Godber v Integrity Car Care ACN 056 621 893 (Civil Dispute)
[2022] ACAT 11
•15 February 2022
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
GODBER v INTEGRITY CAR CARE ACN 056 621 893 (Civil Dispute) [2022] ACAT 11
XD 55/2021
Catchwords: CIVIL DISPUTE – whether a warranty for motor vehicle parts was unfair in its drafting – whether the relevant term was not transparent
Legislation cited: Australian Consumer Law ss 23, 24, 25, 27
Texts/papers cited: Alex Bruce, Consumer Protection Law in Australia (LexisNexis Buttersworth, 2014)
Tribunal:Senior Member A Anforth
Date of Orders: 15 February 2022
Date of Reasons for Decision: 15 February 2022
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 55/2021
BETWEEN:
BRETT GODBER
Applicant
AND:
INTEGRITY CAR CARE ACN 056 621 893
Respondent
TRIBUNAL:Senior Member A Anforth
DATE:15 February 2022
ORDER
The Tribunal orders that:
The respondent is to pay the applicant the sum of $415.42 on or before 15 March 2022.
………………………………..
Senior Member A Anforth
REASONS FOR DECISION
The applicant purchased a second-hand car and on 29 June 2020 took out a warranty with the respondent to cover the costs of replacement of parts should the need arise. The particular warranty was called an “Endurance warranty – Option A – Comprehensive – 12 months”.
Background
On 14 July 2020 the applicant’s car suffered auto electrical problems resulting in a flat battery. He had the car serviced by auto electricians who replaced two relay switches on the cooling system within the air-conditioning system. They reported:
Investigate cause for battery going flat over night. Found radiator fan remaining on despite A/C off, ignition off, coolant temperature below start up threshold. Investigated A/C and management system, including control modules, A/C compressor clutch assembly, relays, fuses and wiring. Upon removing A/C compressor clutch and coolant temperature fan relay control, systems ceased. Likely one or both relays are intermittently staying closed. Replace relays, cleared Diagnostic Trouble Codes and tested. All working as designed.[1]
[1] Applicant’s application lodged 25 January 2021
On 15 July 2020 the applicant lodged a claim with the respondent for the costs of the invoice from the auto electricians in the sum of $338.42.
The respondent denied the claim on the basis that the relay switches were not parts that were within the coverage of the warranty. Clause 4 of the warranty defines the comprehensive cover that the applicant elected. It read:
If the type of cover selected on your Schedule is Comprehensive the Components and Parts covered are listed on the opposite page (page 7) and we will pay the cost of repair or replacement up to the Claim Limits listed below for the Plan selected on your Schedule.[2]
[2] Respondent’s response lodged 28 July 2021
The list referred to contained an entry for ‘cooling system’ with a limit of $350 for ‘Plan A’, and an entry for air-conditioning for the same amount.
On the next page, for comprehensive cover, there were the following entries:
Cooling system – water pump, cooling fan and fan clutch
Air conditioning – Compressor, compressor clutch, dual zone evaporator and condenser.[3]
[3] Respondent’s response dated 28 July 2021
The respondent took the view that the relay switches governing the temperature coolant control did not fall within any of the descriptions in paragraph 6 above. The applicant disagreed.
On 23 January 2021, the applicant lodged a civil dispute claim with the tribunal pleading a breach of contract by the respondent. He claimed the sum of $440 plus the $77 for the Tribunal lodgement fee.
The applicant annexed the invoice for $338.42 and the short report of 14 July 2020 from CWC Auto Services Pty Ltd, auto electricians, referred to above.
On 28 July 2021 the respondent filed its response. The respondent annexed a copy of the warranty and the applicant’s application for the warranty.
The hearing
The matter was listed for hearing by telephone on 1 October 2021. The applicant appeared in person and Mr Mathew Sherry appeared for the respondent.
The Tribunal put its understanding of the issue in dispute to the parties, who agreed.
The applicant gave evidence that he had in fact received the warranty policy in a booklet form. He said he had read through it before signing it.
The Tribunal took the parties to sections 23 and 24 of the Australian Consumer Law (ACL) which relates to the use of standard form contracts and any lack of transparency in them. The Tribunal put to the respondent that the warranty was a standard form contract and that it contained ambiguous or unclear content. In particular, clause 4 of the warranty referred to coverage of ‘systems’ within the car rather than individual parts within the car. This included the ‘cooling system’ and the ‘air conditioning’ system. Then, on the next page, the same language was used again, i.e. a reference to ‘systems’ in the car. It is only there that the specification of ‘water pump, cooling fan and fan clutch’ appeared.
It was put by Mr Sherry that the warranty did not relate to the performance of the ‘systems’ as such, but only to specified parts within a ‘system’, which in the present case was the ‘water pump, cooling fan and fan clutch’. It was his position that if the cooling system failed for any reason other than a defect in one of these specific parts, then the warranty to did not cover the non-functioning cooling system. In the present case, the cooling system did not work but the specific defect was in the fan relay switch and not in the cooling fan itself.
