Beauchamp v Toyota Motor Corporation Australia Limited

[2022] NSWCATCD 146

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Beauchamp v Toyota Motor Corporation Australia Limited [2022] NSWCATCD 146

Hearing dates:

18 July 2022

Date of orders:

05 September 2022

Decision date:

05 September 2022

Jurisdiction:

Consumer and Commercial Division

Before:

P French, Senior Member

Decision:

(1) Toyota Motor Corporation Australia Limited must pay Gaynore Beauchamp the sum of $9,495.02 immediately.

Catchwords:

CONSUMER LAW – consumer guarantees – supply of goods – guarantee as to acceptable quality – action against manufacturer of goods – when does a cause of action accrue

CONSUMER LAW – Fair Trading Act 1987 (NSW) – limitation period

Legislation Cited:

Australian Consumer Law (NSW) – ss 3, 54, 271, 272, 273

Fair Trading Act 1987 (NSW) – ss 28, 74, 79D, 79E, 79L, 79N

Cases Cited:

Barbour v Autosports Five Dock Pty Ltd [2020] NSWCATAP 141

Briginshaw v Briginshaw (1938) 60 CLR 336

Hadley v Baxendale [1854] EWHC J70

Medtel Pty Ltd v Courtney [2003] FCAFC 51

Sacks v Hammoud [2016] NSWCATAP 225

Wilson v Winnicott [2021] NSWCATAP 211

Category:

Principal judgment

Parties:

Gaynore Beauchamp (Applicant)

Toyota Motor Corporation Australia Limited
(Respondent)

Representation:

Applicant (self-represented)
J Ferris (Respondent)

File Number(s):

MV 22/18512

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. This is an application by Gaynore Beauchamp (the applicant) for an order pursuant to s 79N(a) of the Fair Trading Act 1987 (FT Act) that would require Toyota Motor Corporation Australia Limited (the respondent) to pay her $9,495.02 in compensation for damage and loss she contends she has incurred due to the respondent’s failure to comply with the guarantee as to acceptable quality in the supply of goods contained in s 54 of the Australian Consumer Law (NSW) (ACL(NSW)) in the supply to her of a Toyota Yaris (the motor vehicle). This application was made to the Tribunal on 28 April 2022 (the application).

2. For reasons set out in greater detail following, the Tribunal has determined that the respondent did fail to comply with guarantee as to acceptable quality in the supply of the motor vehicle with respect to its’ paintwork. The motor vehicle was supplied with a low film build of the clear coat which has resulted in the delamination of the clear coat within five years from the date of its supply. A reasonable consumer acquainted with this hidden defect in the paintwork at the time of supply would not consider it to be of acceptable quality in terms of appearance and finish, and durability, particularly having regard to the price paid for the motor vehicle and its expected period of use. The applicant is therefore entitled to take action against the respondent pursuant to s 271(1) of the ACL(NSW) to recover damages in accordance with s 272(b), which is the cost she will incur in instating an acceptable paint surface on the motor vehicle, which she has established on her evidence is $9,495.02.

Procedural history

3. The application was first listed before the Tribunal, differently constituted, in a Group List for Conciliation and Hearing by AVL in a VMR in accordance with NCAT’s COVID-19 Revised Hearing Procedure as it was in force at that time. The applicant attended that listing of the application, supported by a consumer advocate, Mr Graham Judge. Mr John Ferris, who is the respondent’s Senior Technical Case Manager, attended on behalf of the respondent. In accordance with the Tribunal’s usual practice where both parties are present at the first listing of the application, the Tribunal attempted to assist the parties to resolve the dispute co-operatively without the need for a formal hearing. Those efforts were not successful. However, an interim agreement was reached between the parties that the respondent would inspect the motor vehicle to determine if it was prepared to settle the claim (see third order numbered 1 of the orders made on that occasion). Consequently, the application was adjourned to a further Group List for Conciliation and Hearing.

4. The application next came before the Tribunal, differently constituted, on 14 June 2022. The applicant and her consumer advocate, Mr Judge, attended that listing of the application, but there was no appearance by the respondent. The applicant informed the Tribunal that there had been no resolution of the dispute. Consequently, the Tribunal adjourned the application for a Special Fixture Hearing and issued directions to the parties for the filing and exchange of the documentary evidence that they intended to rely on at the final hearing.

Evidence and hearing

5. The applicant relies upon a bundle of documents filed on 28 June 2022 (which supersedes an earlier bundle filed on 5 May 2022) and submissions filed on 22 July 2022. The applicant’s bundle of documents was marked Exhibit A1. The respondent relies upon a bundle of documents and submissions filed on 12 July 2022. The documents were marked Exhibit R1.

