MSM Family Trust v Subaru (Aust) Pty Ltd
[2024] QCAT 161
•1 April 2024
QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL
CITATION:
MSM Family Trust v Subaru (Aust) Pty Ltd & Anor [2024] QCAT 161
PARTIES:
MSM FAMILY TRUST (applicant)
v
SUBARU (AUST) PTY LTD (FIRST RESPONDENT)
AND
D MCKAY FAMILY TRUST TRADING AS FIRST CLASS AUTOMOTIVE SERVICES (second respondent)
APPLICATION NO/S:
MVL101-23
MATTER TYPE:
Motor vehicle matter
DELIVERED ON:
1 April 2024
HEARING DATE:
27 March 2024
HEARD AT:
Brisbane
DECISION OF:
Member George
ORDERS:
1. The application be heard and determined as if it were commenced as a minor debt claim.
2. The application is dismissed.
CATCHWORDS:
MOTOR VEHICLE WARRANTY – FAILURE OF FRONT DIFFERENTIAL – WHETHER FAILURE CAUSED BY MANUFACTURING DEFECT OR POOR WORKMANSHIP
Queensland Civil and Administrative Tribunal Act 2009 (Qld) sections 11, 62
TNT Management Pty Ltd v Brooks (1979) 23 ALR 345
Chai Siew Cheng Pty Ltd v Manasarova Pty Ltd [2012] QCATA 074
APPEARANCES & REPRESENTATION:
Applicant:
Ms Mary McCarthy
First Respondent:
Mr Daniel Fuss
Second Respondent:
Mr Dan McKay
REASONS FOR DECISION
Background
This is an application by MSM Family Trust against Subaru (Aust) Pty Ltd (Subaru). Subaru has joined D McKay Family Trust trading as First Class Automotive Services (First Class). The application concerns the breakdown of the applicant’s Subaru in January 2023. At the hearing, Ms Mary McCarthy appeared for MSM Family Trust and Mr Daniel Fuss appeared for Subaru. Mr Dan McKay appeared for First Class.
The application was made to this Tribunal as a motor vehicle dispute, however, no relief pursuant to the Fair Trading Act 1984 (Qld) or The Motor Dealers and Chattel Auctioneers Act 2014 (Qld) is sought.
At the outset of the hearing however, the parties agreed that the application is in substance a claim pursuant to a contractual warranty given by Subaru to MSM Family Trust in respect of the Subaru, which was purchased on or about 19 August 2019. The warranty is in evidence as Exhibit 1 and the contract is Exhibit 2. The parties agreed that the warranty still applies and that under it, Subaru’s role is to supply the goods or provide the services required for repair work. The relief sought is for the Subaru to have its front differential replaced by Subaru, and the cost of the replacement is around $12,000. MSM Family Trust also claimed some incidental expenses incurred in relation to the breakdown. They total $4,484.30.
The parties also agreed that the cause of the breakdown was to be determined and that it could be either of two things. They are, first, that the front differential was run for a period without adequate oil; or secondly, the failure of a seal between the differential and the transmission. If the cause was the first problem, then it is not covered by the warranty. But if the cause was the second problem, then it is covered.
On this basis, I am satisfied that this Tribunal has jurisdiction to hear and determine the matter because the above agreed facts satisfy the jurisdictional prerequisites under section 11 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). I direct that the application be heard and determined as if it were commenced as a minor debt claim under section 62 of the Act.
EVIDENCE OF MSM FAMILY TRUST
Ms Mary McCarthy
Ms McCarthy gave evidence that she lives in Brisbane but had her Subaru serviced on the Sunshine Coast. It was serviced in December 2022 before she drove it to South Australia. After visiting Adelaide, the Subaru broke down in January 2023 on the Barrier Highway near Broken Hill. It was towed to Adelaide and underwent some inspections by various mechanics to which I refer below.
