Liu v Zaccaria trading as Precision Automotive Engineers

[2017] NSWCATCD 59

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Liu v Zaccaria trading as Precision Automotive Engineers [2017] NSWCATCD 59
Hearing dates:	13 April 2017 and 6 June 2017
Decision date:	19 July 2017
Jurisdiction:	Consumer and Commercial Division
Before:	B Shipp, Senior Member
Decision:	1. The Respondent is to pay the Applicant the sum of $21,885.00 on or before 13 August 2017.
Catchwords:	Motor vehicle repair - Australian Consumer Law – duty to provide services with due care and skill – breach of consumer guarantee – expert evidence – measure of compensation.
Legislation Cited:	Fair Trading Act 1987 (NSW) Australian Consumer Law
Cases Cited:	Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; Pownall v Conlon Management Pty Ltd (1995) 12 WAR 370; Mayne Nickless Ltd v Crawford (1992) 59 SASR 490; Read v Nerey Nominees Pty Ltd [1979] VR 47
Category:	Principal judgment
Parties:	Applicant: Mr Yang Liu Respondent: Mr Anthony Zaccaria trading as Precision Automotive Engineers
Representation:	The Applicant in person The Respondent in person
File Number(s):	MV 16/55470
Publication restriction:	Nil

REASONS FOR DECISION

Background and Jurisdiction

1. The Applicant is the owner of a HINO FM1J Ch1-1WD Tipper truck (the truck). The truck had engine problems in July 2016, and he took it to the Respondent to be repaired. The Respondent completed the repairs in early September 2016.

2. The Applicant claims the truck again broke down while driving it in late October 2016 after having driven it only 550 kilometres since the Respondent’s work. He returned the truck to the Respondent who arranged for the installation of a reconditioned engine. He returned the truck to the Respondent in December 2016 and he has had no trouble with it since that time.

3. He had to pay $17,500 for the reconditioned engine and a further $10,000 to the Respondent. The Respondent declined to do this work under warranty.

4. The Applicant claims he was put to the above additional costs as a result of the failure to properly repair the truck when it was first taken to the Respondent. He seeks reimbursement of these amounts.

5. The Tribunal's Consumer and Commercial division has jurisdiction in relation to matters arising under various legislation including the Consumer Claims Act 1998 (NSW)(CCA) which in turn may raise issues rights under the Australian Consumer Law (ACL). This jurisdiction and the legislative provisions have now been transferred to Part 6A of the Fair Trading Act, and that it is the applicable legislation as this application has been lodged after these changes took effect.

6. The ACL was incorporated into the law of New South Wales by section 28(1) of the Fair Trading Act 1987 (NSW) ('FTA'). The ACL (NSW) consists of Schedule 2 of the Competition and Consumer Act 2010 (Cwth), and the regulations under section 139G of that Act (FTA section 27).

7. The ACL applies to create rights at law in consumers that fall within the terms of the ACL including the consumer guarantee provisions in sections 54-57 of Part 3-2 ACL. Whilst the ACL creates a cause of action at law and a range of remedies for parties, it does not of itself confer any jurisdiction on this Tribunal to hear those actions and provide those remedies.

8. Section 79J FTA gives the Tribunal jurisdiction to hear claims falling under the FTA. Section 79D of the FTA defines a 'consumer' to include a natural person to whom a supplier has supplied or agreed to supply goods or services, whether under a contract or not. The Applicant meets this description.

9. The claim arises from the supply of services to the consumer (under a contract or not), and constitutes a claim by the consumer for the payment of a specified sum of money (FTA section 79E). The goods to which the claim relates were supplied in NSW (FTA section 79K). The claim was made within the period of time allowed in Section 79L FTA.

10. The claim is therefore one maintainable under the FTA but as such is subject to the Tribunal's monetary jurisdiction which is limited by section 79S FTA to making orders for the payment of no more than the prescribed amount. The Applicant’s claim is within the monetary limits prescribed.

Proceedings

11. The matter was heard by me over 2 days on 13 April 2017 and 6 June 2017. The Applicant appeared in person on both occasions with a Mandarin interpreter. The Respondent also attended in person. Evidence was given by both the Applicant and the Respondent on 13 April 2017. Both gave their evidence on affirmation. The matter was adjourned part-heard. On 6 June 2017, evidence was given by the experts for the Applicant and the Respondent – Mr Greg Organ and Mr Geoff Senz respectively. The Tribunal also took further evidence from the Applicant as a consequence of some evidence provided by Mr Senz. The experts gave evidence on oath. At the completion of the hearing on 6 June 2017, I reserved my decision.

Issues

12. The Issues in this matter are:

1. Has the Respondent breached its obligation under the Australian Consumer Law to provide services to the Applicant with due care and skill?

2. If so, what is the amount of the Applicant's loss?

Applicant’s Evidence

13. The Applicant relied on the following evidence:

• His Affidavit dated 12 February 2017

• Quotation from the Respondent dated 2 September 2017

• A series of photographs

• Invoice for towing dated 27 October 2016.

• Repair estimate from City Hino dated 1 November 2016.

• Towing Invoice dated 28 November 2016.

• Invoice from SMS Diesel Spares dated 9 December 2016

• Respondent’s Invoice dated 19 December 2016.

• Expert Report of Mr Gregory Kenneth Organ dated 23 January 2017.

14. The Applicant provides the following material evidence.

15. He purchased the truck in April 2016 from Truck City.

16. At the end of July 2016, he noticed the truck engine oil had turned milky in colour. He located the Respondent who operates a diesel motor repair shop and who agreed to do any necessary repair work. He drove the truck over to the Respondent’s premises.