6. The Special Fixture Hearing was conducted by AVL in a VMR in accordance with NCAT’s COVID-19 Revised Hearing Procedure as it was then in force. The applicant attended that listing of the application supported by her consumer advocate, Mr Judge. She gave oral evidence under oath. Mr Ferris attended the hearing on behalf of the respondent. He also gave oral evidence under oath. The parties had the opportunity to present their respective cases, to ask each other questions, and to make final submissions to the Tribunal.

Material Facts

7. The applicant is the owner of a 2015 Model Toyota Yaris which she purchased from a Toyota dealership in Penrith on 25 August 2015 as a new motor vehicle. Neither party has submitted evidence of the purchase price.

8. The respondent is the manufacturer/importer of the motor vehicle.

9. The motor vehicle was sold with a manufacturer’s warranty which lapsed on 28 August 2018.

10. The motor vehicle’s paint colour is vivid yellow (Toyota paint code 5B5).

11. The applicant contends that in early 2020 she noticed that the clear coat paint surface had begun to delaminate. The delamination worsened progressively. The applicant has submitted into evidence various photographs of the condition of the paint surface taken in March and April 2022. These photographs depict extensive peeling of the clear coat paint layer over most of exterior surfaces of the motor vehicle. It is not controversial that this delamination is obvious and unsightly.

12. On or about 9 March 2022 the applicant took the motor vehicle to the Penrith Toyota dealership and requested its repair. This resulted in the dealership submitting to the respondent an out-of-warranty claim for the cost of repainting the motor vehicle, which is in evidence at page 4 of Exhibit A1 (the claim). The claim states that there is “paint cracking over the whole of the vehicle” and that the “cause” of this is “poor paint application”. It recommended as a “remedy” “sub[letting] to a paint specialist”.

13. The respondent’s assessor assessed the claim by looking at photographs submitted with the claim by Penrith Toyota. The claim was rejected by the assessor who stated “[p]hotos show that paint has not been well cleaned/polished, not well maintained, not a manufacturing defect”.

14. The applicant denies that she has failed clean and polish the motor vehicle. In this respect she has submitted into evidence 17 transaction records which she contends relate to professional cleans and polish services conducted between 2017 and 2020 (these being the records she is able to retrieve).

15. The applicant accepts that she does not garage the motor vehicle.

16. At the time of the motor vehicle’s inspection by Penrith Toyota on 9 March 2022 the odometer recorded that the motor vehicle had been subject to 116,933 kms use.

17. The applicant relies upon an expert opinion given by Mr Murray Howell, Global Business Development Manager, Automotive Finishes with The Sherwin- Williams Company dated 25 June 2022. Mr Howell does not state his qualifications and experience. He does state that he has read and considers himself bound by NCAT’s Expert Code of Conduct. Mr Howell states the following in relation to the delamination of the clear coat:

Cause of defect

I note from the photos provided the panels which are the most affected are the bonnet, roof, liftgate, cant rails and the top of the doors and quarter panels. In my opinion the clear coat delamination has occurred due to sunlight breaking down the clear coat leading to the loss of adhesion between various paint layers.

The photos you provided of the roof panel indicating the film build difference between the delaminated area and clear coat area range is 110 microns to 138 microns.

[Note that the foregoing paragraph refers to photographs of Positector readings which had been sent to Mr Howell by Mr Judge for the purpose of obtaining his opinion].

A clear coat film build of 28 microns is excessively low in my opinion. As a leading automotive paint supplier to the refinish industry Sherwin Williams specify a need for 50 microns in the clear coat to receive the paint manufacturer warranty.

It is very rare to see a vehicle build in 2015 with this condition, given the vehicle has not been subjected to any refinishing post production, from my experience this fault can only be attributed to a failure with the clearcoat from production.

Generally speaking, motor vehicle manufacturers build a vehicle with the expectation the paint applied in production will last the lifetime of the vehicle, provided the vehicle is regularly washed and polished.

While surface coating may have a decrease in the gloss level over time, delamination between the base coat and clear coat like this Yaris should not occur.

A sample of the clearcoat could be analysed to identify if there has been a failure with the clearcoat itself and the built in UV protection.

Rectification of the fault would require the vehicle to be thoroughly sanded to remove the existing clearcoat and be resprayed following the automotive paint manufacturer process.

In addition, the vehicle will need to be dismantled with all the door and liftgate apertures refinished to all for the clearcoat to have acceptable adhesion and avoid the appearance of masking edges. To my knowledge no automotive paint manufacturer will provide a warranty if the back masking technique is used in the respray of the motor vehicle.

