Frantzis v Kumar Motors (Bankstown) Pty Ltd t/a Peninsular Motor Group

[2022] NSWCATCD 163

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Frantzis v Kumar Motors (Bankstown) Pty Ltd t/a Peninsular Motor Group [2022] NSWCATCD 163

Hearing dates:

25 March 2022, 3 June 2022

Date of orders:

26 August 2022

Decision date:

26 August 2022

Jurisdiction:

Consumer and Commercial Division

Before:

P French, Senior Member

Decision:

(1) The application is dismissed.

Catchwords:

CONSUMER LAW – consumer guarantees – supply of goods – guarantee as to acceptable quality

CONSUMER LAW – consumer guarantees – supply of services – guarantee as to fitness for a particular purpose

CONSUMER LAW – general protections – misleading and deceptive conduct

Legislation Cited:

Australian Consumer Law (NSW) – ss 3, 18, 54, 61, 63, 259

Civil and Administrative Tribunal Rules 2014 (NSW) – r 35

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

Cases Cited:

Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682

Category:

Principal judgment

Parties:

Arthur Frantzis (Applicant)
Kumar Motors (Bankstown) Pty Ltd t/a Peninsular Motor Group (First respondent)
Integrity Car Care Pty Ltd (Second respondent)

Representation:

Counsel:
P Tiliakos (Applicant)

Solicitors:
Koutzoumis Lawyers (Applicant)

Other:
U Singh (First Respondent)
M Sherry (Second Respondent)

File Number(s):

MV 21/50677

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. This is an application by Arthur Frantzis (the applicant) for an order pursuant to s 79N(a) of the Fair Trading Act 1987 (FT Act) that would require Kumar Motors (Bankstown) Pty Ltd (the first respondent) or Integrity Car Care Pty Ltd (the second respondent), or both, or to pay him $7,775.09 in compensation for damage and loss he contends he has incurred as a result of a breakdown of his motor vehicle on 12 December 2020. The applicant contends that he is entitled to this order because in supplying an extended warranty to him in relation to the motor vehicle the first and second respondents failed to comply with the guarantee as to acceptable quality contained in s 54 of the Australian Consumer Law (NSW) (ACL(NSW)). Additionally or alternatively, the applicant contends that he was induced into the extended warranty contract by misleading and deceptive conduct of the first and second respondent, contrary to s 18 of the ACL. This application was made to the Tribunal on 21 October 2021 (the application).

2. For reasons set out in greater detail following, the application has been dismissed. The applicant’s reliance upon s 54 of the ACL to provide him with a cause of action is misconceived. That guarantee concerns the supply of “goods” as defined. A warranty is a contract of insurance and is thus a “service” for the purposes of the ACL. The substance of the applicant’s complaint is that the extended warranty was not fit for the particular purpose for which he acquired it. However, his claim is not maintainable under the guarantee as to fitness for a particular purpose in the supply of services found in s 61 of the ACL because contracts of insurance are excluded from the operation of that section by s 63(1)(b) of the ACL. The applicant has not established on his evidence that there was any misleading or deceptive conduct by either respondent in relation to the sale to him of the extended warranty. Nor, for completeness, has he established any misleading and deceptive conduct, or breach of contract, by the first respondent in relation to the repairs it carried out to the motor vehicle, or by the second respondent in the determination of his claims against the extended warranty in relation to these repairs.

Procedural history

3. The application was first listed before the Tribunal on 11 November 2021 in a Group List for Conciliation and Hearing conducted by AVL in a VMR in accordance with NCAT’s COVID-19 Revised Hearing Procedure as it was then in force. At that point only the first respondent was named as a respondent party to the application. Mr Uptar Singh, Service Manager, attended that listing of the application on behalf of the first respondent but there was no appearance by the applicant which resulted in the matter being dismissed.

4. The applicant subsequently filed a re-instatement application which was dealt with by the Tribunal, differently constituted, in chambers on 13 December 2021. The Tribunal was satisfied that the applicant had provided a satisfactory explanation for his failure to appear at the first hearing and granted re-instatement.

5. The reinstated application first came before the Tribunal, differently constituted, in a Group List for Conciliation and Hearing by AVL in a VMR on 17 January 2022. The applicant and Mr Koutzoumis, solicitor, attended that listing of the application. There was no appearance by the first respondent. The matter was not heard on that occasion. It was adjourned to a Special Fixture Hearing. Leave was granted to both parties to be represented in the proceedings. Directions were given to the parties for the filing and exchange of documentary evidence they intended to rely upon at that hearing.

6. It appears that the issue of whether the second respondent was a proper party to the proceedings was raised at this listing of the application, although it is not clear from the Tribunal’s file if this was by the applicant or the Tribunal. In any event, the Tribunal directed the applicant to make any application for joinder of a second respondent by 24 January 2022. It also gave directions for the filing of evidence and submissions in support of any joinder application and any reply to that application. However, no joinder application was made pursuant to these directions.

