Burton v Chad One Pty Limited

[2013] NSWDC 301

District Court

New South Wales

Medium Neutral Citation:

Burton v Chad One Pty Limited [2013] NSWDC 301

Hearing dates:

31 October 2013

Decision date:

01 November 2013

Before:

Olsson SC DCJ

Decision:

1.Appeal is upheld.

2.The decision of the Tribunal is quashed.

3.I order that the matter be remitted to the Tribunal for hearing.

Catchwords:

CTTT appeal - Meaning of 'acceptable quality' in Australian Consumer Law - consideration of effect of s.24 of the Motor Dealers Act 1974 (Form8) on s.54(3) of Australian Consumer Law

Legislation Cited:

Acts Interpretation Act 1901
Consumer Claims Act 1998
Consumer Trader & Tenancy Tribunal Act 2001
Fair Trading Act 1987
Interpretation Act 1987
Motor Dealers Act 1974
Motor Dealers Regulation 2010
Sale of Goods Act 1908 (NZ)
Trade Practices Amendment (ACL) Act No.2 2010

Cases Cited:

Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387
Contact Energy Ltd v Jones [2009] 2NZLR 830
Edyp v Brazbuild Pty Ltd [2011] NSWCA 218
Kostas v HIA Insurance Services Pty Limited [2010] HCA 32
Norrie v NSW Registrar of Births Deaths and Marriages [2013] NSWCA 145
Witton v Taupo Motor Company Limited Auckland Motor Vehicle Disputes Tribunal 29 November 2010

Category:

Principal judgment

Parties:

GREGORY JOHN BURTON (Plaintiff)
CHAD ONE PTY LIMITED (ACN 082 837 812) (Defendant)

Representation:

Mr P Batley (Plaintiff)
Mr G Rundle (Defendant)
Legal Aid Commission of NSW (Plaintiff)
Savio Solicitors (Defendant)

File Number(s):

2013/204541

Publication restriction:

No

Judgment

Nature of appeal

1. The plaintiff appeals from a decision of the Consumer Trader &Tenancy Tribunal ("CTTT") delivered on 6 June 2013.

1. The plaintiff appeals under s.67 of the Consumer Trader & Tenancy Tribunal Act 2001 ("CTTT Act") which relevantly provides that if in respect of any proceedings the Tribunal decides a question with respect to a matter of law, a party in proceedings who is dissatisfied with a decision may, subject to the section, appeal to the District Court against the decision.

1. The scope of an appeal under s.67 of the CTTT Act was considered by the Court of Appeal in Edyp v Brazbuild Pty Ltd [2011] NSWCA 218 in light of the High Court decision in Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32. Allsop P (as he then was) gave a detailed analysis of s.67 and at [35] said:

"The essential first task in any appeal under s.67 is therefore to identify the express or implied decision on a question with respect to a matter of law. Without the existence or identification of such a decision, the District Court will have no authority or jurisdiction to review the decision of the Tribunal. The relevant decision will have a clear relationship with any asserted "error of law".

1. At [36] His Honour said:

"One will thus be assisted in identifying the relevant decision (express or implied) by understanding the question, the answer and the error that was posed, answered or said to have been made by the Tribunal."

Factual background

1. The applicant purchased a second hand 1998 model Nissan Patrol motor vehicle from the respondent on 19 October 2012. The contract price was $16,990.00. The odometer recorded that the vehicle had travelled 250,816 kilometres at the time of sale.

1. Just over three months later on 28 January 2013 the vehicle broke down while it was being driven near Bathurst, NSW and had to be towed. He had travelled just over 3,000 kilometres since its purchase. The estimates for the cost of repairs ranged from $11,997.00 to $12,278.00.

1. The plaintiff approached the dealer for assistance and, receiving no satisfaction, made a claim in the CTTT (Motor Vehicles Division) on 27 February 2013.

1. In the application he sought an order for the provision of motor vehicle services to the approximate value of $7,000.00.

1. The matter came before the Tribunal on 9 May 2013.

1. The applicant was represented by a solicitor and the respondent appeared in person. The applicant himself did not give any oral evidence, but tendered a bundle of documents which went into evidence without objection.

1. The evidence included:

(1)   A copy of the contract for sale, which was expressed to be the entire contract between the parties (clause 11 of the terms and conditions). It made no reference to the Form 8 and in fact included a three month warranty.

(2)   Evidence that the price paid by the applicant for the car was $16,990.00.

(3)   Evidence from Redbook.com.au - an online valuation guide to used cars - for the month of October 2012 that valued a 1998 Nissan Patrol in "average" condition, having done 250,816kms at between $6,300.00 and $8,900.00. It valued a vehicle of the same description but in "as new" condition at between $20,350.00 and $12,950.00.