18. As evidence of her loss, the applicant relies upon a detailed quotation provided by an automotive smash repairer which itemises in detail labour and materials involved in stripping and replacing the motor vehicle’s existing paint work at a cost of $9,495.02. Importantly, this quotation is based upon the disassembly of the motor vehicle’s major components.

19. There was argument at the hearing as to whether there are manufacturer or other objective standards which indicate what depth a motor vehicle’s clear paint coat ought to be. The applicant submitted that there must be some such standard or guideline but was unable to produce it into evidence. On behalf of the respondent, Mr Ferris denied the existence of a manufacturer, industry, or other standard to this effect. That evidence appears to be at odds with a statement Mr Ferris made in a letter to the applicant dated 7 June 2022 where he refers to a manufacturing standard which he says the motor vehicle’s clear coat complies with. In any event no objective standard has been produced by either party. The applicant has, however, submitted into evidence a brochure from PPG, which is a major supplier of automotive finish products, which deals with film builds. That brochure states that the clear coat should be between 45 and 60 microns.

20. The respondent relies upon an expert report produced by Mr Gary Black of AVAC Automotive Vehicle Assessment and Consulting dated 3 June 2022. Mr Black states that he has worked in the collision repair and insurance industry for 48 years. He has specific qualifications and experience as a motor vehicle painter. He states that he has read and considers himself bound by NCAT’s Expert Code of Conduct. In his report, Mr Black states as follows (relevantly):

VEHICLE DESCRPTION AND VALUE

The vehicle is a Toyota Yaris 5 Door Hatch. The vehicle’s precondition was as follows for its age and 119,274 kilometres travelled.

• Interior: Average

• Exterior: Below average

I estimate the fair market value to be $12,150. The fair market value does not include stamp duty and transfer fees

SALVAGE VALUE

The estimated salvage value at the time of loss was $2,500.

REPAIR WORK COMPLETED

I have reviewed the Estimate Number 11589 that was submitted by Suna Smash Repairs and note the following:

REMOVE AND REFITT LABOUR

I have reviewed the attached quote and have identified that the labour component of this quote is required as stated in the repair estimate. I have also found that some costs are excessive and some costs are underquoted and I have made necessary adjustments. The new settlement recommendations are based on costs consistent with my recent industry experience with similar labour operations.

REPAIR LABOUR

After viewing the vehicle I have made the necessary adjustments including additional operations not quoted for. The new settlement recommendations are based on costs that are consistent with my recent industry experience with similar labour operations.

PAINT LABOUR

It is my expert opinion that Paint costs are excessive and I have made several adjustments to this segment. My new paint recommendations are based on costs that are consistent with my recent industry experience with similar operations.

CONCLUSION:

I recommend settlement for operations based on my assessment report of $6,780.40 inclusive of GST. Adjustments have not been discussed with the repairer.

I estimate the repair time for this type of repair process would be 14 working days. This is based upon my recent industry experience and has not been discussed with the repairer.

…

Instructions

Inspect the applicant’s vehicle and prepare a technical paint inspection assessment report with detailed observations and test results in relation to the paint condition.

Vehicle Inspection Details

1.0 Using a Positector (an instrument used to measure the total dry film build on a structural surface) on-destructively to ASTM AS 3894.3, it confirms that the vehicle’s surface coating is OEM with no previous repairs or refinishing carried out. Please see the attached silhouette for actual total dry film builds in microns.

1.1 The author notes that the OEM paint finish is Clear Over Base (COB) with the colour name of Vivid Yellow Code: 5B5. The base colour (YellowO is applied robotically to all metal panels followed by hi-temperature clear then baked at a temperature of between 120 and 160 degrees Celsius to cross link and harden/cure. All plastic components such as front and rear brakes and door handles are processed off line using catalysts and low temperature bake to cross link and harden/cure.

1.2 Visually the clearcoat is delaminating on all top horizontal surfaces. Film build readings were taken to determine the approximate thickness range of the delaminated clearcoat. The recorded clearcoat range is 20 to 26 microns for an average of 24 microns.

1.3 Solvent testing (MEK-AS 3894) shows no softening of the non-delaminated clear coat areas.

1.4 Solvent testing (MEK-AS 3894.4 shows some colour shift when used on the exposed yellow base coat colour as expected.

1.5 Hardness testing pencil leads (ASTM D3363) show that a hardness of HB has been achieved (within paint manufacturer’s specifications).

1.6 Adhesion testing (destructive) was not carried out due to the obvious adhesion failure of the clearcoat at the interface of the yellow base coat.