7. On 10 March 2022 the applicant filed an amended claim which he sought leave to rely on. The amended claim was not considered prior to the first Special Fixture Hearing.

8. The application was listed before the Tribunal, as presently constituted, for a Special Fixture Hearing by telephone in accordance with NCAT’s COVID-19 Revised Hearing Procedure as it was then in force on 25 March 2022. The applicant attended that listing of the application, but despite repeated attempts, his legal representatives (solicitor and barrister) could not be contacted due to technical difficulties. Mr Singh attended that listing on behalf of the first respondent. In the circumstances, the application could not proceed to final hearing. However, three interlocutory issues were dealt with. The applicant was granted leave to rely upon the amended claim filed on 10 March 2022. At the request of the first respondent the second respondent was joined as a respondent party to the proceedings. Further directions were given for the service of the amended claim on the second respondent and for the filing and service of evidence by each of the parties in relation to the amended claim.

Evidence and hearing

9. The applicant relies upon bundles of documents and submissions filed with the Tribunal on 11 January 2022, 2 March 2022, 15 March 2022, 6 May 2022 and 1 June 2022. These were marked Exhibits A1 to A 5 respectively. The first respondent relies on two bundles of documents filed on 21 April 2022 and 10 June 2022. These were marked Exhibits R(1)1 and R(1)2 respectively. The second respondent relies on a bundle of documents filed on 22 April 2022. It was marked Exhibit R(2)(1).

10. The Special Fixture Hearing was conducted by telephone in accordance with NCAT’s COVID-19 Revised Hearing Procedure as it was then in force. Mr P Tiliakos of counsel represented the applicant instructed by Koutzoumis Lawyers. The applicant relied upon informal and formal statements made by him which were incorporated into Exhibits A1, A2 and A4 which were read. He was not required to give evidence. Mr Uptar Singh, Service Manager, attended the hearing on behalf of the first respondent. He gave oral evidence under affirmation.

11. The second respondent initially could not be contacted for the hearing despite repeated attempts. Upon review of the file, I was satisfied that notice of the hearing had been served on the second respondent to its registered address. I therefore proceeded with the hearing in the second respondent’s absence in accordance with Rule 35 of the Civil and Administrative Tribunal Rules 2014. Part way through the hearing the second respondent’s representative, Mr Matthew Sherry, Internal Disputes, contacted the Registry and joined the hearing. He did not object to the hearing continuing. He later gave evidence under affirmation.

12. 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

13. The applicant is the owner of a 2016 model Holden Commodore SS-V Redline V8 Auto Sedan which he purchased for a fixed price from an entity trading as Pickles Auctions on 6 December 2018 for $39,000.00 (the motor vehicle).

14. At the time of purchase the motor vehicle had a subsisting manufacturer’s warranty which had currency until 6 November 2019. The applicant contends that at the time of purchase representations were made to him that he could purchase an extended warranty which would cover repairs to the motor vehicle after the manufacturer’s warranty lapsed. It is not apparent from his amended claim or evidence who he contends made these representations. In his amended claim the applicant refers to these representations as the first representations (first representations).

15. On 9 July 2019 the applicant purchased an extended warranty for the motor vehicle, called an “Absolute Motor Vehicle Warranty”, “Level 4”, from the first respondent at a cost of $2,170.00 (the extended warranty). The applicant contends that at the time he purchased the extended warranty he met with a dealer principal of the first respondent, Mr Dilip Kumar, who represented to him that “the extended warranty would cover [him] for any major motor, engine or electrical issues the motor vehicle could encounter for 36 months up to $10,500.00”. The applicant contends that he purchased the extended warranty based on that representation. In his amended claim the applicant refers to these representations as the second representations (second representations).

16. The extended warranty commenced on 6 November 2019 upon the expiry of the manufacturer’s warranty.

17. The extended warranty incorporates the following terms and conditions:

ABOUT THIS WARRANTY

This warranty has been designed to provide you with protection against unforeseen mechanical failure of your vehicle.

It is important that you regularly maintain your vehicle in accordance with the servicing guidelines outlined in this document, this will ensure that you comply with the servicing requirements of this warranty as well as keeping your vehicle in top driving condition.

…

ABOUT THIS WARRANTY

This Warranty agreement is issued by the Dealership in conjunction with the sale of a motor vehicle and is a contract between the Dealership and the contract holder whose name appears on the schedule. The selling Dealership has appointed Integrity Care Care Pty Lts (ABN 58 056 621 893) to administer this Warranty agreement.

This document contains important information about:

…

• How often you should service your Vehicle;

…

By signing the Schedule, you acknowledge that you agree and fully understand the terms and conditions of this Warranty.

…

This Warranty is designed to provide assistance with the cost of repair or replacement of certain Components and Parts of your Vehicle, due to a Mechanical Breakdown.

…

2 DEFINITIONS

…

Mechanical Breakdown … means the failure of the Components and Parts causing sudden stoppage of their function necessitating repair or replacement and not arising from defects in material and/or workmanship of the Components and Parts.

