour and it would take about an hour.[91]
(h)The tool supplied in the tool kit is appropriate to tighten the rear axle and the grub screw does not have to be taken out and a video by itself would not show the requisite force in the absence of a torque wrench.[92]
Applicants’ submissions subsequent to the hearing
[87] Transcript of proceedings dated 24 November 2023, pages 187-189
[88] Transcript of proceedings dated 24 November 2023, page 193
[89] Transcript of proceedings dated 24 November 2023, page 194
[90] Transcript of proceedings dated 24 November 2023, page 198
[91] Transcript of proceedings dated 24 November 2023, pages 199-201
[92] Transcript of proceedings dated 24 November 2023, pages 201-202
Pursuant to my directions at the conclusion of the hearing, the applicants filed further or final submissions dated 1 December 2023. The later submissions superseded the earlier submissions.
The applicants argued that section 54 of the ACL imposed automatic guarantees upon the respondent in relation to the sale of the bikes to them and in particular that the bikes would be of acceptable quality.[93] They further contended that the bikes were not of acceptable quality due to the non-alignment of the rear frame of each bike. The non-alignment of the rear frame was important because mountain biking being a hazardous activity meant that the rear frame could unexpectedly fail and thereby cause serious injury or death to the rider. The applicants further argued that the defects in the bikes were not brought to their attention at the time of purchase.[94]
[93] Applicants’ submissions dated 1 December 2023 at [36]
[94] Applicants’ submissions dated 1 December 2023 at [37]-[38]
The applicants contended that the defects or failure was a “major failure” under section 260(1) of the ACL, and as a result, the applicants were entitled to reject the goods pursuant to section 262 of the ACL and could elect to receive a refund of the purchase price and seek the return of the bikes at the respondent’s cost.[95]
[95] Applicants’ submissions dated 1 December 2023 at [42]-[45]
The applicants maintained that their arguments were more compelling than those of the respondent. In particular, when using a verification test, the “validity” of the test is the most important aspect affecting the test. If test validity is not met, then no other attributes of the test can compensate for its deficiency.[96] The second most important aspect is “reliability”. Reliability is the degree to which a test is consistent and stable in measuring what it is intended to measure.[97]
[96] Applicants’ submissions dated 1 December 2023 at [49]
[97] Applicants’ submissions dated 1 December 2023 at [50]
They submitted that the respondent’s testing of their bikes had a low validity compared to their own testing. The respondent relied solely upon the Park Tool FFG-1 tool. The tool was not mandated by Park Tool for use on the applicants’ through axle frame bikes; was not used correctly; fitted their bikes poorly; can be readily manipulated; was incorrectly assembled and incorrectly operated on their bikes. They also maintained there was no attempt to repeat testing by the respondent and there was no alternative testing performed.[98]
[98] Applicants’ submissions dated 1 December 2023 at [52]
Furthermore, there was inconsistency between the respondent’s witnesses concerning the tolerance specification for acceptable misalignment.[99]
[99] Applicants’ submissions dated 1 December 2023 at [52]
The respondent focussed upon loosening the axle nut retention screw as a remedy, whereas the loosening of the screw would be a “palliative” measure only and would not address the bending stresses occurring in the rear axle when the nut is fully tightened on a misaligned bike nor address the root cause of the problem.[100]
[100] Applicants’ submissions dated 1 December 2023 at [53]
The respondent had focussed upon the applicants not providing video evidence of the effort required to loosen the rear axle nut in response to requests made by Fraser of Advance, however such evidence has no bearing proving or disproving whether there is a misalignment of the rear frame.[101]
[101] Applicants’ submissions dated 1 December 2023 at [54]
As there was no “off the shelf” drop off alignment tool available, Bauer, who is an experienced engineer, designed and produced two “custom fitting alignment tools”. His conclusions reached as a result of using his tools should be accepted or preferred to the respondent’s use of the Park Tool FFG-1 tool, due to the high validity and repetition of results using Bauer’s tools. This included Bauer repeating the test and obtaining the same results at the respondent’s shop.[102]
[102]Applicants’ submissions dated 1 December 2023 at [52], [58]
If there is a breach of the guarantee, the repair of the rear frame is not suitable as this can lead to frame colour matching issues and with the passing of time since purchase of the applicants’ bikes, this is likely the outcome here.[103]
Respondent’s submissions subsequent to the hearing
[103] Applicants’ submissions dated 1 December 2023 at [60]
The respondent filed submissions dated 1 December 2023. The respondent did not dispute that the ACL applied to the applications. The ACL will be discussed more fully below. Implicit in their submission was whether any claim under the ACL was made out and if so, the appropriate remedy.