(4)   Evidence from carsguide.com.au - an online car sales site - from a search for "All Used Nissan Patrol". Although there are variations in the age, condition and number of kilometres travelled by the different vehicles there advertised, for vehicles manufactured between 1989 and 1995, the advertised prices range between $2,998.00 and $5,900.00.

1. The respondent gave brief evidence and relied on a document known as a Form 8 created pursuant to s.24 of the Motor Dealers Act 1974 ("MDA") and clause 28 of the Motor Dealers Regulation 2010.

1. Section 27 of the MDA obliges a motor dealer to repair defects in second hand motor vehicles within the time period or number of kilometres travelled by the vehicle after sale as provided in a table to schedule 1 to the MDA.

1. Schedule 1 does not impose any obligation to repair defects in a vehicle manufactured more than 10 years before the sale or which has an odometer reading of more than 160,000 kilometres at the time of the sale.

1. Section 24 of the MDA requires a second hand motor dealer to affix a prescribed notice to a vehicle displayed for sale.

1. Clause 28 of the Motor Dealers Regulation 2010 prescribes Form 8 as a notice for the purposes of s.24 where the vehicle does not attract a statutory warranty: "Statutory warranty" is defined in clause 3 of the Regulations as "a statement that acknowledges the obligation imposed on a dealer in respect of the vehicle by s.27 of the MDA".

1. The Form 8 itself provides: "no warranty under the Motor Dealers Act 1974 applies to this vehicle". Thereafter follows several parts which record certain particulars in respect of the vehicle including its identifying marks and the records of sales and purchases.

1. The Form 8 signed by the applicant and relied on by the respondent in the Tribunal was affixed to the vehicle at the time of purchase. The age of the vehicle purchased by the applicant and the kilometres that it had travelled qualified it to be sold subject to a Form 8. At the bottom of the form, printed in bold upper case, surrounded by a thick border, is the statement:

"THERE IS NO WARRANTY UNDER THE MOTOR DEALERS ACT 1974 IN RESPECT TO THE SALE OF THIS VEHICLE. ACCORDINGLY THE DEALER IS NOT REQIRED BY THE ACT TO REPAIR OR MAKE GOOD ANY DEFECT WHICH MAY EXIST OR OCCUR IN THIS VEHICLE."

1. The applicant argued that, contrary to s.54 of the Australian Consumer Law ("ACL"), the vehicle was not of acceptable quality and the defendant had breached the guarantee provided in s.54 of that Act. (The ACL is found within the Trade Practices Amendment (ACL) Act No. 2 2010).

1. Section 54 of the ACL 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.

Tribunal's decision

1. The Tribunal held that any reasonable consumer, on signing a Form 8, could be considered to be fully acquainted with the state and condition of the vehicle, including hidden defects, and realised that the vehicle is sold, as is, perhaps with defects either apparent, hidden or latent, and that by purchasing the vehicle the purchaser assumes the risk of the vehicle being of an acceptable quality under the guarantees given by the ACL.

1. The Tribunal dismissed the applicant's claim.

The present appeal

1. On appeal, the applicant said that the questions with respect to a matter of law were these:

(a) The construction of the Australian Consumer Law and, in particular, the construction of s.54;

(b) Whether the facts found fell within the proper construction of the Australian Consumer Law, in particular s.54(3); and

(c) The construction of the statutory warranty provisions of the Motor Dealers Act.

1. Although the applicant Summons identified seven alleged errors of law by the Tribunal, they were distilled in argument to the following:-

(a) The Tribunal erred by failing to give the ACL a purposive, beneficial construction; and

(b) The Tribunal erred in its interpretation of the Motor Dealers Act by treating the Form 8 as notifying the exclusion of all warranties for all purposes when the effect the Motor Dealers Act is only to exclude a statutory warranty under the MDA.

The relevant decision of the Tribunal

1. The process of the Tribunal's reasoning and construction of the ACL is found at paragraphs 28 to 35 of the reasons for decision.

"28. At first blush, there appears to be tension between the ACL guarantee of acceptable quality and the dealer's obligations, or lack thereof, under the Motor Dealers Act.

29. The Tribunal is of the view that the ACL guarantee has to be flexible as it covers a vast range of goods, whose durability may be as short as only hours or days, while other goods have the potential to remain durable for years. On the other hand, the fixed terms of the Motor Dealers Act applies to one class of goods only: second hand motor vehicles.

30. The crux of this litigation is the question of acceptable quality.

31. Section 54(2) of the ACL defines "acceptable quality". Five criteria are contained in subclauses. But 54(2) is qualified by 54(3).