17. Mr Zaccaria inspected the truck and stated he could repair it for $9,000 to $11,000. The Applicant agreed and left the truck at the Respondent’s workshop

18. One week later, Mr Zaccaria called the Applicant and stated there was damage to one piston and it would cost a further $3,000. Two weeks later Mr Zaccaria called and stated he had fixed the engine and road tested it but there was something wrong. After taking the engine apart, he found another three cylinders were damaged. The Applicant told him to “fix it but before you do any work give me a quotation for the extra work”. Mr Zaccaria agreed.

19. Mr Zaccaria called him at the end of August 2016, indicating the truck had been fixed and it will cost $24,000. He had not provided the extra quotation as promised.

20. On 2 September 2016, the Applicant went to the workshop to collect the truck. Mr Zaccaria gave him an invoice for $23,370. The Applicant complained that this was not in accordance with the previous discussions and was excessive. Mr Zaccaria agreed to reduce the invoice to $21,800, which the Applicant paid. The Respondent signed the Invoice and wrote “I guarantee my work. I have given you as 6 months’ warranty on the repair job”. The Respondent told him this covers all labour and parts.

21. On 27 October 2016, the truck broke down on the Hume Highway at Campbelltown. Oil was leaking from the damaged engine. He arranged for GRS Towing to tow the truck to City Hino because he was unable to contact the Respondent. He paid $660 for this tow job. The vehicle had travelled only 550 kilometres since he collected it on 2 September 2016.

22. He eventually contacted the Respondent who agreed to inspect the truck at City Hino.

23. City Hino quoted him $49,100 for labour and parts necessary to complete repairs.

24. The Respondent then contacted the Applicant indicating he had inspected the truck and he wanted to meet with him. The Respondent quoted him $43,000 to replace the engine with a new engine in a similar truck ($31,000 for the engine and $12,000 for other parts and labour). The Applicant indicated this was too expensive, and the Respondent should be liable under the warranty he had provided. The Respondent than offered not to charge him for the labour. The Applicant did not accept this. The Respondent than offered to supply and fit the engine for a total price of $31,000. The Applicant agreed.

25. 3 weeks later, the Applicant found out the new engine was ready, and the Applicant arranged to tow the truck from City Hino to an address provided by the Respondent. This cost $550.

26. One week later, Mr Zaccaria told the Applicant the engine was ready. The Applicant agreed to collect it from SMS Diesel Repairs, but when he got there he discovered it was reconditioned not new. Mr Zaccaria said he could only get a reconditioned engine. Because he had waited so long, the Applicant agreed to have the reconditioned engine fitted. He paid $17,490 for this engine and took it to the Respondent’s workshop.

27. After one further week, the Respondent called to indicate the engine was fitted and ready to collect. The Respondent indicated he would be charging a further $10,000 for fitting the engine. The Applicant stated he should not be liable because it should have been repaired under the warranty. Mr Zaccaria stated he would not return the truck unless the Applicant paid the $10,000. The Applicant eventually paid the $10,000 to recover possession of the truck.

28. On the basis of the above matters, the Applicant seeks reimbursement for the following costs:

1. Cost of replacement diesel motor      $17,490

2. Labour costs               $10,000

3. Towing costs x 2            $ 1,210

4. Expert technical report         $ 675

5. $29,375

29. The Applicant submits that the Respondent failed in his duty to properly service his vehicle because he did not properly service the cylinder head (despite charging him for this service). He makes reference to the last line of the report from SMS Diesel Spares dated 9 April 2017 contained in the Respondent’s documents. That letter states:

“ … work carried out for [the Respondent] as requested by the customer …:

Hino J08CT Cylinder Head

Crack test the face of the head using white contrast paint and black magnetic ink and by putting a magnet across the face of head, no cracks found in face of the head.

Mount head on pressure tester and pressure test head, no water leaks found.

Vacuum test valve seats to check valve seats are sealing, found to be acceptable.

Head thickness checked and found to be 9 thou (sic) off standard thickness, customer advised.

As the customer did not want a full inspection and service of the cylinder head, the head was not disassembled and fully inspected, only the requested work was carried out.”

30. The Applicant suggests that the Respondent’s lack of care in completing the September repair job led directly to the breakdown on 27 October 2016. He notes that the car lost power when travelling at 100 kph, and this was very dangerous.

31. The Applicant also suggests the Respondent (or those working on his behalf) broke one of the parts when he disassembled the engine.

32. The Applicant relies on the findings and conclusions of the expert witness Mr Greg Organ, whose evidence is set out below.

Respondent’s Evidence

33. The Respondent relied on the following evidence:

• His statement

• Quote obtained for another customer for similar reconditioned engine from January 2016

• Repair Estimate for Applicant’s vehicle from City Hino dated 1 November 2016

• His Invoice for $25,370 dated 2 September 2016, and another Invoice of the same date (apparently for the same work) for $24,000

• His Invoice dated 19 December 2016 for $10,122

• A quotation from SMS dated 6 December 2016 for $17.490

• Installation Procedures, Warranty Terms and Conditions for the reconditioned engine.

• Some correspondence between him and the Applicant’s solicitor, and the Applicant’s expert witness Mr Organ regarding inspection of the engine

• Letter from SMS dated 9 April 2017.

• Report of Mr Geoff Senz (expert witness) dated 10 April 2017.