The respondent argued that the applicants used non industry, homemade tooling and the tooling was not of the correct diameter or profile. The applicants’ testing was also done without the derailleur hanger and captive nut fitted and this affected the results obtained by the applicants and the consequential reliability of the applicants’ tests.[104]
[104] Respondent’s submissions dated 1 December 2023, page 1
When the bikes were tested at the respondent’s shop by the lead mechanic Johnstone using the Park Tool FFG-1 tool, no defects or misalignments in the rear frames were found. Both the derailleur hanger and captive nut were correctly in place at the time of testing.[105]
[105] Respondent’s submissions dated 1 December 2023, page 1
Subsequent to the testing in the respondent’s shop, Advance requested video evidence from the applicants, but it was not supplied. Advance also informed the applicants that the pinch bolt holding the captive nut had or may have been overtightened and that loosening the captive nut would let the captive nut float and would allow the axle to move more freely, however this was not accepted by the applicants.[106]
Applicants’ submissions in reply
[106] Respondent’s submissions dated 1 December 2023, page 1
The applicants filed submissions in reply dated 8 December 2023. In these submissions, the applicants argued:
(a)That at the time of testing at the respondent’s shop, the staff members did not inspect the applicants’ test tools and as a result they could not express any opinion on the tools’ construction, diameter or profile.[107]
(b)The presence of the derailleur hanger fitted to the bike has no bearing on alignment testing when using the applicants’ designed and fitted testing tools.[108]
(c)The issue was the tight or jamming performance of the rear axle when it was unscrewed from the bike for its removal rather than when it was tightened.[109]
(d)The pinch bolt does not and cannot adjust the rear axle recess’ fixed orientation. The issue was only raised by the respondent in late July 2023 and well after the inspection of the bikes at the respondent’s.[110]
(e)When the testing was done at the respondent’s shop, the lead mechanic Johnstone could have used a torsion wrench when undoing the rear axle and it would been observed by the Advance representative who was also present.[111]
Consideration and findings
[107] Applicants’ submissions in reply dated 8 December 2023 at [3]-[4]
[108] Applicants’ submissions in reply dated 8 December 2023 at [4]
[109] Applicants’ submissions in reply dated 8 December 2023 at [6]
[110] Applicants’ submissions in reply dated 8 December 2023 at [7]-[8]
[111] Applicants’ submissions in reply dated 8 December 2023 at [12]
The applicants have made a claim under the ACL, a body of Commonwealth, State and Territory statute law, covering, among other things, the supply of goods and services in trade or commerce to a consumer. The ACL arises from Commonwealth law, namely Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the Commonwealth Act). The Commonwealth Act applies the ACL to corporations reflecting the Commonwealth’s constitutional powers. The States and Territories extends the ACL within their own jurisdictions.