32. Section 54(3) sets out five qualifications. The major one, for the purpose of this litigation, is subclause (e) which allows acceptable quality to be subject to "any other relevant circumstances relating to the supply of the goods".

33. The Tribunal is of the view that a relevant circumstance would encompass the circumstances involving the requirement of the dealer to affix a Form 8 to the vehicle to be sold, and for the consumer to sign that form.

34. The Tribunal is of the view that any reasonable consumer, on signing a Form 8, could be considered to be fully acquainted with the state and condition of the vehicle, including any hidden defects, and realise that the vehicle is sold, as is, perhaps with defects either apparent, hidden or latent, and that by purchasing the vehicle, the purchaser assumes the risk of the vehicle being in an acceptable quality under the guarantees given by the ACL.

35. The Tribunal is reinforced in adopting this conclusion due to the applicant obtaining, at no cost, an extended warranty. He did not decline that bonus. He must have realised that there may have been defects which would appear in the vehicle later, and so accepted that possibility, realising that should such defect manifest itself, he could rely on that warranty There was no evidence before the Tribunal about any claim made by the applicant on that extended warranty. The applicant was aware that by signing the Form 8, there could be future problems with the mechanics of the vehicle, but nevertheless, took advantage of that situation by being covered by an extended warranty."

1. It is to paragraph 34 that the applicant's argument was specifically directed.

1. A proper construction of a statutory provision always involves a decision of a question with respect to a matter of law: Norrie v NSW Registrar of Births Deaths and Marriages [2013] NSWCA 145 at [52].

Discussion

1. There was no dispute that the Tribunal had jurisdiction to hear the plaintiff's claim: the combined operation of s.21(1) of the CTTT Act and s.7 of the Consumer Claims Act 1998 and s.74 of the Fair Trading Act 1987 (FTA).

1. Section 74(3) of the Fair Trading Act provides:

"A Tribunal may decide the matter of whether a person has suffered loss or damage because of the conduct of another person that constitutes a local contravention or a contravention of chapter 2 or 3 of the ACL if that matter arises in connection with another matter the subject of proceedings in the Tribunal. In deciding the matter of loss or damage, the Tribunal may award such sum, and make such ancillary orders, as it thinks fit."

1. The ACL is a law of New South Wales by virtue of the operation of s.28 of the Fair Trading Act 1987. The applicant's application to the Tribunal was a consumer claim within the meaning of the Consumer Claims Act and accordingly the Tribunal had jurisdiction under s.74(3) of the FTA to decide the claim for damages for breach of the implied warranty of s.54 of the ACL.

1. Section 31(3) of the Fair Trading Act provides that the Interpretation Act 1897 (NSW) does not apply to the Australian Consumer Law (NSW) or any instrument under that law.

1. However, s.15AA of the Acts Interpretation Act 1901 (Cth) does apply to it. It says:

"In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose of object is expressly stated in the Act) is to be preferred to each other interpretation."

1. Legislation that has a remedial or beneficial purpose is to be given a liberal construction, rather than a literal or technical construction: Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145 at [73].

1. The purpose of the ACL is the protection of consumers, in particular in the present case by the implication of guarantees as to quality in consumer contracts.

1. The tension between the MDA and the ACL identified by the Tribunal in paragraph 28 is only an apparent one. The Form 8 document on its face makes clear that there is no warranty under the MDA and that the dealer is not required by the MDA to repair any defect.

1. This does not signify to a purchaser that all warranties are excluded. In any event, s. 63 of the ACL renders void any term of a contract which purports to exclude or modify a guarantee under the ACL.

1. The Second Reading Speech of the ACL on 24 June 2010 said at page 4284:

"A single set of statutory consumer guarantees replaces the existing system of implied conditions and warranties in the Trade Practices Act under State and Territory laws. Statutory consumer guarantees will give consumers clearer and more effective laws regarding their rights when buying goods and services........The consumer guarantees law is closely aligned to the existing New Zealand Law....."

1. The decision of the Auckland Motor Vehicle Disputes Tribunal in Witton v Taupo Motor Company Limited 29 November 2010 contains a helpful analysis of the equivalent New Zealand provision of s.54:

"The guarantee of acceptable quality contained in s.54 is in three parts. A set of quality elements contained in s.54(2)(a) to (e), a reasonable consumer test which applies a consumer's objective evaluation of those quality elements, and a set of factors in s.54(3)(a) to (e) which are to be taken into account by the reasonable."