34. Mr Zaccaria provided the following material evidence (drawn from his written statements and oral evidence):

The August 2016 repair

1. He first met the Applicant on 2 August 2016 when the latter parked his truck near the Respondent’s premises. The Applicant stated there is a problem with the oil, and Mr Zaccaria checked the dipstick. There was a frothy, milky substance coming out of the dipstick tube.

2. He told the Applicant that he needed a reconditioned engine to properly repair the truck. He showed the Applicant a quote he had obtained for a reconditioned engine for a another customer needing a Hino engine. This was for $42,000 plus other parts needing replacing.

3. The Applicant stated he could not afford this and asked for a cheaper solution. Mr Zaccaria told him he can try to repair it, but it will still be “an old engine”. He suggested initially removing the cylinder head. If it is not cracked, it is likely it will cost $9,000 to replace gaskets, filters and oils. The Applicant agreed to this.

4. He told the Applicant he could not work on the truck at his premises due to other work he had at that time. He suggested taking the truck to another mechanic – Charlie’s Automotive – who also has experience with heavy vehicles. Mr Zaccaria recommended his work. The Applicant agreed to this, locked the truck and left the keys with him.

5. He spoke to the other mechanic Charlie who told Mr Zaccaria that the Applicant “would be better off” replacing the engine with an “exchange reco unit”. Mr Zaccaria stated he had told the Applicant the same information but “he claims he had no money”.

6. He drove the truck to Charlie’s the next day and left it there. Charlie removed the radiator, water pump, turbo, wiring and tubes and cylinder head. Mr Zaccaria then went to Charlie’s to inspect the truck. The radiator was leaking from the core, the water pump was cracked and the piston and liner showed severe scuffing due to extreme overheat. The engine sump was drained and removed. Number 5 piston and cylinder liner were also removed, and this revealed a crack in the parent bore.

7. He told Charlie to stop work until he told the Applicant. He contacted the Applicant and asked him to come to inspect the damage. He came the following day and inspected the damage. Mr Zaccaria again asked the Applicant to consider a reconditioned engine. He again stated he has no money. The Applicant instructed him to continue with the repairs (“try your best”), after receiving Mr Zaccaria’s assurance that he would warrant only their work and the parts they use, not the rest of the engine or associated parts.

8. He took the complete cylinder head minus the inlet and exhaust manifolds to SMS Diesel Spares to perform a crack test, and then a service if required. He purchased all the parts and gave them to Charlie.

9. Charlie arranged for an engine reconditioner to come to his workshop to supply and fit a recovery sleeve in number 5 cylinder. Neil from SMS stated that the cylinder head was not cracked and had already been surface ground previously. He collected the cylinder head from SMS and delivered it to Charlies. SMS assembled the inlet and exhaust manifolds and replaced the broken exhaust studs. They machined the number 5 cylinder and added the recovery sleeve. They then began to reassemble the engine with the necessary new parts including radiator, water pump, cylinder liner, piston and rings and gaskets.

10. Mr Zaccaria and Charlie then started the engine and noticed small bubbles in the water. This indicated some continuing problems, so he asked Charlie to remove the cylinder head again in case something was missed. They removed pistons number 1, 2, 3, 4 and 6. They noticed a sealant (“some solastic”) between the liners and the bore on cylinders 1, 2 and 3. This was cleaned and then they noticed fractures on the cylinder walls. This means it was necessary to machine these three cylinders and supply and fit a recovery sleeve.

11. Mr Zaccaria informed the Applicant of the discovery of this further damage. The Applicant came and inspected the truck again. He asked what the cost would be to complete the repair work. Mr Zaccaria stated it would be “well over $20,000”. There was further discussion about the warranty. Mr Zaccaria there was a 6 months’ warranty on all his labour and the replacement parts he supplied. Mr Zaccaria confirmed that he was taking responsibility for the work he arranged for others to do for the Applicant’s truck.

12. It took some time to do the necessary further repair work. It was finished in late August 2016 and road tested. There were no more air bubbles evident. Mr Zaccaria called the Applicant to tell him the truck was ready and the cost would be $25,370. The Applicant came to collect the truck on 2 September 2016. He gave him the Invoice for $25,370. The Applicant was with his wife. They said they only have $21,800. Mr Zaccaria agreed to release the truck, on the basis that the Applicant paid the balance of $3,570 when he could. The Applicant never returned to pay the balance. He never agreed to reduce this Invoice to $21,800.

13. At this time, Mr Zaccaria told the Applicant to check the oil and water levels daily and to change the engine oil on or before 500 kms.

14. The SMS letter is accurate in stating that this repairer did not disassemble the cylinder head. However, the head was removed when the air bubbles were noticed. He then arranged for KVK Engine Reconditioning at Yennora to come to do some further work. They attended Charlie’s with a portable boring bar and bored out the cylinder head. Mr Zaccaria noted he paid KVK to do this work, but he does not have the Invoice. This is why this work was referred to in the 2 September 2016 Invoice.

The October breakdown and subsequent action

1. The Applicant called him again on 27 October 2016 stating his truck had broken down and that he had it towed to City Hino. He stated the truck was “running fine” until it developed a noise and lost power while he was driving it on the expressway. The Applicant confirmed he had been checking the oil and water levels and they were good. The Applicant asked about the warranty, and Mr Zaccaria stated he would have to check the engine to determine the cause.

2. Mr Zaccaria and Charlie went to inspect the truck the following day. He noticed a small hole in the driver’s side of the engine block and a slight crack in the passenger side. He could not determine what had caused this without dismantling the engine and he contacted the Applicant to tell him this.