The applicants allege that the respondent has breached section 54 of the ACL, which provides a guarantee of acceptable quality when goods are sold to a consumer. The section requires that goods will be of acceptable quality provided that they meet a number of factors such as that the goods are fit for all the purposes for which goods of that kind are commonly supplied; are acceptable in appearance and finish; free from defects; safe; and durable. The applicants argued they only had to show that the bikes did not satisfy one of the factors to not be of acceptable quality, arguing that the misalignment of the rear frame meant that bikes were not free from defects and as a result the bikes were unsafe. [112]
[112] ACL s 54(2)(c)-d)
In my view, the tribunal has jurisdiction to deal with the matter notwithstanding the respondent is not resident in the ACT as a material part of the cause of action in the proceedings arose in the ACT and that the claims were served on the respondent in Australia.[113] The ACL applies to the transaction between the applicants and the respondent as the applicants are “consumers” as defined by section 3(1) of the ACL bearing in mind the cost of the bikes and that the bikes were of a kind ordinarily acquired for personal or domestic consumption, and the respondent is the “supplier” of the goods to the applicants as defined by section 54(1)(a) and (b) as well as section 259(1)(a) and (b) of the ACL.
[113]ACT Civil and Administrative Tribunal Act 2008 s 22; Magistrates Court Act 1930 s 262
The question is whether there was a breach of section 54(1), (2) and (3) of the ACL and whether the bikes were of “acceptable quality”. The section provides:
54 Guarantee as to acceptable quality
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:
(a)fit for all the purposes for which goods of that kind are commonly supplied; and
(b)acceptable in appearance and 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 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.
Presidential Member Symons in Wah & Imex Goods Network Pty Ltd Trading as Imex Motors[114] said that when dealing with a claim involving a good and in that application a motor vehicle:
The test for acceptable quality is found in section 54(2) of the ACL which takes into account the matters in section 54(3) of the ACL. The test is whether a reasonable consumer fully aware of the motor vehicle’s condition including any hidden defects would find it fit for all purposes that such goods are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable.[115]
[114] [2017] ACAT 54
[115] Wah & Imex Goods Network Pty Ltd Trading as Imex Motors [2017] ACAT 54 at [47]
If the bikes were not fit for mountain biking or had a defect and or were not safe or durable, then the bikes were not of acceptable quality and the respondent would be in breach of the consumer guarantee. The bikes were purchased for mountain biking. Mountain biking is an activity of riding specially designed bicycles off road, often over rough terrain and sometimes at speed. Mountain bikes share similarities with other bikes but incorporate features designed to enhance their durability and performance in rough terrain such as front and rear suspension, wider wheels and presumably stronger frames. The activity is not without risk to the rider.
The alleged fault or faults of the bikes were not price determinative. In other words, even if the bikes were priced at a different price point, for example, say $1,000 rather than at $8,399, in some circumstances that may have been a factor in determining whether they were of an acceptable quality or not. However, given the nature of the alleged defects, and that a structural failure of the rear axle of the bike could lead to the rider’s serious injury or death, the applicants may have made the same claim even if the bikes had cost significantly less. However, I appreciate the applicants’ arguments that the bikes’ purpose is for vigorous and at times dangerous mountain biking and that their expectations of the bikes’ quality was higher in light of the purpose and price of the bikes. The nature of the alleged defects is also of a nature that would not have been apparent to the applicants until the testing that they undertook in July 2022. The defects would only have become apparent earlier if the applicants had suffered a rear tyre puncture necessitating the removal of the rear wheel to deal with the puncture or they had sought to practice the removal of the rear wheel earlier than when they did in July 2022. As it was, the bikes appeared to be operating perfectly when they had been ridden on residential streets, but once the testing was done in July 2022 and the applicants discovered the alleged defects, whether there was a major defect in the bikes became the determinative issue in the applications.
The applicants argued that the alleged defects entitled them to a remedy against the respondent under section 259 of the ACL. The nature or extent of the remedy is at least in part determined by whether the failure to comply with the guarantee is a major failure. The applicants argued that it was a major failure as defined by section 260 of the ACL.
Section 260 of the ACL provides that:
260 When a failure to comply with a guarantee is a major failure
(1) A failure to comply with a guarantee referred to in section 259(1)(b) that applies to a supply of goods 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)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.
(2) A failure to comply with a guarantee referred to in section 259(1)(b) that applies to a supply of goods is also a major failure if:
(a)the failure is one of 2 or more failures to comply with a guarantee referred to in section 259(1)(b) that apply to the supply; and
(b)the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of those failures, taken as a whole.