Normal wear and Tear … means any Components and Parts that naturally and inevitably require replacing as a result of normal wear and tear commensurate with age and mileage of the Vehicle.

…

3. WHAT THE WARRANTY COVERS AND CLAIM LIMITS

We will pay the repair costs for Mechanical breakdown to the Components and Parts that were originally covered by the Manufacturer’s Warranty except those components and parts as described under Section 13 “Exclusions”.

ABSOLUTE MOTOR VEHICLE WARRANTY

…

Level 4 up to market value of the vehicle per claim

…

4. ADDITIONAL BENEFITS

Where a claim in relation to the Mechanical Breakdown of a Component and Part that is authorised by use we will provide the following Additional Benefits where expenses are incurred by reason of that claim:

…

Car Hire

We will reimburse you up to $100.00 per day up to a maximum Claim Limit below for car hire paid by you and reasonably incurred, if the Vehicle is immobilised for more than 2 days

…

Car Hire …………………………………………………….Up to $500 per claim

5. SERVICE REQUIREMENTS

To maintain your Warranty, you are required to service your Vehicle at regular intervals in accordance with the Vehicle Manufacturer’s directions and recommendations.

All services and maintenance must be carried out by a licensed mechanical workshop

…

Please keep a record of your Vehicle’s service history and ensure it shows the date and odometer reading each time your Vehicle is serviced. Integrity will require the Vehicle service invoice and history if you claim under this Warranty.

If you exceed the service requirements intervals by more than 30 days or 1,000kilometres (whichever occurs first), your Warranty becomes inactive, and it may affect your entitlement to make a claim under this Warranty.

…

13 EXCLUSIONS

We will not pay any contribution or claim by you for any of the following:

• Consequential loss - Claims relating to consequential loss of any kind. Loss or destruction of or damage to any property whatsoever or any loss or expense whatsoever resulting or arising therefrom or any consequential loss.

…

• Excluded parts – Any parts that would normally be regarded as adjustments, calibrations, alignment, machining, servicing and/or maintenance related items, brushes, gaskets and seals (unless required to successfully effect the repair of a covered component), fuses, exhaust systems, catalytic converters, particulate filters, rubbers, interior or exterior panel of paint items, trim (including seats), glass, mirrors cables, accessory items, cosmetic vehicle items, suspension systems including airbags and sensors, pulleys and tensioners.

…

• Normal wear and tear – Failure of any Component and Parts caused by Normal Wear and Tear.

…

• Service Breach – Where you exceed the service requirements intervals, the Warranty ceases to have effect …

18. On or about 26 March 2020 the first respondent advised the applicant that the motor vehicle’s shock absorbers required replacement. Upon the applicant’s instruction the first respondent attempted to claim this cost from the second respondent under the extended warranty. The second respondent refused this claim relying upon its “excluded parts” exclusion.

19. The motor vehicle operated normally between 6 December 2018 and 11 December 2020.

20. On 12 December 2020, the applicant was driving the motor vehicle and it experienced a mechanical failure, which required him to pull over and call NRMA roadside assistance. After conducting a short inspection, the NRMA technician recommended the motor vehicle be towed to a motor vehicle repairer. It was towed to the first respondent’s workshop on 14 December 2022.

21. The first respondent’s mechanic inspected the motor vehicle, diagnosed the engine malfunction, and carried out repairs between 12 December 2020 and 22 January 2021.

22. There is a dispute between the parties as to what caused the mechanical failure and the scope of works that was necessary to make the motor vehicle roadworthy. The applicant relies upon an opinion stated in an email by James Chalazia of JDC Automotive dated 30 May 2022. Mr Chalazia does not state his qualifications or experience. His opinion is based upon a review of the first respondent’s invoice dated 22 January 2022 (as to which see following). He opines:

Reviewing the invoice that Arthur has sent me and from his description of the situation in my professional opinion there is not enough conclusive evidence to prove on what the initial cause of failure was. There are multiple scenarios which could have happened first.

Arthur advised me that the intake valve and pushrod were bent meaning that there is a possibility the engine could have jumped timing causing the piston to hit the value and subsequently braking valve spring this is just 1 example of possible scenarios.

On page 1 of the invoice line 4 (upon further inspection found plastic from inlet manifold made its way into the other cylinder head r/hand side) this is another possibility that could have happened on the left hand side which could have also caused failure to the engine.

In my professional opinion the engine as a whole minus accessories should have been covered in the warranty as there was visible damage to the piston (which was not replaced) advised by Arthur also in the invoice there was no mention about testing the structural integrity of the piston and camshaft at a minimum, as these components were directly affected by impact of other failed components i.e. pushrod (which was replaced due to it being bent) and also intake valve which was also bent from impact.

I do believe consequential loss is not a factor in this case as there is no possible way of determining which part or parts was the initial cause of failure and an engine failure should be considered as a whole not as a particular component.