3. On 1 November 2016, the Applicant and his wife came to see Mr Zaccaria. He told them they needed an exchange engine. He showed the same quote he had showed them previously. This was $30,200 for the engine and $12,000 for the reconditioning of parts. The Applicant’s wife said this was too expensive. City Hino had quoted them much less for a new motor ($21,000). Mr Zaccaria doubted the veracity of this, but suggested that the Applicant have the work done by someone else. The Applicant insisted that Mr Zaccaria do the job. Mr Zaccaria later contacted City Hino who denied having quoted $21,000 for the engine. The City Hino employee sent Mr Zaccaria a copy of a quote for the reconditioned engine for close to $50,000. Mr Zaccaria produces a copy of this quote. There is no mention of a “new” engine.

4. Mr Zaccaria phoned SMS for a price and availability of a “reco exchange unit”. He agreed with the Applicant not to charge him for the labour costs for fitting the exchange engine until the old engine was dismantled to determine whether this was a warranty claim. He indicated to the Applicant he would need to charge for reconditioning the injector pump, injectors and turbo. This is standard practice for any reconditioned engine. Mr Zaccaria refers to the Installation procedures document from Bernieparts which indicates the need to recondition fuel injectors, fuel injection pump and turbocharger to validate the warranty. This document came with the new engine from SMS.

1. It took some time to get the reconditioned engine from SMS. He kept the Applicant informed at all times. When the engine was still not available by the end of November 2016, Mr Zaccaria suggested to the Applicant that he tow the truck to Charlie’s to commence the dismantling of the old engine in readiness for the reconditioned one.

2. Finally, SMS advised on 5 December 2016 that the reconditioned engine was ready to deliver. He informed the Applicant who went to SMS and paid $15,290 for the engine. The engine was then delivered to Charlie’s who did the necessary work. Mr Zaccaria called the Applicant on 15 December 2016 telling him the truck was ready, and that he would be liable to pay $10,000 for the items needing attention to validate the warranty. This amount was for the necessary parts to go with the reconditioned engine. There were no labour charges. The Applicant and his wife objected to paying an extra $10,000. Eventually they agreed to pay the Invoice in full.

The Applicant in Response

35. In relation to the August 2016 repair, the Applicant denies ever having indicated they have no money. They relied on the Respondent to use his expertise to do everything necessary to properly fix his truck.

36. There was never any discussion about a reconditioned engine at the time of the first repair. He just referred to the necessary repairs that would cost $9,000 to $11,000.

37. At the time of these initial discussions, he was with his father. Neither of them speaks good English. For later discussions with the Respondent, his wife who speaks much better English attended. He does not think it possible that the Respondent spoke about a reconditioned engine, but he did not understand. During the initial conversation, Mr Zaccaria just mentioned the gasket. He said if this would be replaced, nothing could go wrong.

38. Later he indicated the further problem with Cylinders 1, 2 and 3. There was no further discussion about the cost of repairs until he received the Invoice for initially $24,000 and then later $25,300. The Respondent agreed to accept $21,800 in full settlement of the Invoice for $25,370 issued on 2 September 2016.

39. They have never previously seen 2 of the documents produced in evidence by the Respondent. This includes the second version of the 2 September 2016 Invoice (indicating a reduction to $24,000).

40. Mr Zaccaria told him to change the oil after 1000 kilometres, not 500.

41. In relation to the October breakdown and subsequent action, the Respondent never did the service he claimed to have done. He doubts that the Respondent ever replaced the injector pumps, turbo and injectors. Mr Zaccaria gave a range of different explanations for charging $10,000 in December 2016. These included the need to replace the injector pump, and to pay for the reconditioned engine and the SMS warranty

42. When he returned his truck after the breakdown at the end of October 2016, the Respondent quoted him for a brand new engine, not a reconditioned engine.

Evidence of Expert Witnesses

43. Written and oral evidence was provided by Mr Greg Organ on behalf of the Applicant, and Mr Geoff Senz on behalf of the Respondent.

44. Mr Organ sets out the relevant history as related to him, photos of the relevant parts with commentary and his conclusion. On the basis of his analysis, Mr Organ finds that:

1. The engine failed in late October 2016 just after the respondent had completed major repairs. This is likely to have been due to an assembly problem, rather than a problem with the parts. Even the cheapest parts should last more than 500 kilometres.

2. The photos of the engine and engine components taken after it broke down in October 2016 show evidence of a failure to complete the first repair job in August 2016 with sufficient care. In particular, the damage to the No 6 piston was caused by either the exhaust and inlet valves being incorrectly adjusted, or hard metal sections coming through the inlet manifold as other pistons started to show the same type of damage

3. The engine failed in October 2016 due to “an uncontrollable combustion problem with No 6 cylinder”

45. In his oral evidence, Mr Organ provided the following further material evidence and conclusions:

1. His report and opinion is based on his own experience and direct observation of the internals of the truck engine after it was returned to the Applicant.

2. There was a failure in the valve head, piston, con-rod and piston pin

3. SMS (the Respondent’s sub-contractor) crack-tested the engine, but did not surface grind it.

4. The fact that the Respondent found air bubbles after attempting the first repair indicates that the work was not completed thoroughly before.

5. It is apparent that the vehicle broke down in late October 2016 because it dropped the valve which destroyed the piston and put holes in the block which could not be repaired.

6. It is likely that the valve was not adjusted in the correct method at the time of the August 2016 repair. This led directly to the valves being unable to move up and down properly.