Note: The multiple failures do not need to relate to the same guarantee.
(3) Subsection (2) applies regardless of whether the consumer has taken action under section 259 in relation to any of the failures.
The applicants argued that had they have known of the alleged defects in their bikes, they would not have purchased the bikes. The applicants were adamant that this would have been the case and if their evidence is accepted, then they would satisfy section 260(1)(a). Further, the applicants regarded the bikes as “unsafe” and as a result, they maintained that they also satisfied section 260(1)(e) and thereby the bikes were not of an acceptable quality.
Under section 260 of the ACL, the “major failure” can occur in one of five circumstances, and it is only necessary to satisfy one of the criteria set out in section 260(1)(a) to (e), whereas the applicants argued that they satisfied two.
Once the applicants discovered the alleged defects in July 2022, they no longer rode the bikes and Bauer complained to the respondent on 2 August 2022 and Mayer complained to the respondent on 9 September 2022. The applicants identified the axle tightness issue and the rear frame issue and their safety concerns in a detailed communication to the respondent. The communications detailed the method and conclusions of the applicants’ testing and the applicants also provided photographs of the alleged offending components of the bikes. In their communications, the applicants each stated that they considered the defects a “major” defect and referenced the ACL and sought a replacement bike of the same model but not affected by the rear axle and alignment issues; and if the issues were prevalent across all production models, they then sought the return of the bikes and a refund.
Noting the alleged defects that the applicants complained about, it is my view that a reasonable consumer would not have purchased the bikes if they had known about the alleged problems with the rear axle and rear frame. It is also my view that as a result of the alleged problems, the bikes, due to the rear axle issues, would have been unsafe. Thus, if the applicants are correct, then they have satisfied that there has been a major failure under two of the necessary criteria in determining whether there has been a failure to comply with a guarantee.
The issue then is whether there is an issue with the bikes. Bauer provided a detailed description and justification of his testing methods and results and has repeated the testing and obtained the same results on more than one occasion. The applicants have not only relied upon Bauer’s analysis and results but have also sought the opinion of van der Meer and Rakali. Van der Meer when testing the front and rear axles obtained similar results to that of Bauer. Van der Meer (presumably upon instructions from Bauer) then used the measuring tools that had been developed by Bauer and obtained similar results to those previously found by Bauer. There was probably some influence upon van der Meer by Bauer (i.e. his friendship with Bauer and Mayer). However, I accept van der Meer’s testing and evidence even if it is not completely independent. It was unfortunate that Rakali was not available to be cross-examined. Rakali had also found that there were issues with the alignment of the rear dropouts, but it is not completely clear how he conducted the tests. I therefore find that Rakali’s opinion is of limited assistance, but I note that his findings were not inconsistent with Bauer’s. It is then what is the appropriate weight to attribute to the report and evidence of van der Meer and the report of Rakali.
The applications are somewhat unusual in that the applicants relied upon two experts. However, the applicant Bauer, given his qualifications and expertise as a mechanical engineer, is in my view an expert as well. Among all the expert witnesses, Bauer is the only qualified engineer. Other experts have undergone training courses as bike mechanics and have many years of experience, however none has engineering qualifications. In conjunction with his qualifications is his experience in bike mechanics and repair as well as other mechanical involvements including the maintenance, repair, restoration and operation of bicycles. Bauer (as a party) has an obvious interest in the outcome of the applications. The respondent was able to test Bauer’s opinions in cross-examination. Bauer’s qualifications and expertise was not challenged by the respondent. Among the witnesses for the respondent, Johnstone is employed by the respondent as their lead mechanic and Fraser previously worked for Advance, the distributer of Merida bicycles and responsible for warranty claims. Therefore, each could not be regarded as independent either. It might be argued that as Fraser is no longer employed by Advance, Fraser’s opinion might be regarded as independent; however, for the relevant period in issue, and when he was first called to give evidence, Fraser was employed by Advance, the distributer of Merida bikes. Also, any opinion expressed by Fraser has to be considered in the light of the fact that at no time did he actually examine the bikes. Fraser was reliant upon the information that was provided to him and much of that information was provided by the respondent.