…

23. In its submission dated 10 June 2022 the first respondent (via Mr Singh) states the following as to the cause of the mechanical failure in response to Mr Chalazia’s opinion:

From the evidence that has been submitted by us [the invoice] it is clear that the valve spring has collapsed, and this is identified as the main cause of the noise in engine, physical inspection of the valve spring is enough to identify this issue.

Engine value timing was inspected as part of diagnostic procedure and found to be OK at that time. (Considering the design of these Gen 3 engines no timing chain jumping issue has been reported in part decade).

To make this clearer if the timing jumps it would damage all the pushrods and other part on that bank, in this case only one spring failed. All other springs and pushrods were found to be ok at time of inspection.

Regarding the piston hitting the valve and causing the spring to fail it is not the scenario in this case as the small valve marks found on the pistons suggest that the spring has failed first suspending the value from its guide and touching the piston head, this contact was not enough to damage the piston, so the pistons were not required to be replaced. As there was no damage on the piston this scenario fails.

All other repairs done on this car were done on instruction from the customer, even if these additional parts were not replaced it was possible to get the car back running. Customer instructed us to replace the additional part as a precautionary measure including the plastic inlet manifold. The email evidence of this approval has been submitted …

As per submission from Integrity this whole repair should never have been covered by any warranty due to breach of agreement, but as a gesture of goodwill the parts that have failed were covered by Integrity.

Kumar Motors have conducted repairs as per instructions from the customer and warranty company Integrity.

24. On 22 December 2020 the first respondent provided the second respondent with its quotation for the replacement of the motor vehicle’s valve spring.

25. The second respondent contends that it assessed this claim in accordance with the terms and conditions of the warranty, which included checking if the service history for the motor vehicle complied with the service requirements of the warranty as set out in section 5. The second respondent submits that the manufacturer recommendation for a 2016 Holden Commodore is every 12 months or 12,000kms whichever comes first. However, the second respondent has submitted no objective evidence of this recommendation. The service history provided the second respondent by the applicant showed that the motor vehicle was serviced on 15 November 2019 @ 72,393km and on 30 August 2020 @ 87,513kms, being difference of 15,120km. It concluded on this basis that the applicant had not complied with the manufacturer’s recommended service frequency based on usage by 3,120km.

24. However, this did not result in the second respondent rejecting the claim outright. It made what it contends was a “goodwill” payment of $681.28 (inclusive of GST) for the value spring ($31.28) and labour ($650.00) which was paid to the first respondent on 25 January 2021.

25. In the Customer Copy Tax Invoice issued to the applicant on 22 January 2021 the repair work on the motor vehicle carried out by the first respondent is described as follows:

Work Description

CHECK FOR KNOCKING NOISE FROM ENGINE

Carried out checks for knocking noise from engine

Upon inspection found intake valve spring collapsed on left hand side of engine cylinder heard … removed engine cylinder head as required and sent way for servicing … as required … upon further inspection found plastic from inlet manifold made its way into the other cylinder head r/hand side … removed R/H side cylinder head as required and sent away for inspection and repairs … upon further inspection found inlet manifold internally faulty due to plastic inside manifold … customer has been advised of extra work to be done to vehicle and has authorised to proceed … customer has supplied the majority of the parts 12 that have been required for replacement … reassembled vehicle and checked operations all OK … road test vehicle all OK at time of road test

28. The total invoice cost was $4,111.30. In the section headed payment details $681.28 of that amount was charged to the second respondent and $3,430.02 was receipted from the applicant.

29. It is not in dispute that the applicant supplied the first respondent with some parts it used in the repair which he sourced personally. He had submitted into evidence receipts for the purchase of these parts which total $313.79.

30. While the motor vehicle was off the road undergoing repairs, the applicant hired a replacement motor vehicle between 23 December 2020 and 9 January 2021 at a cost of $1,180.00. He has submitted a receipt for this cost into evidence.

31. On or about 15 January 2021 the applicant submitted a claim to the second respondent for car hire costs. The second respondent contends that it assessed this claim in accordance with the terms and conditions of the extended warranty and approved the claim to the maximum payable under the policy which is $500.00. On or about 18 January 2021 it sent claim reimbursement form the applicant for him to complete. However, the applicant has not completed and returned this form up to the date of the hearing. In his statement dated 6 May 2022 the applicant.

32. The applicant contends that the first respondent carried out the repairs without initially obtaining his consent, and later induced him to believe that the whole repair was to be covered by the extended warranty to obtain his consent to the repairs. In this respect, in his informal statement filed on 2 March 2022 the applicant states:

As it looked like a major issue, I stated to Nick [the service advisor] that I wanted a formal quote before any repairs were commenced. Further to, I did not sign any authorisation for my vehicle to be pulled apart. …

A few days later, Nick called me and advised me that the motor had dropped an inlet valve spring in No 7 cylinder. I said, hang on, where’s my quote and typical of all the service advisors there, he don’t respond.