7. There is also evidence of rust that has not been cleaned out. There were vast amounts of carbon present. This should have been completed by the Respondent at the August repair.

8. Overall, the Applicant had paid the Respondent to recondition the engine, but it appears that the engine never left the block. The first repair should have involved removing the engine, inspecting and cleaning it. It is apparent that this did not occur.

9. The type of damage which appears on his inspection could not have occurred in just the 500 km of driving completed by the Applicant after the first repair.

10. There is evidence a large amount of piston alloy material which suggests a very quick failure time.

11. The engine failure in October 2016 would never have occurred if the Respondent had properly serviced the cylinder head at the time of the first repair. Pressure testing was insufficient in the circumstances. The Respondent chose to rely on sub-contractors rather than completing the work himself. He must take responsibility for their work.

46. Mr Senz notes that he was requested by the Respondent to address the following matters:

• Identify the most probably cause of the catastrophic failure

• Determine whether investigation was hampered by excessive post failure operation

• Determine whether failure can be reasonably attributed to the Respondent’s actions

• Comment on the Applicant’s documentation.

47. Mr Senz noted that he viewed the partially dismantled engine in April 2017. Based on this observation and his experience, he concludes as follows:

“Failure most probably (due to) fatigued exhaust valve

Investigation was hampered by excessive post failure operation

Failure cannot be attributed to (the Respondent)”.

48. Mr Senz notes that there had been little change to the condition of the engine since it failed in late October 2016, and that his observations of the engine can therefore be relied upon to deduce the likely cause of failure.

49. Mr Senz makes the following observations and findings:

1. He accepts the Respondent’s version of events that he advised the Applicant to install a reconditioned engine, but the Applicant insisted that the Respondent perform “a minimalistic repair”. This may be the reason why the cracks in cylinders 1, 2 and 3 were not located in the early stage of the first repair.

2. After the October 2016 failure, there was no evidence that the engine had lost coolant/water or oil which suggests that the Respondent’s repair had been effective.

3. The engine suffered a catastrophic failure in the No 1 cylinder. Number 1 piston had completely disintegrated causing the hole in the cylinder block. This throws doubt on the Applicant’s suggestion that the water level was correct. It is likely there was no coolant in the engine’s cooling system at the time of the failure.

4. The piston destruction was likely due to the left hand exhaust valve in the no 1 cylinder becoming detached.

5. There is evidence of previous repairs to the engine. It appears that the cylinder head had been recently reconditioned or otherwise changed. This means that the engine was “fatigued from being previously overheated.” The evidence for this is:

1. Some untarnished machining marks on the cylinder head, and

2. a broken water pump prior to August 2016 repair, and

3. Rust marks around the cylinder block water pump aperture suggesting a long history of inadequate cooling system maintenance.

4. The discovery of cracks to 4 separate cylinders, suggesting the vehicle was sold to the Applicant by the previous owner due to problems with an overheating engine

5. It is therefore highly likely that the truck engine had been “temporarily repaired” and still had internal faults at the time it was purchased by the Applicant in April 2016. As further faults became apparent to the Applicant within three months of purchase, he could have returned the truck to the dealer to have the faults corrected under warranty

6. There is no evidence of engine overheating after the failure in late October 2016. The Respondent therefore fixed the overheating problem in the first repair.

7. It is likely that the damage to the engine components was unnecessarily exacerbated by the Applicant driving the truck for too long (on 27 October 2016) after he became aware of the loss of power. This was likely to have caused excessive damage to the turbocharger, and was one of the reasons it and the intercooler needed to be replaced when the reconditioned engine was fitted. The failure debris in the pistons is consistent with the vehicle having been driven for “a negligent period of time long after No 1 cylinder stopped functioning”. The debris cannot get into the system until after the piston has been holed. The piston does not suddenly explode. Mr Senz suggests the evidence indicates that:

“ the engine was effectively driven to destruction without any apparent attempt to mitigate damage and thereby rectification cost”

He further stated in oral evidence:

“There would have been a massive amount of banging and clanging and … an instant loss of power … he should have stopped immediately. It appears that the Applicant ignored these signs and continued to drive”

1. There is no physical evidence to support the suggestion that the Respondent had incorrectly adjusted the valve train to cause it to fail.

2. There is no evidence to establish that the broken exhaust valve or any other valve has been incorrectly adjusted or that they were operating in an unstable manner. It is not possible that the hard metal fragments entered through the intake manifold. To get there it would have had to come through the turbocharger and intercooler which would act as a filter, and stop the material getting into the affected cylinder.

3. There was a clear need to replace the turbocharger and fuel cylinder due to the damage caused when the engine failed on October 27. The “failure debris” went through the turbocharger. This also resulted in the intercooler needing to be cleaned.

4. It is not correct to say the Respondent failed to inspect the cylinder block. He has instructed his subcontractors to fit the reclamation sleeves, and he would not have known this without doing a thorough inspection. Failure to do this inspection would likely have resulted in the Respondent releasing the vehicle to the Applicant with the cracked Nos 1, 2 and 3 cylinders. Furthermore, No 5 piston does not display evidence of overheating. The Respondent had therefore rectified the coolant loss as requested.

5. It was quite reasonable for the Respondent to have arranged for SMS to pressure test the cylinder head to check for valve sealing. Given the Applicant’s request to do a “minimalistic” repair, there was no need at this stage to surface grind the head. Not every cylinder head needs to be fully machined.