The trip involved some 4,000 kilometres and driving speeds of up to 110 kilometres per hour on highways before the breakdown. While driving, no warning lights came on until very shortly before the breakdown. There was no indication that anything was wrong and the car seemed to be running perfectly. There were no abnormal noises or smells coming from the car before the breakdown.
Ms McCarthy gave evidence that the first two services of the car were carried out by Subaru, and then she took it to First Class for servicing. In the leadup to the trip to South Australia, the car had been serviced by First Class. Mr McKay carried out the repairs personally. Ms McCarthy tendered three tax invoices that First Class had issued to her for services performed before the breakdown dated 25 February 2021, 26 June 2022 and 24 November 2022. They are Exhibits 7, 8 and 9.
The tax invoice dated 24 November 2022 states that the Subaru’s odometer reading was then 86,022 kilometres and Ms McCarthy gave evidence that the odometer reading was 93,737 kilometres at the time of the breakdown. This means that the Subaru had travelled 7,715 kilometres between the November 2022 service and the breakdown. The odometer reading was about 26,000 kilometres on the last occasion that the vehicle was serviced by Subaru.
DRW Automatics
Ms McCarthy tendered a tax invoice dated 20 February 2023 from DRW Automatics (DRW). It was one of the mechanics in South Australia that inspected the vehicle after the breakdown. DRW’s tax invoice is Exhibit 3.
Relevantly, DRW’s tax invoice states:
“Suspect cause of front diff damage, internal seal which separates the front diff & transmission is damaged & has caused front diff oil to enter transmission, which has contaminated the transmission oil & caused extensive damage to the front differential.”
I note that DRW’s tax invoice also states to the effect that DRW checked the transmission oil level and found it slightly below level and signs of oil contamination.
Ms McCarthy confirmed that DRW’s tax invoice was the only expert opinion evidence that the applicant relied on to prove the cause of the breakdown. Ms McCarthy tendered the tax invoice without calling its author for cross-examination. Mr Fuss and Mr McKay did not object to the tax invoice being tendered.
Eblens Automotive
Ms McCarthy also tendered a tax invoice from Eblens Automotive (Eblens), which is another mechanic in South Australia that inspected the car post-breakdown. Eblen’s tax invoice is Exhibit 6.
Eblens’ tax invoice relevantly states that it inspected the front differential and found it to have no oil and large amounts of metal debris present. It said that it also checked the transmission and found its oil over-full and contaminated. Eblens suspected that differential oil was filled to the transmission case instead of the differential.
EVIDENCE OF SUBARU (AUST) PTY LTD
Mr Daniel Fuss
Evidence on behalf of Subaru was given by Mr Fuss. He is a qualified mechanic and has been for some 24 years. He gave evidence that the vehicle’s odometer reading was 25,912 kilometres on the last occasion that it was serviced by Subaru on 3 August 2020. He said that the front differential oil was due for replacement at 50,000 kilometres according to Subaru’s scheduled servicing.
His evidence was that the car could have driven 7,000 kilometres from Brisbane to South Australia before breaking down because the differential may have had sufficient oil before it finally lost its lubricating properties to the point where the differential would fail. He said that remnants of oil partially remain and degrade gradually. He said that it was impossible to say how much oil would be required but that the front differential usually contains 1.3 litres of oil. In his experience, he was only aware of one other case where the seals between the differential and transmission had failed, and it was a case where a differential had failed after being run with insufficient oil.
He said that the oils placed into the differential and the transmission were different. The failure may have occurred because oil meant for the differential was put into the transmission mistakenly and, as a result, the differential oil was never topped up or replaced. As differential oil loses its lubricating properties over time, it needs to be topped up or replaced periodically. Oil has a limited life span and degrades. He said that differential oil is a semi-synthetic “gear oil”. It has a high viscosity and is quite thick. Heat caused after the failure of the differential due to insufficient lubrication means there can be the appearance of no oil in the differential, or a “dry” differential.