1.7. UV degradation is noted on the clear coat adjacent to the delaminated areas. … UV degradation is also noted on both front headlamps, and wiper arms front and back. This is a clear indication that the vehicle is not garaged.

1.8. Visually it is noted that the vehicle had been recently washed, however, it was also obvious that the vehicle has not had regular washing maintenance carried out as there is a build-up of dirt vegetation around the turret mouldings, tailgate aperture, and engine bay, with a small amount of fallout residue on the bonnet. This type of fallout over time has a corrosive effect on all surface coatings. ….

1.9 A google search to ascertain the environment that the vehicle is kept in shows that the vehicle is parked in and around tress on a property at Prospect NSW. …

Conclusions

2.0 As noted in item 1.0 the total dry film builds show that the vehicle is OEM with not previous repairs or finishing carried out.

2.1 As noted in items 1.3 and 1.4 hardness and cure of all areas are in good order.

2.2 Visually as noted in items 1.2 and 1.7 there is a significant delamination of the clear coat and UV degradation which has occurred over time. The root cause is related to the low film build of the clearcoat (range is 20 to 26 microns for an average of 24 microns). This range is considered insufficient for long-term durability of a surface coating.

2.3 The horizontal surfaces of a vehicle are subject to severe damaging climate conditions and particular environmental conditions in which a vehicle is kept. It is important that vehicles are maintained accordingly.

…

21. The respondent also relies upon the following sections of the Owner’s Manual for the motor vehicle:

Washing and waxing your Toyota

Washing your Toyota

Keep your vehicle clean by regular washing.

NOTICE

The following cases may cause weakness to the paint or corrosion to the body and components … Wash your vehicle as soon as possible.

• After driving near the sea coast.

• After driving on salted roads.

• If you see coal tar or tree sap on the paint surface

10

• If you see dead insects, insect droppings or bird dropping on the paint.

• After driving in an area contaminated with soot, oily smoke, mine dust, iron powder or chemical substances

• If the vehicle becomes heavily soiled in dust or mud.

• If liquids such as Benzene and gasoline are spilled on the paint surface

…

Waxing your Toyota

Polishing and waxing is recommended to maintain the original beauty of your Toyota’s finish

Apply wax once a month or if the vehicle surface does not repel water well.

1. Always wash and dry the vehicle before you begin waxing, even if you are using combined cleaner and wax.

2. Use good quality polish and wax. If the finish has become extremely weathered, use a car-cleaning polish, followed by a separate wax. Carefully follow the manufacturer’s instructions and precautions. Be sure to polish and wax the chrome trim as well as the paint.

Contentions of the parties

22. The applicant contends that the respondent failed to comply with the consumer guarantee as to acceptable quality when it supplied the motor vehicle to her because it was supplied with a deficient (defective) clear paint coat which resulted in the delamination of the clear coat within five years of the supply. She contends that if she had known of this hidden defect at the time of supply, she would not have acquired the motor vehicle. That is because at the time of purchase she expected the paintwork to be durable and remain of acceptable appearance and finish over the lifetime of the motor vehicle, having regard to the fact that the motor vehicle was new at that time and the purchase price she paid. In this respect the applicant relies upon the following definitions of “durable”:

Cambridge Online Dictionary: “able to be used for a long time without becoming damaged”

Merriam-Webster Online Dictionary: “able to exist for a long time with significant deterioration in quality or value”

23. In response to the respondent’s contention that the Tribunal does not have jurisdiction to deal with the application because it has been made more than three years after the time of supply, the consumer contends that her application has been made within three years of her becoming aware that the clear coat was defective and has therefore been made within the time permitted. She denies the respondent’s contentions that she has failed to car for the motor vehicle’s paint work in accordance with the owner’s manual recommendations.

23. The respondent’s primary contention is that the Tribunal does not have jurisdiction to deal with the application because the cause of action on which the consumer relies first accrued more than three years before the date on which the claim was lodged and is therefore barred by s 79L(1)(a) of the FT Act. That submission is premised on the applicant’s cause of action having accrued on the date of supply of the motor vehicle, being 25 August 2015.

24. In relation to the merits of the applicant’s case, the respondent contends that the cause of the delamination is poor care of the motor vehicle by the applicant and its exposure to harsh environmental conditions, including ultraviolet light, where it is parked. In this respect the respondent contends that the applicant has failed to regularly clean and polish the motor vehicle’s paint surface in accordance with the recommendations set out in the owner’s manual. It contends that she has parked the motor vehicle under vegetation for prolonged periods and allowed dirt and debris to accumulate on the paint surface which has caused it to corrode.