Re-examination of Applicant

50. In view of the significance placed by the Respondent’s expert on the alleged excessive driving by the Applicant after the failure on 27 October 2016, I invited the Applicant to provide further direct evidence about his manner of driving at this time. He gave evidence on the basis of his previously given affirmation.

51. I asked the Applicant about the actions he took after his vehicle broke down on the Hume Highway at Campbelltown on 27 October 2016. He told the Tribunal that there was no prior indication of any problem. It suddenly broke down. He heard a banging sound and the truck lost power. He drove the truck to the kerbside. He was travelling at 70 kph. He slowly pulled over the road shoulder. He stopped the truck completely within 50 to 100 metres.

52. After this, he did not try to restart the vehicle. He saw a lot of oil leaking out, and then he attempted to call Mr Zaccaria. He arranged to have the vehicle towed from where it stopped.

53. I invited the Respondent to cross-examine the Applicant in relation to this further evidence. He declined to do so, but gave the following evidence in response. The Applicant had told him he heard a noise and the truck slowly lost power, and he noticed that it was leaking oil from the sump. He was unable to indicate how far the vehicle had travelled after he heard the banging sound.

Overview of the experts’ evidence

54. Mr Organ suggests that the failure of the engine on 28 October 2016 is due to one or more of the following factors:

• The failure of the Respondent to properly service the cylinder head at the time of the first repair

• The failure of the Respondent to properly reassemble the engine parts

• An uncontrolled combustion problem.

55. Mr Senz suggests that the failure occurred due to one or more of the following factors:

• Significant pre-existing damage to the truck engine

• The choice made by the Applicant to undertake “minimalistic repairs” rather than to accept the Respondent’s advice to fit a reconditioned engine

56. He also suggests that the extent of the damage found to the engine is largely attributable to excessive driving by the Applicant after the engine failed.

57. I note that Mr Senz also referred in his written and oral evidence on many occasions to a misdescription of engine parts by Mr Organ (including the numbering of cylinders) in order to discredit the latters’ findings. I was not satisfied on the evidence that this issue had any material bearing on the decision I had to make. It did not matter what impact on the question of what caused the October 28 failure. There was no dispute that there was a failure within a cylinder. It did not what number cylinder this was. I regarded this issue therefore as not being material to the questions to be determined.

General Comments about the expert evidence

58. I note at the outset that the expert reports complied in formal terms with NCAT Procedural Direction 3 Expert Witnesses, in so far as there is an acknowledgement that the authors have read the Experts Code of Conduct and have agreed to be bound by it, and the qualifications are set out. 

59. I am concerned however about the extent to which the experts have embodied the principles underlying the Code of Conduct. I note in particular the reference to the Expert’s Code of Conduct in the Procedural Direction:

11.      An expert witness has an overriding duty to assist the Tribunal impartially on matters relevant to the expert witness’s area of expertise.

12.       An expert witness’s paramount duty is to the Tribunal and not to any party to the proceedings (including the person retaining the expert witness).

13.       An expert witness is not an advocate for a party.

14.       An expert witness must abide by any direction given by the Tribunal.

60. At the commencement of the hearing, I invited the experts to meet to discuss their findings and to determine if there was any common ground. Mr Organ indicated he was prepared to do so, but Mr Senz declined on the basis of what he said to be the previous dealings between these particular experts. He also indicated a preference not to give evidence simultaneously with Mr Organ for the same reason.

61. While giving their evidence, it was clear that there was a significant degree of animosity between the 2 experts, based again apparently on their past dealings with each other. This related not only to the subject matter of their reports, but also to such matters as challenging the other’s qualifications and capacity to provide opinions.

62. The conduct of both witnesses during the hearing detracted from the quality of their evidence, as each interrupted each other on occasions, and made derogatory comments to each other.

63. In this sense, the experts did not exhibit an overriding duty to the Tribunal, but rather gave the impression of partiality towards the party who engaged them to give evidence. There was no attempt to find any common ground, and the reports were littered with attempts to undermine the conclusions of the other, rather than a focus on the purpose of the report.

64. This does not mean that I can ignore the findings of the experts, but my findings in this regard detract from the overall reliability of their conclusions. There were broadside attacks by each expert against the qualifications of the other (particularly by Mr Senz against Mr Organ). I make the following general findings about the evidence of the witnesses. I am satisfied from their detailed Curriculums Vitae that both have extensive experience and expertise to provide the opinions which are within their reports.

65. As to the common law approach to assessing expert evidence, the seminal case is the decision of the Court of Appeal in the case of Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. In this case, Heydon JA makes it clear that a reasoning process is to be stated by an expert when giving opinion evidence:

Heydon JA:

“85 In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of “specialised knowledge”; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be “wholly or substantially based on the witness’s expert knowledge”; so far as the opinion is based on facts “observed” by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on “assumed” or “accepted” facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is “wholly or substantially based”, applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ’s characterisation of the evidence in HG v R (1999) 197 CLR 414, on “a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise” (at [41]).” [Emphasis added]

66. Heydon JA also referred to a number of decisions of Anderson J. in the Supreme Court of Western Australia, including Pownall v Conlon Management Pty Ltd (1995) 12 WAR 370 at 389-90 in which Anderson J. stated:

“Expert opinion is to be judged like any other evidence. It must be comprehensible and reach conclusions that are rationally based. The process of inference that leads to the conclusions must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about the reliability of them.”

67. I have considered the above principles in relation to the expert evidence provided by both parties. The Tribunal is not bound by the rules of evidence in the same way as a Court, but the above principles remain relevant to the question of the weight to be given to the reports.