I, after the fact, gave consent verbally, as I still needed the repair carried out. In my mind, I believed I had the fallback of the extended warranty …

The warranty that I purchased was misrepresented to me, as I asked if it was a Holden extended warranty and the salesman said yes. This was not the case at all. The extended warranty was with Integrity Car Care and they stated that would only pay for the failed component and the labour to repair it. I said what about the other valve springs, they’ve all done the same work. Nick aid No. I said what about the bent inlet valve, the bent pushrod, the potentially damaged roller lifters. He said no they don’t pay for consequential damage. I said I’ve got a warranty that gives me up to $10,500 engine damage cover.

33. The first respondent denies that any work was carried out without the applicant’s agreement or that it represented to the applicant that the work would be funded by the extended warranty. It gives the following account of events in its submissions dated 21 April 2022, which was affirmed by Mr Singh in his oral evidence (paragraph numbers have been added):

2. When diagnosed found 1 valve spring broken and push rod bent

3. We contacted customer and advised him about the fault in the car, customer advised that he has purchased a warranty from independent warranty provider integrity through our company.

4. We then contacted integrity and advised them about the fault, the after investigating the fault agreed to pay for the failed part and labour to replace the failed part only.

5. Mr Arthur Frantzis was informed about this decision, and he authorised us to remove the cylinder heads and check, cylinder heads were removed and sent for inspection, at this stage Mr Frantzi also advised us to replace all the valve springs that he purchased from Total Performance in Melbourne (email authorisation for this work is attached … This additional work was requested by Mr Frantzis and was not part of any repair before this. Mr Frantzis wanted to replace these parts just to make sure another spring doesn’t fail in future.

6. On removal of the cylinder head, it was also found that the part of inlet manifold was broken, customer was advised about this, and he advised us that he will find a second-hand part and supply, we received the secondhand inlet manifold and was fitted to the car.

7. Cylinder heads were received back from the machine shop and were fitted back to the car, engine was started and tested, no fault codes or any issues found after the repair, the car was returned to the customer.

8. Mr Arthur Frantzis was charged $3430.02 for this repair by us….

Integrity was charged $681.28 towards their contribution for this repair …

…

15. We at Kumar Motors have acted as per directions from Mr Frantzis and has not done any unauthorised work on his car.

16. Mr Frantzis requested the old parts to be returned, all these parts were kept in safe place for months, but Mr Frantzis never collected them.

34. The first respondent relies upon two emails sent by the applicant to its service adviser (Nick) dated 4 January 2022, which state

Subject: SSV Redline parts replacement …

Good afternoon Nick,

As per our conversation @ approx. 1350 hrs today, I would like the following parts to also be replaced:

The inlet side rocker arm (no 7 cylinder) All head bolts (As they are torque to yield) Both roller lifters No 7 cylinder.

Please also note, I would like to have any and all parts to be replaced to be returned upon pick up of my vehicle

…

Subject: Parts replacement …

Good afternoon Nick

Further to,

Please also replace all valve springs in the cylinder seals, as per previous conversation.

They will be coming to you direct from Total Performance in Melbourne, and should be with you, all things willing, by tomorrow midday (05/01/21)

…

35. In his statement dated 6 May 2022 the applicant responds to the first respondents’ submissions (set out at paragraph 33 above) as follows:

5. In response to Paragraph 2 of the Kumar Motors’ Evidence, I repeat that at that point in time I had the following conversation with Nick of Kumar:

Me: “I want a formal quote before any repairs are commenced”.

After this, I did not receive any formal quote and I did not sign any authority for the vehicle to be pulled apart.

6. In response to Paragraph 3 of the Kumar Motors Evidence, I say that during the course of that conversation I also said to Nick that:

Me: “I have insurance that I purchased from your company. I was told by your representatives when I purchased that insurance that it would cover me for any major motor, engine or electrical issues the car might suffer for 3 years up to $10,500. I will be claiming the repairs on my insurance”.

Nick: “Yes, that is fine”

7. In response to Paragraph 5 of the Kumar Motors Evidence, I say the matters raised in the first sentence is a complete lie. I found out about these items of work after the fact. I understood that all of the work was being covered by the extended warranty and was never told otherwise.

8. In response to Paragraphs 6 and 7 of the Kumar Motors Evidence, I say that I understood that all of the work was being covered by the extended warranty and was never told otherwise.

36. In relation to the second respondent’s claim that the motor vehicle was not serviced in accordance with manufacture recommendations the applicant appends to his statement of 6 May 2022 a copy of a section of the motor vehicle’s logbook, which is headed “servicing”. That section includes the following statement:

Distance/time based servicing intervals

…

The first scheduled maintenance service is due at 9 months or 15,000km (whichever occurs first) from taking delivery of your vehicle and thereafter, every 9 months or 15,000kms (whichever occurs first).

Based on this statement the applicant contends that he has ensured that the motor vehicle has been services in accordance with the manufacturer’s recommendations.