Applicable law

26. By operation of s 28 of the FT Act, the Australian Consumer Law (NSW) (ACL(NSW)) is made part of the law of NSW and may be applied in the determination of a consumer claim. Section 74(3) of the FT Act provides that the Tribunal may decide the matter of whether a person has suffered loss or damage because of the conduct of another person that constitutes a contravention of Chapter 3 of the ACL(NSW) if that matter arises in connection with another matter subject to proceedings in the Tribunal. In deciding the matter of loss or damage, the Tribunal may award such sum as it thinks fit.

27. Chapter 3, Part 3.2, Division 1, of the ACL(NSW) contains several specific protections for consumers in trade and commerce, known as the “consumer guarantees”.

28. Subdivision A contains guarantees in relation to the supply of goods, including in s 54, a guarantee as to acceptable quality. It relevantly 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.

29. There are some exceptions to the guarantee as to acceptable quality which are found in s 54(4) to (7). The exception found in s 54(6) is potentially relevant in this case:

(6) Goods do not fail to be of acceptable quality if:

(a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and

(b) they are damaged by abnormal use.

30. Part 5.4 of the ACL(NSW) contains the remedies that are available to a consumer where a consumer guarantee is not complied with. Division 2 deals with actions for damages against manufacturer of goods. It relevantly provides:

271 Action for damages against manufacturers of goods

(1) If:

(a) the guarantee under section 54 applies to a supply of goods to a consumer; and

(b) the guarantee is not complied with;

an affected person in relation to the goods may, by action against the manufacturer of goods, recover damages from the manufacturer.

(2) Subsection (1) does not apply if the guarantee under section 54 is not complied with only because of:

(a) an act, default or omission of, or any representation made by, any person other than the manufacturer of an employee of agent of the manufacturer; or

(b) a cause independent of human control that occurred after the goods left the control of the manufacturer; or

(c) the fact that the price charged by the supplier was higher than the manufacturer’s recommended retail price, or the average retail price, for the goods.

…

(6) If an affected person in relation to goods has, in accordance with an express warranty given or made by the manufacturer of goods, required the manufacturer to remedy a failure to comply with a guarantee referred to in subsection (1)…

(a) by repairing the goods;..

…

Then, despite that subsection, the affected person is not entitled to commence an action under that subsection to recover damages of a kind referred to in section 272(a) unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the failure within a reasonable time.

…

272 Damages that may be recovered by action against manufacturers of goods

(1) In an action for damages under this Division, an affected person in relation to goods is entitled to recover damages for:

(a) any reduction in the value of the goods, resulting from the failure to comply with the guarantee to which the action relates, below whichever of the following prices is lower:

(i) the price paid or payable by the consumer for the goods;

(ii) the average retail price of the goods at the time of supply; and

(b) any loss or damage suffered by the affected person because of the failure to comply with the guarantee to which the action relates if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of such a failure.

…

273 Time limit for actions against manufacturers of goods

An affected person may commence an action for damages under this Division at any time within 3 years after the day on which the affected person first became aware, or ought reasonably to have become aware, that the guarantee to which the action relates has not been complied with.

31. Section 74(3) of the FT Act provides that the Tribunal may decide the matter of whether a person has suffered loss or damage because of the conduct of another person that constitutes a contravention of Chapters 2 or 3 of the ACL(NSW) if that matter arises in connection with another matter subject to proceedings in the Tribunal. In deciding the matter of loss or damage, the Tribunal may award such sum as it thinks fit.

32. “Reasonable foreseeability” of loss for the purposes of ss 259(2)(b)(i) and 267(2)(b)(i) is determined in accordance with the principles established in on the first limb of Hadley v Baxendale [1854] EWHC J70. The loss must arise naturally from the supplier’s failure to comply with the guarantee.

33. The applicant bears the onus of proving his case to the civil standard of proof, which is on the balance of probabilities, bearing in mind the Briginshaw standard (Briginshaw v Briginshaw (1938) 60 CLR 336) which is found at p362 in the judgement of Dixon J:

…when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence ... It cannot be found as a result of a mere mechanical comparison of probabilities … but reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer.... In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences.’

Jurisdiction

34. The threshold issue in this case is whether the Tribunal has jurisdiction to deal with the application. As set out above, the respondent contends that the Tribunal does not because the application has been made outside the three-year limitation period imposed by s 79L(1)(a) of the FT Act. Section 79L(1)(a) is in the following terms:

79L Limitation periods

(1) The Tribunal does not have jurisdiction to hear and determine a consumer claim if any of the following apply -

(a) the cause of action giving rise to the claim first accrued more than 3 years before the date on which the claim is lodged,

…

35. As also set out above, the respondent’s contention as to lack of jurisdiction is premised upon the applicant’s cause of action having accrued on the date of supply of the motor vehicle on 28 August 2015 and her application to the Tribunal having been made on 28 April 2022, 6 years and 8 months later.