Has the Respondent breached its obligation under the Australian Consumer Law to provide services to the Applicant with due care and skill?

68. The common position is that there was a “catastrophic failure” on 27 October which caused defects that could not be repaired – hence need for reconditioned engine. The issue is whether the effective or principal cause for this was the failure of the Respondent to exercise due care and skill when he completed the July/August repairs.

69. The Respondent’s arguments amounts to combination of 1. blaming the Applicant for (i) insisting on minimal repairs, contrary to his advice, and (ii) failing to properly maintain the water levels after the repairs, and (iii) driving the vehicle for an extended period after the initial loss of power on 27 October, and 2. blaming the poor pre-existing condition of the truck engine. There is some internal inconsistency in these suggestions as further explored below.

70. To succeed in his application, the Applicant must establish on the civil standard of proof that the evidence supports the claim that the Respondent has failed to comply with any of the ACL consumer guarantees. The most relevant to this claim is that contained in s 60 of the ACL which provides:

“If a person supplies, in trade or commerce, services to a consumer, there is guarantee that services will be rendered with due care and skill”.

71. In this case, the services to be provided by the Respondent were that of an automotive engineer “specialising in all mechanical repairs petrol and diesels diesel injection services and overhaul of pump and injectors” (as indicated in their correspondence).

72. The consumer guarantee that services be provided with “due care and skill” that is implied into consumer contracts is a guarantee that the services will be performed in a “careful, skilful, and workmanlike” manner. However, the test is an objective test (Mayne Nickless Ltd v Crawford (1992) 59 SASR 490; Read v Nerey Nominees Pty Ltd [1979] VR 47 at 49; S.G. Corones The Australian Consumer Law (2011) Lawbook Co pp 361-362), and all of the facts and circumstances must be considered in the context of the application of an objective standard of due care and skill.

73. In this case, a vehicle owner in the position of the Applicant was entitled to expect that a person with the expertise and experience of the Respondent would offer him a proper diagnosis and reasonable resolution for the presenting engine problem. It is no answer to this to suggest that the Applicant had sought “minimalistic repairs” and that he had rejected the Respondent’s recommendation to source a reconditioned engine, rather than undertake repairs. The Applicant has denied this conversation ever took place, but, even if it had, the Respondent made the decision to undertake these repairs, indicating a willingness to do what was required to get the truck back on the road. Having done so, the Applicant was entitled to believe that, in the absence of any other intervening cause, the repairs would have been sufficient to keep the engine running for a reasonable period of time. In any view of the matter, a travel distance of 550 kilometres and just under 2 months was not a reasonable period of time. If the Respondent did not believe the repairs would maintain the proper running of the truck for this period of time, he could have declined to do the work, if the Applicant ignored his recommendation. Instead, he chose to do the work, and to invoice the Applicant in excess of $20,000 to do so.

74. This argument of the Respondent effectively suggests that it was inevitable that the truck engine would fail, given the choices the Applicant has made based on his financial situation.

75. The Respondent’s alternative argument is somewhat inconsistent with this. It argues that there was an intervening cause to the October 27 failure – namely the failure of the Applicant to maintain the water levels. However, this appears to contradict the claim by Mr Senz that an inspection of the damaged engine indicates that the overheating problem had been fixed.

76. It is also no answer in my view to point to the apparent damage to the engine, and previous repairs, which pre-dated the Applicant’s purchase of the truck. The Respondent claims that the principal damage was caused when the “fatigued exhaust valve” became detached, and that this was due to the pre-existing condition of the engine. Mr Senz was able to identify the likelihood of this pre-existing condition from the appearance of the engine in April 2017 (marks on the cylinder head, and rust marks around the cylinder block), and by inference from the nature of the presenting damage (cracks to 4 different cylinders and a broken water pump only 3 months after the Applicant had purchased the truck). If Mr Senz could identify this, then an experienced repairer like the Respondent should also have had sufficient evidence to make this determination, and the likelihood that there would be further failures causing varying degrees of damage to the engine. Once again, the Respondent chose to proceed with the repairs despite what now appears from Mr Senz’s report to be a reasonable likelihood of further extensive damage to the engine. Mr Zaccaria emphasises that he showed the Applicant the damage as it became apparent, and he approved the repairs. I think it reasonable to say that the Applicant agreed to this, on the understanding that the Respondent was warranting the work.

77. The Respondent wonders why the Applicant did not return the truck for warranty repairs to the dealer who sold it to him less than 3 months prior to the initial failure in July 2016. I regard this as an irrelevant consideration. The fact that a person in the position of the Applicant may have a remedy against another party or person, does not impact on the question of whether the Respondent he has chosen to proceed against has or has not breached its obligations to him under the ACL.

78. Finally, the Respondent relies on Mr Senz’s findings that the extent of the damage could have been limited but for the Applicant’s decision to not stop the truck immediately, and to “continue to operate a highly distressed engine” and to effectively “drive the vehicle to destruction”. This is not relevant to the question of the reason why the vehicle suddenly lost power on 27 October. It is potentially relevant to the question of the extent to which the actions of the Applicant contributed to the extent of the damage. The only direct evidence about this came from the Applicant himself, who suggested he acted promptly to bring the truck to a halt after he heard the bang and lost power. The Respondent’s argument in response relies largely on the location of the “failure debris” in the pistons. I note that the Respondent declined to cross-examine the Applicant about his direct evidence on this matter, although it had become clear that this was an important piece of evidence. I note that the Applicant’s statement is largely consistent with the account given by the Applicant (“developed a noise, started to lose power and pulled over on the side of the road”). I had no reason to disbelieve the Applicant. His evidence about this issue was quite consistent over time. It appears from the undisputed evidence that he has attended promptly to issues concerning his truck, and that he relied on it to generate his income. It would be quite inconsistent for him to have deliberately ignored the obvious signs of major damage to his truck, particularly when he had recently spent more than $20,000 to have it fixed. Overall, I could not be satisfied that the Applicant had driven his vehicle excessively on 27 October 2016, in the manner suggested by Mr Senz.