The applicant’s claim

37. The applicant claims the following compensation:

No.	Description	Amount
1	Refund of the cost of the extended warranty	$2,170.00
2	Refund of the close of the repairs carried out by the first respondent	$4,111.30
3	Compensation for the cost of parts supplied to the first respondent for the repairs	$313.79
4	Compensation for the cost of hire car fees for part of the period the motor vehicle was off the road	$1,180.00
TOTAL	$7,775.09

Contentions of the parties

38. The applicant contends that in supplying the extended warranty to him the first and second respondents failed 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)). He contends this was because the extended warranty was not fit for the purpose for which goods of that kind are commonly supplied: that purpose being to fund the cost of any necessary repairs to the motor vehicle during its period of currency. The applicant also contends that the contract for the extended warranty ought to be set aside because he was induced into it by the first and second respondents’ misleading and deceptive conduct contrary to s 18 of the ACL. In this respect he contends that in deciding to buy the extended warranty he relied upon the first and second respondents’ representations to him that any necessary repairs to the motor vehicle would be covered by it during its period of currency.

39. The first and second respondents deny that they misled the applicant as to the terms of the extended warranty. The first respondent denies that it carried out the repairs to the motor vehicle without the applicant’s consent, or that it represented to him during the repairs that they were being covered by the warranty. The second respondent denies that the allegation that it failed to consider the claims made by the applicant under the extended warranty in accordance the terms and conditions of the warranty.

Jurisdiction

40. 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. By operation of s 28 of that Act, the ACL(NSW) is made part of the law of NSW and may be applied in the determination of a consumer claim.

Applicable law

41. Chapter 2 of the ACL(NSW) contains several general protections for consumers in trade and commerce, including, in s 18, a prohibition on misleading and deceptive conduct. Section 18 provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

42. In Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [10] Gordon J (as she then was) summarised the principles to be applied in determining if conduct is misleading and deceptive for the purposes of section 52 of the former Trade Practices Act 1974. Those principles have equal application to section 18 of the ACL and are stated following (references omitted):

1. A contravention of s 52(1) of the TPA is established by “conduct” which is misleading or deceptive or likely to mislead or deceive. The “conduct”, in the circumstances, must lead, or be capable of leading, a person into error and the error or misconception must result from “conduct” of the corporation and not from other circumstances for which the corporation is not responsible. “Conduct” is likely to mislead or deceive if there is a “real or not remote chance or possibility regardless of whether it is less or more than fifty per cent”.

2. Section 52(1) is concerned with the effect or likely effect of “conduct” upon the minds of that person or those persons in relation to whom the question of whether the “conduct” is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself. Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests. Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context.

3. “Conduct” can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive.

4. By making a statement of past or present fact, a corporation’s state of mind is irrelevant unless the statement involved the state of the corporation’s mind. Contravention of s 52(1) does not depend upon the corporation’s intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false.

5. Precisely the same principles control the operation of s 52(1) to statements involving the state of mind of the maker when the statement was made (e.g. promises, predictions and opinions). A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind.

6. A statement of opinion will not be misleading or deceptive or likely to mislead or deceive merely because it turns out to be incorrect, misinforms or is likely to do so. An incorrect opinion does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation. An expression of an opinion which is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion however erroneous misrepresents nothing.

7. However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene s 52 of the TPA.

43. 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”.

44. 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.

45. There are some exceptions to the guarantee as to acceptable quality which are found in s 54(4) to (7). None of these exceptions are relevant in this case.

46. Subdivision B contains guarantees in relation to the supply of services, including in s 61, guarantees as to fitness for a particular purpose. It relevantly provides:

61 Guarantees as to fitness for a particular purpose etc

(1) If:

(a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and

(b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer;

there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose

(2) If:

(a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and

(b) the consumer makes known, expressly or by implication, to:

(i) the supplier; or

(ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made;

the result that the consumer wishes the services to achieve;

there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.

(3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier.

…

47. However, s 63 of the ACL(NSW) provides that s 61 does not apply to a contract of insurance:

63 Services to which this Subdivision does not apply

(1) This Subdivision does not apply to services that are, or are to be, supplied under:

…

(b) a contract of insurance

48. The terms “goods” and “services” are defined for the purposes of the ACL in s 3 as follows:

“goods” includes:

(a) ships, aircraft and other vehicles; and

(b) animals, including fish; and

(c) minerals, trees and crops, whether on, under or attached to land or not; and

(d) gas and electricity; and

(e) computer software; and

(f) second-hand goods; and

(g) any component part of, or accessory to, goods.

“services” includes:

(a) any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce; and

(b) without limiting paragraph (a), the rights, benefits, privileges or facilities that are, or are to be provided, granted or conferred under: 20

…

(iv) a contract of insurance

49. Subdivision A sets out the action available to a consumer in relation to a supplier of goods. In this respect, s 259 relevantly provides:

259 Action against suppliers of goods

(1) A consumer may take action under this section if:

(a) a person (the supplier) supplies, in trade or commerce, goods to the consumer; and

(b) a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2) … is not complied with.