The respondent’s lead mechanic, Johnstone, is an experienced mechanic. I formed the view when he was giving his evidence, he gave it truthfully and to the best of his ability. However, he engaged in a minimal way with the applicants at the respondent’s shop. When undoing the axle, he used a longer tool than that supplied and did not comment upon the required effort. He did not explain his testing method or what tool he was using or perhaps adequately engage with Bauer whilst Bauer attempted to demonstrate the misalignment. Ultimately, I am required to determine whose opinion I prefer. Johnstone when giving his evidence said that he was not aware that Bauer was an engineer at the time of the testing at the respondent’s shop, but said that even if he had been aware, it would have made no difference to his opinion. The reason he gave was that he believed that the tool used by Bauer was inserted from the wrong side of the bike frame and as a result, Johnstone formed the view that Bauer’s test would not be accurate.[116] As it was, Johnstone’s testing took about five minutes and was conducted too quickly in my view. Bearing in mind the cost of the bikes and applicants’ detailed concerns and that the applicants had travelled from Canberra to Cronulla with the bikes and had even delayed the journey due to weather and possible impact to the bikes, it would have been preferable if more time and explanation had been afforded to them at the time of the inspection.
[116] Transcript of proceedings dated 24 November 2023, page 198
The oversight of identification of the respondent’s tool and minimal engagement with the applicants during testing was indicative of the respondent’s consideration of the applicants’ complaints. As previously mentioned, witnesses for both the applicants and the respondent had originally described it as a Park Tool FFG-2 tool. Indeed, there had been communications with the tool’s manufacturer and documents tendered including email communications and an instruction manual. Even Fraser from Advance had been under the incorrect assumption that it had been an FFG-2 tool when he was communicating with the applicants and when he gave his oral evidence. Following the inspection at the respondent’s shop, Bauer had borrowed an FFG-2 tool to perform further testing both by himself and with van der Meer (and possibly Rakali). What differences in reliability between the two models of the tool, if any, was not able to be explored, but in my view, the oversight did not assist the respondent’s arguments in responding to the claim.
Interestingly, a representative of Advance, Petley was also present at the testing at the respondent’s shop. Petley did not provide a statement or give evidence. Given that he worked at Advance and was present at the test, his evidence may have been of assistance and may have assisted in the resolution of the two competing views on the bikes and the testing. A junior mechanic was also present and according to Bauer, the junior mechanic observed Bauer reproduce the 4 mm misalignment. No statement was provided by the junior mechanic, and he did not give evidence. I accept the applicants’ account of this interaction and the replication of Bauer’s test results at the respondent’s shop.
There was considerable argument on whether the FFG -2 tool (and the FFG-1 tool had it been known at the relevant time) was the correct tool or not for the testing of the alignment of the bike rear frame. The applicants argued that it was not the correct tool for “through axle frames” and was not reliable in any event, whereas the respondent argued that you could use it for checking alignment of through axle frames but not to straighten through axle frames (if they needed to be realigned). The respondent was not able to provide any evidence that this was the case beyond Johnstone referring to some Park Tool’s online communication forums. No copy of the forums was produced into evidence.
There was also considerable argument about testing and whether the derailleur hanger along with the captive nut should have been in place during testing and whether this could be an explanation for the discrepancy of test results. The applicants had removed the parts whereas Johnstone had not. Indeed, Johnstone said that both were integral parts of the frame and that a true result from any test could not be obtained without them.[117] The applicants argued that this was a “palliative” measure only and cannot affect the alignment conditions of the dropouts. Johnstone said that when he replicated the tests without the derailleur hanger and floating nut, “you could get almost any result you want” compared to when the correct and essential parts were in the frame.[118] Ironically, the applicants when using the borrowed FFG-2 tool said that they concluded from testing that the respondent had the FFG-2 tool “wrongly configured.” Fraser in evidence conceded that the FFG tool can have inconsistent readings.
