Santini v Northern Trading Pty Ltd
[2021] QCAT 409
QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL
CITATION:
Santini v Northern Trading Pty Ltd & Anor [2021] QCAT 409
PARTIES: MARK SANTINI (applicant)
v
NORTHERN TRADING PTY LTD (respondent)
SUBARU (AUST) PTY LTD (respondent)
APPLICATION NO/S:
MVL232-20
MATTER TYPE:
Motor vehicle matter
DELIVERED ON:
23 November 2021
HEARING DATE:
5 August 2021
HEARD AT:
Brisbane
DECISION OF:
Member Bertelsen
ORDERS:
Mark Santini shall return the motor vehicle the subject of these proceedings to Northern Trading Pty Ltd trading as Keys Motors within 14 days of the date hereof in exchange for payment by Northern Trading Pty Ltd trading as Keys Motors of $30,342.00 to Mark Santini
CATCHWORDS:
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – GUARANTEES, CONDITIONS AND WARRANTIES IN CONSUMER TRANSACTIONS – GUARANTEES, CONDITIONS AND WARRANTIES – whether motor vehicle of acceptable quality – whether vehicle corresponded with description – whether failure to comply with consumer guarantees a major failure – whether goods rejected during the rejection period – whether consumer entitled to refund – whether consumer entitled to damages
Competition and ConsumerAct 2010 (Cth), Schedule 2 – Australian Consumer Law, s 54, s 55, s 56, s 57 s 259, s 260, s 262, s 263
Fair Trading Act 1989 (Qld), s 50A
Nesbit v Porter [2000] 2 NZLR 465
APPEARANCES & REPRESENTATION:
Applicant:
Mark Santini
Respondent:
Northern Trading Pty Ltd represented by Troy Johnston
Subaru (AUST) Pty Ltd represented by Lucas Harris
REASONS FOR DECISION
By application filed 2 November 2020 the applicant Mark Santini seeks refund of the sum of $29,990.00 paid to Northern Trading Pty Ltd t/a Keys Motors to purchase a new Subaru XV AWD CVT Hatch (the vehicle) on about 13 October 2017. He asserts breach of warranty under the Australian Consumer Law (ACL) with possession on 7 November 2017.
Background and Evidence
Dr Santini had researched his purchase. He test drove a similar vehicle at the Port Melbourne test centre in mid-2017 where it was driven over steep rutted unsealed tracks and through water demonstrating its durability and sophistication. In Townsville the Keys Motors salesman advised its suitability for use on Magnetic Island where Dr Santini lived part-time. From the date of purchase the vehicle was garaged in an undercover secure apartment carpark some 50 metres from the open ocean, was always scheduled serviced and driven on sealed or unsealed roads on Magnetic Island but never driven on beaches or submerged in creeks or other fresh water. The vehicle has only ever been driven by himself and his wife.
In early May 2019 whilst driving on Magnetic Island Dr Santini noticed screeching when the brakes were applied. Brake disc rotors were rusted as were the muffler, the exhaust and the boot. The vehicle was returned to Key Motors for servicing with Dr Santini at the same time raising concerns about the extent of rust that was evident. He stated that even the Key Motors service mechanic said he had never seen so much rust in a Subaru. He requested that Subaru be contacted regarding the rust.
Subsequently on 12 June 2019 Dr Santini emailed Jamie O’Donnell at Key Motors inquiring as to any response from Subaru. Mr O’Donnell responded “still awaiting reply from Subaru Australia regarding the rust issues on the vehicle. As soon as I hear from them I will forward on any information directly to you”. But there was no reply. A reminder was sent, no reply.
On 19 July 2019 Dr Santini referred his concerns to the Office of Fair Trading. On 20 July 2019 Lance Walsh of Key Motors made contact according to Dr Santini stating that his warranty had been voided because the vehicle had been driven on a coastal road. On 25 July 2019 Dr Santini emailed Lance Walsh stating, “we have never driven this car on the sand or in sea water. Further parts of the boot including the tools are corroded which could not have been exposed to sand or the sea water. We believe that the reason for the corrosion was because we left it garaged at Bright Point for 6 months. There is no question that the sea breeze is extremely salty and this causes corrosion. However, other owners leave their Jeeps and Toyotas parked in the same car park without this level of rust occurring”. In reply Subaru rejected any liability for rust stating it to be due to external influence and not manufacturing defect. Despite that Key Motors contacted Dr Santini stating that Subaru would replace brakes and some rusted underside parts including muffler and exhaust. That was done on 2 September 2019 when a towbar was also installed for Dr Santini to tow his newly acquired kayak.
Dr Santini stated that subsequently on 20 January 2020 the vehicles underside was briefly subjected to flash flooding during a storm on Magnetic Island. Fresh water reached the wheels to the level of the muffler but did not enter the exhaust pipe. Nor did it reach the motor or the vehicle boot. Vehicle performance was not affected. When the vehicle was being serviced in February 2020 Key Motors recommended the underbody be cleaned and sprayed with anti-corrosion protection. Townsville Car Care Centre was suggested. Covid intervened and on 11 September 2020 that entity applied anti-corrosive coating.