36. 36 A cause of action accrues when each of the elements necessary to constitute the cause have crystalised: Sacks v Hammoud [2016] NSWCATAP 225 at [32]; Barbour v Autosports Five Dock Pty Ltd [2020] NSWCATAP 141 at [64].

37. 37 In this case the consumer relies upon a statutory cause of action, being a consumer guarantee in relation to the supply of goods. These guarantees operate independently of the contract for the sale of the motor vehicle: Barbour at [47].

38. The elements of the cause of action are:

1. The applicant is a “consumer” within the meaning of s 79D of the FT Act and s 3 of the ACL(NSW),

2. The guarantee that goods will be of acceptable quality applies, because the goods were supplied in trade and commerce and not by auction: s 54(1),(2) and (3) of the ACL(NSW),

3. There was a failure by the respondent to comply with the guarantee as to acceptable quality in the supply of the goods: s 271(1) of the ACL(NSW),

4. The applicant suffered reasonably foreseeable loss or damage because of that failure: s 272(1)(b) of the ACL(NSW), and

5. The action for damages was commenced within 3 years after the day on which the applicant first became aware, or ought reasonably to have become aware, of the respondent’s failure to comply with the guarantee: s 273 of the ACL(NSW), and

6. The application is a consumer claim within the meaning of s 79E of the FT Act.

39. There is no issue in this case in relation to elements (a), (b) and (f).

40. With respect to element (c), the temporal focus of section 54 is the time the goods are supplied, informed by what is known of their subsequent condition and by what it was reasonable to expect from the type of goods in issue: see generally, Medtel Pty Ltd v Courtney [2003] FCAFC 51 per Moore J at [40], Branson J at [70], and Jacobson J agreeing with Branson J at [81]. In thus falls to the applicant to prove on the balance of probabilities that the motor vehicle’s paint work was not of acceptable quality at the time of supply having regard to what it was reasonable to expect in terms of its future function at that time.

41. The “reasonable consumer” test for acceptable quality in s 54(1) expressly incorporates constructive knowledge of “any hidden defects” which, by definition, are not known to the consumer at the time of sale. The implication of this is that the goods may be found to of unacceptable quality at the time of supply retrospectively when the hidden defect becomes manifest. That conclusion is reinforced by s 273 of the ACL(NSW) which provides that an action against a manufacturer must be commenced within three years of the date the consumer becomes aware, or ought reasonably to have become aware, that the guarantee had not been complied with. Section 273 clearly contemplates that this may be a date that is not contemporaneous with the date of supply.

42. In this respect, I note what is said by SM Curtin SC in Wilson v Winnicott [2021] NSWCATAP 211 at [52] to [58] but decline to follow this reasoning. I prefer the reasoning of Sacks v Hammoud [2016] NSWCATAP 22 absent that reinterpretation of its meaning.

43. For reasons I explain in greater detail in relation to the merits of the claim I am satisfied that the respondent failed to comply with the guarantee as to acceptable quality when it supplied the motor vehicle to the applicant because it was supplied with a deficient (defective) clear paint coat which would delaminate within 5 years of supply. As set out below I have found that a reasonable consumer would not have considered the motor vehicle of acceptable quality at the time of supply if they had known that the paintwork was not durable and would become of unsightly appearance and finish within 5 years supply, having regard to the fact this was a new motor vehicle at the time of supply.

44. There is no issue in this case that the consumer has suffered damage and loss because of the respondent’s failure to comply with the guarantee. In his expert evidence on behalf of the respondent, Mr Black states that fair market value for a vehicle of this type and age is $12,150.00 (exclusive of stamp duty and transfer fees), but this vehicle has a salvage value of $2,500.00 due to its delaminated paint work. The applicant’s evidence, from a licensed smash repairer, is that it will cost her $9,495.02 to replace the defective paint work. Mr Black disputes some of the components of that cost, but nevertheless estimates that the cost of rectification will be $6,780.40.

45. The evidence in this case is that the consumer first became aware of the delamination of the clear paint coat in early 2020. That was her sworn evidence and there is no evidence to contradict it. However, that constituted an awareness of the damage, and not necessarily an awareness of the respondent’s failure to comply with the guarantee (defect and damage are distinct concepts).