[117] Transcript of proceedings dated 24 November 2023, page 194
[118] Transcript of proceedings dated 24 November 2023, page 195
What was clear from the evidence was that even a relatively small misalignment could cause issues. Fraser conceded that a 1.6 mm misalignment could cause problems with the brake rotor dragging and could not be adjusted in the brake calliper.[119] The applicants argued the misalignment was greater than this at 4 mm in Bauer’s frame and something similar in Mayer’s, but the actual misalignment of Mayer’s bike was not specified from Bauer’s testing. However, at the respondent’s shop, the applicants argued that misalignment of 1.6 mm was identified for Mayer’s bike, but the respondent said that there was no actual measurement and that Mayer’s bike was “minorly misaligned” but the misalignment was not measured.[120] As to Bauer’s bike, the respondent found no misalignment. I do not think it is possible on the evidence to determine what the alleged misalignment was on Mayer’s bike, but I accept that it was something similar to Bauer’s bike, particularly due to the commonality of complaints pertaining to axle tightness and presence of the bolt shavings. Ironically, given the respondent found no issue with Bauer’s bike and only a minor issue with Mayer’s, the misalignment may in fact have been slightly greater on Mayer’s bike when adopting Bauer’s testing into account, but it is not necessary for me to make an actual finding on this point.
[119] Transcript of proceedings dated 24 November 2023, page 165
[120] Transcript of proceedings dated 24 November 2023, page 185
If the respondent did find a misalignment in the applicants’ bikes, then even if the misalignment was minor, an actual measurement of the misalignment would have assisted in the respondent’s assessment. As it is, to find a misalignment, but not be able to (or willing to) measure it, suggests a rushed or inattentive approach by the respondent in their testing.
The respondent did not call any independent expert witnesses and relied only upon Fraser from Advance and Johnstone from the respondent. An independent expert and particularly an engineer may have assisted the respondent in responding to the claim and Bauer’s engineering opinions, including what effect, if any, the removal of the derailleur and the captive nut had on the measuring.
During his evidence, Fraser said that the warranty claim had not been rejected and that he had asked for more data to allow Merida to assess the claim and especially a video of the applicants showing that a force of more than 10 Nm to loosen the rear axle was required.[121] With respect to the respondent, this might have resolved one issue, but it would not have necessarily resolved the issue of frame misalignment. Johnstone could also have used a torsion wrench to undo the axle and this would have shown what force was being used.
[121] Transcript of proceedings dated 24 November 2023, pages 176-177
I accept the applicants’ submission that when selecting a suitable verification test, the validity of the test is the most important aspect affecting the test, that is, a test is valid if it actually measures what it is supposed to measure. If test validity is not met, then no other attribute can compensate for the deficiency. I also accept the applicants’ submission that second to validity is reliability, that is, the degree to which a test is consistent and stable in measuring what it is intended to measure.[122] Bauer, an experienced mechanical engineer with a keen interest in bicycle repair was both curious and concerned for the reasons behind the rear axle’s difficult removal and shavings. He conducted a careful examination of the bikes and developed tests and identified a misalignment in the rear frame. He repeated his testing a number of times, including at the respondent’s shop. Bauer then sought the opinions of van der Meer and Rakali who generally confirmed his findings. Although van der Meer is a friend, he is qualified to express an opinion given his experience. Similarly, although Rakali did not give evidence and was not cross-examined, he is qualified to express an opinion given his experience. Thus, although I may not have placed great weight on upon each of their opinions individually, collectively van der Meer and Rakali provide support as to why the evidence of the applicants should be preferred to that of the respondent. Having carefully considered the evidence, I therefore find that there is an axle and alignment issue with both bikes and that this constitutes a major failure. It is likely that the alignment issue arose during the manufacturing process but I do not need to make a definite finding on that point.