Mr Fuss also said that it was possible to put both differential oil and transmission oil into the transmission mistakenly without overfilling it because the transmission is essentially a case that fills up with an air gap at its top, and there would be room for additional oil. He could not explain why the transmission could function for 7,000 kilometres without failing if its oil had been contaminated with differential oil.
He said that no warning light about an oil problem would necessarily activate because the differential does not have a sensor to monitor if the oil is low, and the transmission has no sensor to detect if the wrong oil has been used. He also said that if the oil in the transmission were contaminated, there would not necessarily be any signs in the form of strange noises or slipped gears. He said that the transmission can hold 14 litres of oil so the contamination might not be sufficient to cause those signs to appear.
He disagreed that the differential would fail immediately upon reaching speeds typical on a highway. He said it was dependent on the residual oil left in the differential, and he did not know how much oil was left at the time the Subaru set out for Adelaide.
A & B Automotive
Mr Fuss tendered a report from Mr Grant Rattenbury of A & B Automotive Remanufacturing Pty Ltd (A & B). The date of the report is 17 March 2023. It is Exhibit 10.
Mr Rattenbury was called for cross-examination. He is a qualified mechanic aged 59 years, who completed his apprenticeship when he was about 18 or 19 years old. He had been conducting the business of A & B for some 33 years. He has experience servicing differentials generally and Subarus in particular. He has performed work for Subaru since 1991 as an authorised transmission repairer. He has also performed work for other vehicle manufacturers as an authorised transmission repairer, including Ford and Land Rover.
His report said that, based on the damage he observed when the car was inspected by him, the front differential had been running without oil. Differential oil had been placed in the wrong plug and entered the transmission. A plug situated on the passenger side of the transmission, called a “pressure plug”, showed damage from being removed, but it is not used during servicing of the transmission or the differential. He agreed that the transmission and differential are separate parts and have their own oil types.
In his report he said that, in his experience, differentials can survive for some time when driven at low speeds with a small splash of oil. He said a failure occurs as soon as the car is driven at highway speeds and with no oil to lubricate, the differential gears and differential bearings fail. The failure of the bearings withdraws the support of a shaft, and two seals between the differential and transmission fail allowing contamination of oil. Based on the evidence he had been presented with, the failure was not a manufacturing defect.
His report contained a photograph of the damaged pressure plug. He said that if differential oil is placed into that plug, it pours into the transmission. He had kept oil found in the transmission and it had a “gear oil” smell to it. The report also produced photographs of the front differential oil “fill plug” and the front differential oil “level plug”. The fill plug is situated on the driver’s side of the differential. He said that these plugs are relevant to an oil change concerning the front differential, and it appeared that they had not been removed.
In his oral evidence, Mr Rattenbury confirmed that in his report where he refers to the engine running with no oil, he did not mean that the oil had completely drained. He agreed that references to there being no oil in the differential means the point at which residual oil no longer has lubricating effect.
He said that there may have been a residue of oil in the differential when the car started the trip to South Australia, but he did not think that there would be sufficient lubrication to maintain high speeds for very long. He said that a vehicle may go longer with little to no oil at low speeds, but that failure occurs when the vehicle is driven at high speeds because there is not enough oil for lubrication. This is why most failures that he is aware of occur on highways.
He could not say for sure how many kilometres a car could drive with little to no oil before the failure occurs at high speed, but his best estimation was that, if a car were travelling at a speed of between about 80 to 100 kilometres per hour, there may be a failure after about 50 kilometres.
He did not believe the car could be driven from Brisbane to Adelaide with only a residue of oil. However, he could not say with any certainty how far the car could be driven at high speeds before it would fail. He said that it came down to a case-by-case basis. He agreed that oil loses its lubricating effect gradually. He said on several occasions during his oral evidence that he could not say how much oil the front differential had in it when the journey to South Australia commenced.