46. In this case, it appears that the consumer did not acquire specific knowledge of the deficiency in the clear coat (the failure to comply) until 10 March 2022 when the Penrith Toyota dealership reported to the respondent and the applicant that the motor vehicle had a “defective paint coat” when it submitted the out of warranty claim. Alternatively, it was in approximately April 2022, when her advocate conducted measurements of the clear coat using a Positector and found it be significantly lighter than what he understood to be the industry standard.

47. However, I am satisfied that manifestation of the damage (the delamination) in early 2020 ought reasonably to have caused the consumer to become aware of the defective clear coat (the failure to comply) at that time by presenting the motor vehicle for inspection by a motor vehicle paint specialist. Section 273 provides that time for an action against a manufacturer is to run from the date of awareness of the failure to comply, or the date the consumer ought reasonably to have been become aware of the failure to comply. I am satisfied that the latter should apply in this case.

48. For the purposes of s 79L(1)(b) time therefore must be taken to run from early in 2020. Even if a fixed date of 1 January 2020 is taken to be the date from which time runs, the application, made on 28 April 2022, has been made within the three year limitation period prescribed by 79L(1)(b).

49. The respondent’s contention, in effect, that the applicant ought to have become aware of the deficiency in the clear coat on the date of supply on 28 August 2015 cannot be accepted. How the applicant was supposed to have become aware of this hidden defect on that date is unexplained. It is reasonable to assume that the applicant had the opportunity to inspect the paint work at that time. But there is no issue that it was of acceptable finish and appearance then. It is not reasonable to expect a consumer to attend a dealership with a Prositector in hand to test for underlying deficiencies in paint application prior to purchasing a motor vehicle.

50. Other than in relation to the limitation period, there can be no issue that the Tribunal has jurisdiction to deal with this application as a consumer claim under Part 6A of the FT Act.

Consideration

51. To determine the outcome of this application on its merits the Tribunal must pose and answer the following questions:

1. When it supplied the motor vehicle to the applicant, did the respondent fail to comply with the guarantee as to acceptable quality?

2. If the answer to (a) is “yes”, did the applicant suffer reasonably foreseeable damage and loss because of that failure?

3. If the answer to (b) is “yes”, what remedy, if any, is the applicant entitled to?

52. I am satisfied on the evidence of both experts that at the time of supply the motor vehicle had defective paint work. Mr Howell noted from the Prositector readings supplied to him by Mr Judge that the motor vehicle has clear coat film build of 28 microns, which is “excessively low” in his opinion. In his expert report on behalf of the respondent, Mr Black expresses the same opinion at paragraph 2.2 stating that the root cause of the delamination is the low film build of the clear coat which he determined was within the range 20 to 26 microns with an average of 24 microns. He specifically concludes that this range is insufficient for the long-term durability of a surface coating. I also note that the Penrith Toyota mechanic who first inspected the motor vehicle upon its presentation by the applicant on 9 March 2022 noted the paint work to be “defective”. There is no issue that the clear coat is original to the time of supply – the paint surface of the motor vehicle has not been resurfaced for any reason since the time of supply.

53. There can really be no issue that the delamination of the paint work renders it of unacceptable quality. A new motor vehicle’s original paint work is, on a normative basis, supplied with the expectation that it will last over the typical life of the vehicle subject, of course, to wear and tear. The extensive delamination of the motor vehicle’s paintwork far exceeds the wear and tear that it would be reasonable to expect, even after almost 7 years of use. It is not suggested by the respondent that the expected period of use of the motor vehicle had ended or was approaching, such that the paint work had completed or was nearing completion of its life. Both parties conducted themselves on the basis that it was reasonable to expect the motor vehicle to be capable of several, if not many years, of future use. In this respect the paintwork was not durable. The delamination is also very unsightly, so much so that it has reduced the motor vehicle’s value from a book value of $12,150.00 to a scrap value of $2,500.00 in Mr Black’s assessment. I am satisfied that a reasonable consumer who knew of this hidden defect in the clear coat would not have acquired the motor vehicle having regard to its purchase price and the reasonably expected period of future use of goods of this type.

54. The only real issue is whether the paint work came to be of unacceptable quality due to its misuse by the applicant (s 54(6) of the ACL(NSW)). Despite the opinion of its own expert as to the “root cause” of the delamination, the respondent contends that it was poor care of paint work by the applicant which caused the delamination. It contends that she failed to regularly clean and polish the paint work in accordance with the recommendations contained in the manufacturer’s user manual. In support of this contention, the respondent relies upon paragraphs 1.7 to 1.9 of Mr Black’s report which note exposure to ultraviolet light, vegetation, and a build-up of dirt vegetation in the turret mouldings, tailgate aperture, and engine bay. Mr Black also noted a small amount of fallout residue on the motor vehicle’s bonnet, which he states has a corrosive effect over time. In his oral evidence, Mr Ferris also stated that he had noted the same issues when he inspected the motor vehicle.