[122] Applicants’ submissions dated 1 December 2022 at [49]-[50]
Where there is a major failure, section 259 of the ACL provides the consumer with three separate remedies. The consumer may:
(a)reject the goods pursuant to section 259(3)(a), but the rejection is subject to section 262.
(b)recover compensation pursuant to section 259(3)(b) against the supplier for any reduction in the value of the goods below the price paid or payable by the consumer for the goods; and
(c)recover damages pursuant to section 259(4) for any loss of damage suffered by the consumer because of the failure of the supplier to comply with the guarantee provided that it was “reasonably foreseeable” that the consumer would suffer such loss or damage as a result of the failure[123]
[123] ACL s 259(2)-(3)
Thus, even though section 259 of the ACL provides the consumer with a right to reject the goods in certain circumstances, the right is subject to the provisions and limitations contained in section 262 of the ACL. The limitations are that the rejection period to reject the goods has ended; the goods have been lost, destroyed or disposed of by the consumer; the goods were damaged after being delivered to the consumer for reasons not relating to their state or condition at the time of supply; or the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.[124]
[124] ACL s 262(1)-(2)
The only likely relevant restriction in the present applications would be whether the rejection period to reject the goods has ended. There was no suggestion that the bikes had been lost or destroyed or damaged since the delivery of the bikes to the applicants and certainly no suggestion that they had somehow been attached to or incorporated into other real or personal property. Although neither party directly addressed the restrictions, it is necessary to consider the restrictions in light of the remedies sought by the applicants.
I find that the interval or period from the purchase or supply of the bikes and the discovery of the major failure in each bike was within the period within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b). The period from purchase to discovery was about 6 months. Bauer had not ridden his bike more frequently due to personal circumstances. The issue was only discovered when Bauer sought to practice the removal and replacement of the rear wheel in the event that he needed to repair a puncture when riding. It might be argued that had he ridden more frequently, the need to perform the removal and replacement might have arisen earlier. However, there was no evidence that this was the case and whether he would or would not be more likely to have sustained a puncture is conjecture and, in my view, it does not alter the outcome. Similarly, Mayer had not ridden his bike much either, largely in part because he was waiting to go riding with Bauer. It was never put in issue that the bikes had been poorly handled or damaged in the interval between their purchase and the discovery of the issue. I also note that the respondent had not submitted that the rejection period had ended and that therefore the discovery and notification had occurred within the reasonable period. In my view having regard to the history that was provided by the applicants and which was not put in issue by the respondent, I find that the “rejection period” for the goods had not ended.
The consequence of the applicants rejecting the goods is that they can claim a refund under section 263(4)(a)(i) of the ACL. The consumer must return the goods to the supplier at the consumer’s cost, unless the size or height of the goods means that significant cost to the consumer would be incurred. In those circumstances, the supplier must within a reasonable time collect the goods at the supplier’s expense.[125] The Explanatory Memorandum of the ACL provides a number of examples in which a supplier would be responsible for collection of the goods, and relevant here is the example of a 127 centimetre television that is the subject of a major failure and its size would make it costly for the consumer to return it to the supplier. [126] The applicants submitted that the bikes are large or heavy and I agree. In a communication with the applicants, the respondent advised a pickup fee of $80 per bike would be payable.[127] In my view, $80 may be a reasonable fee to transfer a bike between Canberra and Cronulla, but it is still objectively a significant cost. I find therefore that the respondent is to collect the applicants’ bikes at the respondent’s cost.
[125] ACL s 263(2)(b)
[126] Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No.2.) 2010, page 200
[127] Exhibit A2 Witness statement of John Bauer dated 13 September 2023, Attachment B, email from respondent to applicants dated 3 August 2022
It follows then that both Bauer and Mayer are each entitled to a refund of the purchase costs of their bikes of $8,399.