Mr Rattenbury said that if differential oil had been placed into the transmission, warning lights would not necessarily activate. Each case is different. He said there are sensors and valves but whether they deploy depends on what oil has been affected and nothing in the transmission here showed damage to make any light come on. He also said that there would not necessarily be any signs, smells or slipped gears indicating a problem in the transmission or differential before failure. At low speed there would not be any such signs but at high speed there may be. There are breathers in parts of the car to allow fumes out and although there was heat in this case, most noise would have occurred after failure, and at high speed any noise would be hard to hear.
He gave evidence as to what would happen if the seal between the differential and transmission broke consistently with DRW’s opinion. He said that two seals need to break, not one, and if either seal does break, there is a cavity between the transmission and the differential, and the oil would leak into it. He said the car would still operate. There may be an oil leak underneath, but both respective parts would still have oil.
He said that the pressure plug showed signs of socket marks indicating that it had been removed. In contrast, the fill plug and the level plug did not show any such damage and so there was no evidence, in his view, of them being removed to fill the oil in the differential. He said that one would reasonably expect to see marks on the plugs because a socket is used to undo them, and a socket would leave some mark.
Oil in a differential may be contaminated with transmission oil due to the breakage of the seals after a differential fails. The thing that causes the seals to break is the failure of the bearings, and the bearings fail due to the heat caused by the failure of a differential running with insufficient oil.
Due to this, he firmly disagreed with DRW’s opinion. He essentially said that what DRW described was very unlikely because the differential has no oil pump, so it cannot pump its oil into the transmission. Conversely, the transmission has an oil pump and can pump its oil into the differential. He stressed that there were two seals, and both must fail for this to occur. DRW’s tax invoice only referred to one seal. He said that he had only ever seen both seals break in cases where the pinion bearing had failed because a differential had been running with insufficient oil. He said that what DRW described was the effect of the failure of the differential, and not its cause.
Mr Rattenbury agreed that other mechanics had worked on the car other than First Class before it had been inspected by him, and he was unable to comment on whether the other mechanics caused the damage to the pressure plug. His evidence was to the effect that it may not be obvious to a mechanic that he or she was mistakenly filling the transmission with differential oil because they could be filling the oil by working off the volume that they had drained earlier, and simply refilling the part with the same volume thinking that they were doing the correct thing.
EVIDENCE OF D MCKAY FAMILY TRUST
Mr Dan McKay
Mr McKay’s evidence was that he had been servicing cars since about 1974 or 1975, including Subarus. He had changed differential oil and transmission oil on many occasions. His service of the vehicle in November 2022 was not the first time he had performed that task. He said that he had serviced the vehicle from February 2021 with the odometer reading about 39,000 kilometres.
Mr McKay gave evidence of his procedure to refill front differential oil. To estimate how much oil is needed, he drains the oil which tells him how much oil to put back in, and a measuring jug assists with this. He undoes the plugs and drains the oil into the measuring jug. He recalled that 1.3 litres of oil came out of the car in this case. He said that he tightens the drain plug and refills the differential with about the same amount of oil that comes out. He then tightens all the plugs.
He said that in his three tax invoices, the reference to “semi-synthetic gear oil” or “semi-synthetic diff oil” were references to the oil that he placed in the vehicle’s differentials. He said that for the services in February 2021 and June 2022, the reference to these oils was a reference to oils he placed in the rear differential. However, the reference to the oil for the service in November 2022 was a reference to oil that he placed in the front differential.
He agreed that he changed the oil in the front differential for the first time when there was about 86,000 kilometres on the odometer. He had serviced the vehicle on other occasions but did not replace the front differential oil at 50,000 kilometres in accordance with Subaru’s scheduled servicing. He said that before 86,000 kilometres the oil seemed fine to him and did not need to be changed based on its colour and smell. He said that in his judgment it was fine to leave it.
As to the absence of damage on the fill plug and the level plug, he said that they might not be damaged even if they had been removed. He said that it was a question of degree. He knew that his services were different to Subaru’s scheduled servicing but he serviced the vehicle differently based on his experience and the need to treat each car on its merits.