55. With respect to this issue, there are three fundamental difficulties for the respondent on its own case. First, despite noting areas of uncleanliness in specific recessed areas (other than bonnet), Mr Black did not conclude that this uncleanliness was the causal of the delamination. His opinion as to causation was the low film build of the clear coat. The implication of this is that the clear coat was prone to delamination irrespective of the degree of care the applicant exercised in relation to the paint work. Second, the recessed areas of the motor vehicle where there is vegetation and other dirt residue visible do not appear to show signs of delamination which is consistent with this not being causal of the delamination. Third, Mr Black’s opinion is that fallout residue he noticed on the bonnet has the potential to be corrosive over time. The ordinary meaning of corrosion is “to eat away”. The applicant’s complaint does not relate to the corrosion of the paint surface, it concerns its delamination, or ‘splitting off’ from the paint layer underneath. These are distinct processes. For these reasons the respondent’s defence fails on its own terms in my view.

52. In any event, while the applicant accepts that the motor vehicle is not garaged and that it is sometimes parked under vegetation, she denies that she failed regularly clean and polish the paint work. She gave evidence under oath of having the motor vehicle professionally washed every four weeks or so since the time of purchase. The transaction records for car washes she has submitted into evidence lend support to that evidence.

53. Apart from the condition of the clear coat, the motor vehicle’s other paint work appears to be in reasonable condition in the photographs that are in evidence. The “Vivid Yellow” layer remains luminous and in apparently good condition overall. The exterior of the motor vehicle, other than the paintwork, also appears to be in reasonable condition for its age. There is no evidence of dents or scrapes. In his report, Mr Black states that the condition of the interior of the motor vehicle is average. He does not note any damage of deterioration. I conclude from all of this that the motor vehicle has been subject to reasonable care by the applicant since purchase, even if this was not optimal care.

54. For the foregoing reasons, I cannot be satisfied that the paint work was rendered of unacceptable quality due to its misuse by the applicant. The respondent has not proved to my satisfaction the misuse it contends for, and in any event, its own expert evidence is to the effect that any such misuse was not causal of the delamination.

55. There is no issue between the parties’ experts that the only way the motor vehicle’s paint work can be rectified is by stripping the existing paint work and repainting. I make that finding. I am satisfied that the loss the applicant will incur in having this work carried out is a reasonably foreseeable consequence of the respondent’s failure to comply with the guarantee as to acceptable quality. It arises naturally from the respondent’s supply of the motor vehicle with the defective clear coat.

56. In assessing the applicant’s loss, I have had regard to the quotation for the stripping of the existing paint work and the repainting of the motor vehicle the applicant has submitted into evidence. That is a detailed itemised quotation from a licenced motor vehicle (smash) repairer in the amount of $9,495.02.

57. In his report, Mr Black assessed this quotation and expressed the opinion that it is in several respects excessive. However, there are three difficulties with this evidence.

58. First, the respondent has not submitted any quotation from an alternative contractor that could give the Tribunal comfort that the work could, in fact, be completed in accordance with Mr Black’s appraisal of the fair value cost of the work.

59. Second, the quotation relied upon by the applicant allows for the major components of the motor vehicle’s frame to be disassembled prior to stripping and repainting, whereas the scope of work Mr Black sets out does not. I accept Mr Howell’s evidence that the former is necessary to avoid masking lines appearing on the finished paint work and to ensure effective adhesion of the new paint work. I also accept the applicant’s submission that masking lines would detract from the appearance of the paint work and affect the motor vehicle’s resale value.

60. Third, in the absence of any evidence from a contractor prepared to carry out the work in accordance with Mr Black’s appraisal, I cannot be satisfied that his masking method would result in a warranty in relation to the new paint surface. Mr Howell’s evidence raises a substantial doubt about this.

61. I am therefore satisfied that the applicant’s loss is to be assessed in accordance with the cost quoted to her by her smash repairer. The respondent must therefore pay her compensation in the amount of $9,495.02.

Orders

66. For the foregoing reasons I make the following order:

1. Toyota Motor Corporation Australia Limited must pay Gaynore Beauchamp the sum of $9,495.02 immediately.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Amendments

25 September 2023 - Formatting amendments.

Decision last updated: 25 September 2023