Bauer has also claimed for $509.98 for the purchase of a colour computer and shift switch upgrade parts for his bike. There was minimal evidence concerning this cost apart from what was contained in Bauer’s statement and annexures. It would appear that the purchase took place according to the payment receipt on about 26 May 2022. The transaction was not referred to in any particulars of the application but was referred to under the heading “other amounts claimed” in the application and documents in support, including the computer and shift lever upgrade transaction details attached to the application. The claim was not referred to in the response and Bauer was not cross-examined on the purchase and it was not disputed that the purchase was made. I find that the claim is made out and I allow the amount of $509.98. Similarly, Baur claimed $49.95 for omitted electrical wire from the colour computer and shift switch upgrade and for the same reasons, I find that the claim is made out and I also allow the amount of $49.95.
Bauer has also claimed $80 for fuel costs for the trip to the respondent’s shop for the assessment. The ACL permits claims for consequential loss that results from the respondent’s failure to meet a consumer guarantee and that the loss is reasonably foreseeable. Given that the inspection had to take place at the respondent’s shop and that I have found the respondent has failed to meet a consumer guarantee, I find that the claim is reasonably foreseeable and I allow the amount of $80.
Similarly, Bauer claimed $25.45 for the components to make test tools in order to conduct his testing and ultimately substantiate his claim. Similarly, if the consumer guarantee had been met, the cost would not have been incurred. I find that the claim is reasonably foreseeable and I allow the amount of $25.45.
Bauer also claimed $100 for the report fee for Rakali of Monkey Wrench. Ordinarily in the tribunal, a party to an application must bear their own costs.[128] The report fee claim is not made out and is not allowed.
[128] ACT Civil and Administrative Tribunal Act 2008 s 48
Finally, Bauer claimed the tribunal filing fee of $170. Payment of the filing fee and a company search fee may be ordered to be paid for a successful applicant. I find the claim is made out and I allow the filing fee of $170.
Mayer, in addition to a refund of the purchase costs of his bike of $8,399, claimed a company search fee of $9 and the tribunal filing fee of $170. I find the claims are made out and I allow the search fee of $9 and the filing fee of $170.
Both Bauer and Mayer claimed interest from the dates of their first communications to the respondent raising their complaints.[129] The claims for interest were limited to the purchase costs of the bikes. In my view, interest is claimable as a consequential loss upon the basis that the compensation should put the consumer in the position they would have been if the goods had met the consumer guarantees. The applicants are therefore entitled to claim interest on the purchase costs of their bikes of $8,399 each. I do not agree with the applicants that interest should run from the date of each respective complaint. In both complaint communications, Bauer and Mayer sought a response within 5 working days. The respondent’s response to Mayer was received within that time frame, requesting Bauer and Maher to bring their bikes to the respondent’s shop and also advising that the complaints had been forwarded to the Merida importer. As discussed above, the bikes were eventually taken to the respondent’s shop on 31 August 2022. Mayer’s complaint was therefore made after the inspection at the respondent’s shop. It is my view that for Bauer, interest should run on and from 31 August 2022 until today’s date and for Mayer, it should run from the 6th day after his complaint was made on 9 September 2022, namely 15 September 2022 until today’s date.
Conclusion
[129] Applicants’ submissions dated 1 December 2023 at [69]
For the reasons set out above, I find that the ACL applies to the transaction being the sale of the bikes between the applicants and the respondent. As a result, the respondent automatically provided guarantees to the applicants that the bikes supplied to the applicants by the respondent were of acceptable quality. I have also found that the respondent failed to meet the guarantee and as a result, the respondent has to provide a remedy to the applicants in order to put right the failure to meet the obligation. I have further found that the failure is a “major failure” under the ACL and as a consequence, the applicants are entitled to reject the bikes and claim a refund from the respondent. The bikes are to be returned to the respondent at the respondent’s cost. The arrangements for the return of the bikes to be determined between the parties but the return and the refund from the respondent to the applicants is to be completed within 28 days of this order.
………………………………..
Member W Hawkins
| Dates of hearing: | 3 November 2023 and 24 November 2023 |
| Applicants: | In person |
| Respondent: | Mr Mitchell Fletcher, authorised representative |
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