The Tribunal put to him that this was a very fine distinction that was almost certain to escape anyone other than an auto electrician and certainly would escape the ordinary person likely to take out the policy. Mr Sherry disagreed.
Mr Sherry argued that the terms of the warranty were clear on its face in limiting liability to the specific defective part only and not to defective systems. The Tribunal suggested that it was open to the respondent to have to put some clear warnings to prospective clients in the form of a black box warning or otherwise drawing attention to the respondent’s interpretation of its warranty.
The Tribunal pointed out to the parties that the amount in dispute was small and a consideration of proportionality was relevant to how the matter was finalised. The Tribunal told Mr Sherry that it was satisfied that sections 23 and 24 of the ACL applied. In light of these findings, the respondent was given an opportunity at hearing to settle the matter without admission of liability or proceed with the hearing with the prospect of published reasons. Mr Sherry declined the opportunity to settle the matter. Tribunal then gave the parties a couple of weeks to obtain any advice they wished on the ACL issue and file submissions on that point.
On 13 October 2021, the respondent filed its submissions which, with one exception, only replicated its previous arguments. The new argument was as follows. Page 1 of the warranty contains the following:
This Warranty agreement is issued by the Dealership in conjunction with the sale of a motor vehicles and is a contract between the dealership and the contract holder whose name appears on the Schedule. The selling Dealership has appointed Integrity Car Care Pty Ltd (ABN 58 056 621 to administer this Warranty agreement.[4]
[4] Respondent’s response dated 28 July 2021
The respondent argued that this fact precluded the application of the ACL to its conduct. The suggestion was that the applicant should have joined the car dealership in the claim as the party with whom the contract existed.
This was the first time this argument was raised by the respondent and the amount in issue did not justify relisting the matter for further hearing on that point.
The Tribunal notes clause 13 of the warranty which deals with complaints about decisions by the respondent. This clause provides that it is the respondent that will make any relevant decision and will consider any relevant complaints. There is no reference to the dealership. Clause 13 then goes on to inform the policy holder of their right to seek review by the Office of Fair Trading in their state or territory.
It is not apparent to the Tribunal how Fair Trading would obtain this jurisdiction other than via the ACL.
Australian Consumer Law
The Tribunal is satisfied that a contract of insurance existed between the applicant and the respondent that was separate and distinct to the contract for the purchase of the car from the dealer and so the ACL applies.
Sections 23, 24 and 25 of the ACL provide:
23 Unfair terms of consumer contracts and small business contracts
(1)A term of a consumer contract or small business contract is void if:
(a)the term is unfair; and
(b)the contract is a standard form contract.
(2)The contract continues to bind the parties if it is capable of operating without the unfair term.
(3)A consumer contract is a contract for:
(a)a supply of goods or services; or
(b)a sale or grant of an interest in land;
to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.
…
24 Meaning of unfair
(1) A term of a consumer contract or small business contract is unfair if:
(a)it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
(b)it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
(c)it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
(2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following:
(a)the extent to which the term is transparent;
(b)the contract as a whole.
(3) A term is transparent if the term is:
(a)expressed in reasonably plain language; and
(b)legible; and
(c)presented clearly; and
(d)readily available to any party affected by the term.
(4) For the purposes of subsection (1)(b), a term of a contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.
25 Examples of unfair terms
Without limiting section 24, the following are examples of the kinds of terms of a consumer contract or small business contract that may be unfair:
(a)a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract;
The present warranty is a consumer contract for the supply of a service that was intended to be used entirely for domestic purposes.
It was in a standard form in the sense that it was the policy used by the respondent on a take it or leave it basis.[5] Section 27 of the ACL provides a rebuttable presumption that a contract is in standard form unless the proponent of the contract proves otherwise:
[5] Alex Bruce, Consumer Protection Law in Australia (LexisNexis Buttersworth, 2014) at [7.5]
(1) If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a standard form contract unless another party to the proceeding proves otherwise.
(2) In determining whether a contract is a standard form contract, a court may take into account such matters as it thinks relevant, but must take into account the following:
(a)whether one of the parties has all or most of the bargaining power relating to the transaction;
(b)whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties;
(c)whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented;
(d)whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1);
(e)whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction;
(f)any other matter prescribed by the regulations.
Conclusion
The respondent in the present case did not resist the Tribunal’s characterisation of the warranty as a standard form contract.
The limitation in the warranty to specific defective parts as opposed to defective systems, is not transparent and is accordingly void. The remainder of the warranty is then one for defective systems specified in the warranty and hence the applicant is entitled to succeed.
It is not apparent how the applicant arrived at the figure of $440. The evidence before the Tribunal is that he paid $338.42 plus $77 lodgement fee giving a total of $415.42. This is the amount I have awarded.
………………………………..
Senior Member A Anforth
| Date of hearing: | 1 October 2021 |
| Applicant: | In person |
| Respondent: | Mr M Sherry, authorised representative |
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