1. The New Zealand High Court in Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [86] and following, said:

"The quality standard is set by reference to the expectations of a reasonable consumer "fully acquainted with the state and condition of the goods, including any hidden defects." The phrase derives from s 16(b) of the Sale of Goods Act 1908, which established an exception to the warranty of merchantable quality of goods bought by description from sellers dealing in goods of that description. The warranty does not apply where the buyer had examined the goods, as regards defects which such examination ought to have revealed."

1. The court referred to Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 and continued at [88]:

"...s 7(1)(a) of the Consumer Guarantees Act [the equivalent of s.54 of the ACL] requires that quality be assessed by reference not only to defects and price but also fitness for purpose. Fitness for purpose is assessed by reference to all purposes for which the goods are commonly supplied, so it does not suffice if the goods are suitable for any one or more of their common purposes (compare Hardwick Game Farm v Suffolk Agricultural Producers Association [1969] 2 AC 31). But it is not an absolute requirement, in that the Act does not positively require that the goods be fit for all common purposes."

1. At [94] the court said:

"The hypothetical reasonable consumer is taken to be fully acquainted with the "state and condition" of the goods, including any hidden defects. Less obviously, he or she must also be taken to know the nature of the goods, all relevant circumstances of supply and any representations made about the goods by the manufacturer or supplier, so far as relevant. That is so because it is the hypothetical consumer who determines by reference to those considerations whether the goods are acceptable. The test is objective, but it is applied to the particular goods and circumstances.

Acceptable quality is a composite and context-specific attribute. I adopt the observations of Ormrod LJ, speaking of merchantable quality, in Cehave NV v Bremer Handelsgesellschaft mbH at page 80:

'It is a composite quality comprising elements of description, purpose, condition and price. The relative significance of each of these elements will vary from case to case according to the nature of the goods in question and the characteristics of the market which exists for them. This may explain why the formulations of the test of merchantable quality vary so much from case to case.'"

1. Applying that to the present situation, it is apparent that such authority as there is on the NZ equivalent provision of s.54(3) makes it clear that all of the matters in that sub-section are to be considered when determining whether or not the goods were of acceptable quality. The use of the conjunctive "and" within the section supports this interpretation.

1. In this case, the Tribunal had before it:

(a)   The contract for sale expressed to be the entire contract between the parties (clause 11 of the terms and conditions) which made no reference to the Form 8 and in fact included a three month warranty.

(b)   Evidence that the price paid by the applicant for the car was $16,990.00.

(c)   Evidence from Redbook.com.au - an online valuation guide to used cars - for the month of October 2012 that valued a 1998 Nissan Patrol in "average" condition, having done 250,816kms at between $6,300.00 and $8,900.00. It valued a vehicle of the same description but in "as new" condition at between $20,350.00 and $12,950.00.

(d)   Evidence from carsguide.com.au - an online car sales site - from a search for "All Used Nissan Patrol". Although there are variations (as there must be) in the age, condition and number of kilometres travelled by the different vehicles there advertised, for vehicles manufactured between 1989 and 1995, the advertised prices range between $2,998.00 and $5,900.00.

1. The preponderance of evidence before the Tribunal was that the subject vehicle was sold for a price that was greatly in excess of the market price for a vehicle of that age and mileage. Price is a factor to be considered in the matters to be considered in s.54(3) of the ACL. The evidence suggests that in this case, it was an important factor.

1. The Form 8 document is no more than an expression of the statutory exemption available to a motor dealer, based only on the age and mileage of the vehicle.

1. Moreover, if this document alone was able to invest the hypothetical consumer with qualitative information about the vehicle ("fully acquainted with the state and condition of the goods including any hidden conditions") it would give the ACL in this context no work to do.

1. I am satisfied that the Tribunal's decision involved an error of law, being the proper construction of section 54(3) of the ACL.

1. In my view the Tribunal erred in:

(i)   failing to consider each of the elements in the subsection, in particular that of price in the context and circumstances of the evidence regarding value and price,

and

(ii)   by investing the consumer with knowledge of the state and condition of the vehicle solely from a form which provided no qualitative information about the vehicle.

1. In doing so, the Tribunal erred in the proper interpretation or application of s.54(3) and moreover, failed to give effect to a construction that would best achieve the consumer protection purpose of the ACL by failing to give it a beneficial construction.

Findings and orders

(1)   The appeal is upheld.

(2)   The decision of the Tribunal is quashed.

(3)   I order that the matter be remitted to the Tribunal for hearing.

(4)   With respect to costs, the order I propose is that the respondent pay the costs of the applicant but as neither party addressed on the point, I give the parties leave to have the matter re-listed for that purpose. If that leave is not exercised within 14 days of the date hereof, the proposed order as to costs will stand.

Decision last updated: 12 March 2014