He could not say for sure how long the car could be expected to drive with little or no oil other than to say that he did not think it would be 7,000 kilometres. It depended on how much oil was left in the differential at the start of the car’s journey. He agreed that oil loses its lubricating properties gradually and said that it also depends on how a car is driven, suggesting that if it is driven in a rough or heavy-handed way, then this would have an effect on the life of the oil. He was unable to comment on the reason for the failure of the seals.
SUBMISSIONS
In submissions, Ms McCarthy said that the car should not have broken down 7,000 kilometres after its last service. She relied upon DRW’s tax invoice to support a finding that the failure of a seal caused the breakdown. Mr Fuss submitted that the breakdown was caused by poor workmanship and not a manufacturing defect. He submitted that First Class maintained the car and he relied upon A & B’s report for a finding that the breakdown was caused by insufficient oil. Mr McKay submitted that if the car were running with insufficient oil, then there should have been some sign of it. He assumed that something had failed but did not know what it was. He submitted that the differential had the correct level of oil.
CONSIDERATION
As the applicant, MSM Family Trust has the burden of proving that the breakdown was caused by a manufacturing defect, here, the failure of a seal. This is a civil case, to be decided on the balance of probabilities and I am guided in that regard by what was said by the High Court of Australia in TNT Management Pty Ltd v Brooks (1979) 23 ALR 345 at 349-350 per Gibbs J (with whom Stephen and Mason JJ agreed):
“… The principle to be applied was stated by this court in Bradshaw v McEwans Pty Ltd (1951; unreported) in a passage cited in Luxton v Vines (1952) 85 CLR 352 at 358 : “Of course, as far as logical consistency goes, many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture … But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as a mere conjecture or surmise.”
I note that the above was cited with approval in Chai Siew Cheng Pty Ltd v Manasarova Pty Ltd [2012] QCATA 074 per Alan Wilson J at [17].
As discussed above, the only expert opinion evidence supporting a finding that the breakdown was caused by a broken seal is the tax invoice of DRW. The relevant text in the invoice is brief and provides no full explanation for the basis of the author’s opinion. It does not state the author’s name or their qualifications. They were not called for cross examination.
The only other expert opinion evidence has been given by A & B. I accept that evidence is independent despite A & B being an authorised repairer for Subaru. A & B is an authorised repairer for other manufacturers. Mr Rattenbury is significantly experienced in the repair of transmissions generally, including Subaru transmissions. I found his evidence to be frank and balanced.
On Mr Rattenbury’s evidence, the cause of the breakdown could not be as stated by DRW. His evidence as to why DRW’s opinion is flawed was detailed, logical and not directly challenged. There are two seals between the transmission and differential. DRW’s tax invoice only refers to one seal.
Further, for DRW to be correct, both seals need to break. There is a gap between the two parts, and oil would drain into it. The differential also does not have a pump, and its oil would not make its way into the transmission. It is not disputed that the oils used for the two parts are different, and the oil used for the differential is gear oil. Mr McKay confirmed that his tax invoice records the oil he used, and in one instance it is expressly described as “gear oil”. Mr McKay’s evidence was that smell is a method used to detect the properties of oil, and A & B’s report describes the smell of “gear oil” in the transmission. I note that DRW’s tax invoice also refers to signs of oil contamination in the transmission.
Mr Rattenbury said that he had only seen one other case where the seals had broken and that was where the differential had failed from running on low oil. He said that the failure of the seals was the effect and not the cause of the failure of the differential. I accept his evidence.
Accordingly, I find that the above evidence does not support a finding that the cause of the breakdown was the failure of a seal.
In my view, the preponderance of the evidence supports a finding that the cause of the breakdown was the differential being run with insufficient oil. This is the opinion of Mr Rattenbury. It is also the opinion of Eblens although the weight I place on the tax invoice of Eblens is affected by the fact that nobody from Eblens was called for cross-examination.