(2) If the failure to comply with the guarantee can be remedied and is not a major failure:

(a) the consumer may require the supplier to remedy the failure within a reasonable time; or

(b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time – the consumer may:

(i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or

…

(4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.

50. 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.

51. “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.

52. 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.’

Consideration

53. To determine the outcome of this application the Tribunal must pose and answer the following questions:

1. Is the extended warranty a “good” or a “service” for the purposes of the ACL?

2. If it is a “service”, does the applicant have a maintainable cause of action under s 61 of the ACL in the alternative to s 54?

3. Should the contract for the purchase of the extended warranty be set aside because the applicant was induced into it by misleading and deceptive conduct by the first respondent and/or the second respondent?

4. Was there any misleading and deceptive conduct or breach of contract by the first respondent in relation to the repairs?

5. Was there any breach of contact by the second respondent in relation to its assessment of the claims made by the applicant under the extended warranty?

6. Having regard to the answers to these questions what remedy, if any, is the applicant entitled to.

54. I am not satisfied that the extended warranty is “goods” for the purposes of the ACL having regard to the definition contained in s 3. Although it is a non-exclusive definition, all the examples of goods that are included in the definition are tangible items. A warranty is a chose in action. It confers a right to receive a benefit which is activated by the submission of a claim. It is thus a “service” within the meaning of paragraph (a) of the ACL definition, being a right conferred in trade and commerce.

55. More specifically, I am satisfied that the extended warranty is a contract of insurance for the purposes of that definition. In this respect the term “contract of insurance” is not defined in the ACL(NSW) and should be given an ordinary meaning. A contract of insurance is a form of guarantee of compensation for specified loss or damage in return for payment of a specified premium. The extended warranty clearly falls within the scope of that ordinary meaning.

56. That being the case, the application, insofar as it relies upon the guarantee as to acceptable quality in the supply of goods contained in s 54 of the ACL(NSW) must be dismissed on the basis that it is misconceived. The extended warranty is not “goods” and therefore does not attract the operation of that section.

57. I have considered if the applicant has an alternative cause of action in s 61 of the ACL(NSW). However, by operation of s 63(1)(b) of the ACL(NSW) contracts of insurance are excluded from the operation of the purpose and result guarantees in the supply of services found in that section, so this cause of action is not available.

58. Even if I were to be wrong in that conclusion, I am not satisfied that the first or second respondent failed to comply with the purpose and result guarantees when they supplied the extended warranty to the applicant.

59. On any reasonable objective view the “purpose” and the “result” the applicant sought from the supply of the extended warranty was an extension of the motor vehicle’s manufacturer’s warranty for a 36-month period. None of the parties have placed the manufacturer’s warranty into evidence. However, in general terms it may be taken to have provided a warranty in relation to mechanical failure caused by defective components. That is what the extended warranty provided to the applicant. A manufacturer’s warranty does not indemnify against the cost of maintenance which is necessary or desirable because of wear and tear, just as it does not indemnify against damage to the motor vehicle arising from misuse or accident.

60. In this case, I am satisfied that the motor vehicle’s mechanical failure was caused by a defective part, being a collapsed valve spring. The first respondent recommended that parts and labour associated with the replacement of the valve spring be covered by the warranty and the second respondent approved the claim insofar as it concerned the valve spring.

61. I accept the first respondent’s evidence that the remainder of the repair work it carried out was not necessary to remedy the mechanical failure caused by the collapsed valve spring. It was, in effect, preventative maintenance work requested by the applicant due to wear and tear in other components. This is not work covered by a manufacturer’s warranty. I do not accept Mr Chalazia’s opinion that the applicant was entitled to the replacement of all and any engine part under the extended warranty because the cause of the mechanical malfunction was uncertain. Mr Chalazia did not inspect the motor vehicle or the repairs. His opinion is speculative. I prefer the opinion of the first respondent which did inspect the motor vehicle and diagnose the mechanical failure.

62. Insofar as the applicant relies upon s 18 of the ACL(NSW) he appears to contend:

1. That he was induced to purchase the extended warranty based upon misleading and deceptive representations made about its scope; and

2. He was induced to authorise the repairs carried out by the first respondent based upon misleading and deceptive representations made by the first respondent’s service advisor that all the work was being covered by the extended warranty.

63. I cannot grasp the basis upon which the applicant contends the first representations constituted misleading and deceptive conduct by either the first or the second respondents. He does not identify who made those representations and as the motor vehicle was purchased at Pickles Auctions it obviously was not any representative of either respondent. In any event, the applicant did not purchase the extended warranty at that time based on the first representations.