79. I cannot be satisfied therefore on the balance of probabilities that there was any intervening cause for the catastrophic failure of the truck engine on 27 October 2016. I am not satisfied that the Respondent’s conclusions in this respect are rationally based.

80. Mr Organ suggests that: A: the real cause was the Respondent incorrectly adjusting (assembling) the valves, leading to a spontaneous combustion problem, and B: that this was a direct result of the failure of the Respondent to undertake sufficient repairs. Mr Senz’s response suggests that this theory has not been established. There is considerable technical detail provided in support of the 2 contrary positions.

81. Having considered this matter in some detail, I am satisfied that it is unnecessary to make a formal finding about the actual technical cause of the failure. Having found that there is insufficient evidence to establish any intervening or exacerbating cause of the October 27 failure, and having determined that a reasonable consumer in the position of the Applicant would not have expected such a failure so soon after the previous repairs, I am satisfied that the repairs were completed without due care and skill. Taking into account the amount paid by the Applicant for the repairs, the time taken to do the repairs, and the age and usage of the vehicle, and the self-proclaimed expertise and experience of the Respondent, a reasonable consumer in the position of the Applicant was entitled to expect a reasonably trouble-free period of driving for a period of time much longer than he had.

82. I am satisfied therefore that the Respondent breached his obligation to carry out the August 2016 repairs with due care and skill.

To What Remedy Is the Applicant entitled?

83. Section 267 of the ACL sets out the actions that can be taken against suppliers of services where there has been a breach of one of the consumer guarantees. It relevantly provides:

84. Action against suppliers of services

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

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

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

(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

(ii) terminate the contract for the supply of the services.

(3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:

(a) terminate the contract for the supply of the services; or

(b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services.

(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.

(5) To avoid doubt, subsection (4) applies in addition to subsections (2) and (3).

85. Section 268 of the ACL provides guidance as to whether the failure to comply with the service guarantee is a major failure.

268   When a failure to comply with a guarantee is a major failure

A failure to comply with a guarantee referred to in section 267(1)(b) that applies to a supply of services is a major failure if:

(a)  the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b)  the services are substantially unfit for a purpose for which services of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(c)  both of the following apply:

(i)  the services, and any product resulting from the services, are unfit for a particular purpose for which the services were acquired by the consumer that was made known to the supplier of the services;

(ii)  the services, and any of those products, cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(d)  both of the following apply:

(i)  the services, and any product resulting from the services, are not of such a nature, or quality, state or condition, that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier;

(ii)  the services, and any of those products, cannot, easily and within a reasonable time, be remedied to achieve such a result; or

(e)  the supply of the services creates an unsafe situation.

86. I am satisfied that a reasonable consumer, aware of the extent and nature of the deficiencies I have found in the actions of the Respondent, would not have acquired those services from him. He would not have paid the invoiced amount had he known he would be liable to pay a significant further amount for a reconditioned engine, and associated costs, approximately 3 months later.

87. The failure to comply is therefore a major failure and the provisions of Section 267(3) and (4) apply.

88. The compensation sought by the Applicant is Cost of the reconditioned engine ($17,490), associated labour costs paid to the respondent ($10,000) Towing costs associated with the October 27 breakdown ($1,210) and the cost of Mr Organ’s report ($675).

89. There is no purely scientific or mathematical way of calculating the reduced value of the services provided by the Respondent to the Applicants. This does not relieve me from making findings of their loss.

90. In my view, the Respondent’s breach of their service obligation meant that the Applicant gained only minimal value from the August 2016 repairs. The principal part of their loss (“compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services”) can therefore best be calculated by reference to what he paid for this service. It is agreed he paid $21,800. He received little value for this, as all serviced parts were eventually removed and replaced with the reconditioned engine. Taking into account the short period of usage he had, I am satisfied he is entitled to be reimbursed $20,000 of this amount. Having made this finding, it is unnecessary to deal with the disputed evidence about whether the Respondent did not did not agree to reduce the invoice from $25,300 to either $24,000 or $21,800.

91. I am also satisfied that the Applicant is entitled to be reimbursed the amounts claimed in respect of towing costs ($1,210) and the expert report ($675), as these are reasonably foreseeable costs directly attributable to the breach of the ACL guarantee.

92. I am not satisfied that the costs of the reconditioned engine or associated labour and parts should be recoverable by the Applicant. These are costs which would have been incurred by the Applicant if he had received proper advice in July 2016. The Applicant has claimed he should not have been charged for the extra parts replaced with the reconditioned engine. However, the Respondent has established that he undertook this labour in accordance with the assembly instructions. The Applicant is therefore not entitled to any additional reimbursement in respect of these charges.

93. I therefore order the Respondent to pay the Applicant $21,885.00. This amount is payable on or before 13 August 2017.

B Shipp

Senior Member

Civil and Administrative Tribunal of New South Wales

19 July 2017

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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

Decision last updated: 06 September 2017