A & B’s opinion is supported by the absence of evidence that the fill and level plugs were removed. Mr Rattenbury’s evidence is that the plugs must be removed with a socket and a socket leaves marks. The way I understood Mr McKay’s evidence, he did not challenge this but said that sometimes a socket could be used on the plugs without leaving marks. While I accept that this may be possible, here I find it improbable because there was not only one, but two, plugs that had no marks, and Mr McKay’s evidence was that he would “tighten” the plugs at the end of the service. This indicates that a socket would have been used with some degree of force to achieve tightening.
There were also socket marks on the irrelevant pressure plug. While in theory it is possible that another mechanic could have left those marks, this is purely speculative, and it does nothing to explain the absence of marks on the fill and level plugs. The presence of marks on the pressure plug supports Mr Rattenbury’s evidence that one would reasonably expect marks on the fill and level plugs if they had been removed.
When this evidence is put together with evidence of the oil found in the transmission, it is consistent with the differential oil being added to the transmission mistakenly, leaving the differential without sufficient oil. Mr Rattenbury’s evidence is that a well-meaning mechanic could make this mistake if approaching the task based on the volume. Mr McKay’s evidence is consistent with approaching the task in that way.
The evidence of Mr Rattenbury and Mr Fuss is that the transmission is large enough to hold both oils, so filling it incorrectly would not necessarily alert a mechanic to that fact. Eblens tax invoice says that it found the transmission oil to be overfull. The incorrect pressure plug is situated on the passenger side of the transmission and the fill plug is situated on the driver’s side of the transmission. This could further add to the opportunity for a mistake to be made in a moment of confusion.
I accept Ms McCarthy’s evidence that no warning lights or other signs of a problem were experienced until just before the breakdown. Someone who is not trained as a mechanic would reasonably expect these things to have occurred in the circumstances. However, the evidence from the mechanics in this case is detailed and plausible in explaining how the problem would not necessarily have revealed itself in those ways.
Some degree of time was taken during the hearing with A & B’s report stating that the failure would occur “as soon as” the car is driven at highway speeds. But when one reads on, that sentence goes on to say, “… and with no oil to lubricate…”. While Mr Rattenbury thought that the car would break down after about 50 kilometres at higher speeds, he agreed in his oral evidence that oil loses its lubricating effect gradually and he did not know how much residual oil was left in the differential when the car started its journey to Adelaide. He repeated this several times during his oral evidence. Mr Fuss and Mr McKay also said that oil loses its lubricating effect gradually. I note that DRW’s tax invoice refers to oil that it found in the front differential.
Mr McKay’s evidence was that oil quality is a factor to be assessed on a case-by-case basis. In the case of this vehicle, the oil quality was sufficient for him to defer changing it until some 30,000 kilometres beyond the point recommended by Subaru. It seems possible that there may have been enough residual oil for the differential to function until the breakdown. Mr Fuss said that differential oil has a high viscosity. It would depend on the amount of residual oil at the time its journey commenced, and nobody can say how much residual oil there was.
Moreover, any uncertainty about this issue does not render as mere conjecture or surmise, the conclusions I have reached on the evidence that the breakdown was caused by insufficient oil in the differential, and not the failure of a seal. There is no uncertainty about Mr Rattenbury’s evidence about the breakdown not being caused by the failure of a seal. His evidence must be preferred over the evidence of DRW.
It follows that the evidence does not support a finding that the breakdown was caused by the failure of a seal.
Conclusion and Orders Made
Based on the findings made above, there is no basis to find that the breakdown was caused by a manufacturing defect, and so there is no basis to find that the breakdown is covered by the warranty. MSM Family Trust has not joined First Class to the application and sought no relief against First Class.
Accordingly, I make the following orders:
1.That the application be heard and determined as if it were commenced as a minor debt claim.
2.That the application is dismissed.
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