64. The second representations were made by an officer of the first respondent, but it is difficult to grasp the basis upon which the applicant says those representations were misleading and deceptive. If the applicant thought he was purchasing an extended warranty from Holden, I am satisfied that was a mistake of his own invention, rather than the result of a representation made to him by Mr Kumar. The applicant was self-evidently purchasing an extended warranty because the Holden manufacturer’s warranty was about to lapse. Moreover, he had all the documentation concerning the warranty in front of him before he signed the purchase agreement. That documentation clearly identifies who is providing and who is administering it.

65. The specific statement made by Mr Kumar which the applicant contends was misleading or deceptive, even if it was said in exactly that form, is not on any reasonable objective view misleading and deceptive once it is put in context. The applicant was purchasing an “extended warranty” which extended the period of operation of the manufacturer’s warranty. The warranty was being provided on terms equivalent to the manufacturer’s warranty.

66. As I have already stated, a manufacturer’s warranty covers mechanical failure caused by defective components. I am satisfied that the statement the applicant attributes to Mr Kumar means no more than that. In any event, the applicant had all the documentation that set out what was covered by the extended warranty in front of him before he signed the purchase agreement. If he did not read it, and if he did not make reasonable enquiries about it, he acted unreasonably. Section 18 does not protect consumers who fail to take basic steps to protect their own interests.

67. I do not accept the applicant’s evidence that the first respondent’s service advisor represented to him that the whole of the repair being carried out was covered by the extended warranty. That evidence is inconsistent with the objective facts and surrounding circumstances. The applicant sourced and paid for some parts used in the repair. That is inconsistent with a genuine belief that the whole of the work was being covered by the extended warranty.

68. As already stated, other than the replacement of the collapsed valve spring, I have accepted the first respondent’s evidence that the other repairs were not necessary to make the motor vehicle roadworthy but were preventative maintenance work requested by the applicant. That evidence is corroborated by the emails the applicant sent the first respondent on 4 January 2022. I note that there is no reference in those emails to the authorisation of the work being subject to it being covered by the extended warranty. If the work was being covered by the extended warranty a situation would not arise where the applicant would be asked to approve the work. He was asked to do so because he would be responsible for its payment. The applicant could not reasonably have held a genuine belief that all and any repair or maintenance to the motor vehicle would be covered by the extended warranty, because his claim for the replacement of shock absorbers had been refused in March 2020.

69. For the foregoing reasons, there is no basis upon which either the contract for the purchase of the extended warranty, or the contract for the repair, should be set aside on the basis that the first or second respondent engaged in misleading or deceptive conduct. They did not.

70. I have also considered if the applicant has any cause of action against the first or second respondents in contract. I have concluded that he does not. The motor vehicle was towed to the first respondent because of a mechanical breakdown for inspection, diagnosis, and repair. The first respondent could not quote the cost of this work without inspection or diagnosis. That required inspection and diagnosis work to be commenced before the provision of any quotation for the work to the applicant. I thus do not accept the applicant’s contention that he did formally approve any dismantling of the engine. If he did not approve inspection and diagnosis, there would have been no reason for the motor vehicle to be towed to the first respondent. It would have been towed to a storage facility. After diagnosis, it is clear from the applicant’s emails of 4 January 2021 that the first respondent did discuss the repairs with the applicant and sought his approval for the work, which the applicant gave. The applicant cannot be heard to say in the face of this evidence that he did not know these repairs were being carried out, or that he objected to them.

71. I am thus satisfied that the first respondent offered to inspect, diagnose, and repair the motor vehicle, and that this offer was accepted by the applicant. That’s why the motor vehicle was towed to the first respondent and why the first respondent inspected and diagnosed the mechanical failure. I am prepared to accept that the scope of repair was subject to further agreement between the applicant and the first respondent. But this is what occurred. After diagnosis, I am satisfied that the first respondent offered a scope of work for the repair and that this was accepted by the applicant as is evident from his emails of 4 January 2021. A binding contract thus existed between the applicant and the first respondent which required him to pay for the work carried out by the first respondent.

72. With respect to the second respondent, I accept the applicant’s evidence as to the manufacturer’s recommended service intervals for the motor vehicle. He has submitted a copy of the relevant section of the motor vehicle’s logbook which demonstrates that he has serviced the motor vehicle as recommended. The second respondent has not produced into evidence the manufacturer recommendations it contends for. The contention rests on a bare assertion.

73. I am thus satisfied that the extended warranty was not voided by any failure of the applicant to service the motor vehicle in accordance with the manufacturer’s recommendations. The second respondent was thus contractually obliged to cover the cost of replacement of the collapsed valve spring. But it did so in any event as a purported “goodwill payment”. If there was a breach of contract, the applicant suffered no loss because of it. The applicant’s claim for hire car costs was approved by the second respondent up to the maximum amount payable under the extended warranty. It has not been paid because the applicant has failed to submit the necessary forms. That cannot constitute a breach of contract by the second respondent.

Orders

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

1. The application is dismissed.

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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

19 September 2023 - Formatting amendments.

Decision last updated: 19 September 2023