The technician, Craig Chapman, noted the vehicle which was pretty clean at the time was rusting throughout including paintwork above the doors where rust bubbling was occurring despite the paintwork never having been scratched particularly so above the left-hand rear door near the roof which is a flat surface, undamaged paintwork, no seams in a sealed area. Technician Craig Chapman surmised the vehicle was rusting from the inside out. He provided a statement produced to the tribunal.
Subaru’s assistance was again sought resulting in a meeting on 23 September 2020 at which Key Motors assessed the vehicle and concluded the vehicle was a write-off with Subaru unlikely to repair the vehicle under warranty. That was confirmed by Key Motors own motor body repairer Douglas & Miller in a statement dated 2 October 2020 produced to the tribunal. The same day 2 October 2020 Martin Taylor of Keys Motors emailed Dr Santini stating “the claim regarding rust … has been denied by Subaru Australia as water damage is not a manufacturing fault’. At about this time Dr Santini had taken the vehicle to Gemini Townsville, a Suncorp approved panel beater. One Ben Davies observed there was rust occurring on both sides of the vehicle cant rails causing paint to bubble and crack; that there was no sign of a chip, scratch or prior repair. Such corroded areas were factory finish areas; rust in those areas resulting from defective paintwork or incorrect proof coating. He provided a statement and photos which are produced to the tribunal. Both Townsville Car Care Centre and Gemini Townsville statements were provided to Subaru on about 11-12 October 2020. Concerned about rust progression Dr Santini arranged for repair work on 30 November 2020.
Dr Santini asserted the following
(a)He had maintained the vehicle properly having had it rust proofed at his cost at Townsville Car Care Centre as recommended by Keys Motors;
(b)The vehicle has been garaged undercover since purchase;
(c)Virtually no exposure to sea water;
(d)Parts replaced in September 2019 (brakes, underside, muffler and exhaust) have not rusted to the same degree as the original vehicle;
(e)The vehicle has been properly maintained and serviced in accordance with scheduled servicing requirements;
(f)The vehicle has never been driven in salt water;
(g)It has been regularly washed.
Dr Santini asserted there was nothing in or about his conduct such as to void his new vehicle warranty.
The BASF Australia Ltd report dated 10 February 2021
BASF was retained by Subaru to prepare a report on the condition of the vehicles paintwork with attention to corrosion (rust) type defects in the paint film.
A field technician, Christopher Barlow, was selected by BASF to attend Magnetic Island on 2 February 2021 to retrieve physical evidence/data and furnish it to BASF. That was collected, sent to and collated by one Shaun O’Connor within BASF with the report being signed off by both Christopher Barlow and Ian Johnston technical manager of BASF. The report it seems was prepared on a no-fee basis as a service to industry.
Mr Barlow’s inspection took place on Magnetic Island where the vehicle was garaged some 50m from open ocean and at which time there was a light covering of salt residue on the vehicles paint film or more technically described as the film build.
Mr Barlow noted corrosion (rust) type defects located on the rear of the offside front door panel adjacent to the door handle. It was of a blistered appearance with a rough texture. As well there was separate corrosion (rust) type defect 20 millimetres from the rear of the panel adjacent to the door handle. It was of a blistered appearance with a rough texture.
With respect to the near side rear quarter panel and cant rail Mr Barlow noticed two small corrosion (rust) type defects located on the leading edge of the quarter panel adjacent to the rear door striker. They were of a blistered appearance with a rough texture. As well two corrosion (rust) type defects located on the cant rail section of the panel adjacent to the top of the window frame of the rear passenger door. Generally on close inspection several areas of film build appeared broken/flaking and of a discoloured appearance.
The vehicles film build otherwise overall was described consistently as even surface texture (peel), good gloss, good gloss retention and even metallic placement.
Mr Barlow measured the total film build i.e. primer coat, base coat (the colour) and clear coat in microns taking three readings per panel averaged out to give an average film build per panel. That resulted in the vehicles exterior coatings or paintwork or film build at 121 microns consistent with what would be expected of an original equipment manufacturers (OEM) finish. Mr Barlow concluded:
the exact cause of the corrosion (rust) type defects is not known, however in my opinion due to the following factors, it is most likely that these defects have occurred due to environmental influences rather than as a result of an OEM process.
The vehicle is garaged in a coastal location, only a short distance from the open ocean, indicating that the vehicle is constantly exposed to harsh environmental elements such as high salinity in the air and salt water.
Other metal components of the vehicle have been replaced due to corrosion.
At the time of inspection the vehicle appeared to have recently been cleaned, however a light covering of salt residue was present on the paint film.
In my opinion, based on past experience and the type of defects present in the paint film, the most likely cause of the corrosion (rust) type defects is resulting from mechanical damage to the paint surface (stone chips, scratches, etc), which have compromised the paint film allowing moisture to penetrate to the underlying coats of the paint film or the metal substrate.
In evidence Ian Johnston stated that the exterior protection comes from the clear coat, that is the outside coat, some 40 microns thick. He said the total film build could not be measured sectionally to discern if a layer was missing or too thin. Such would require destructive testing i.e. taking a sample. His was an inspection-based opinion.
Ian Johnston considered environmental influences causing corrosion were at play; vehicle seaside location, salinity in the air, salt sitting on the paint film being able to break through particularly where there was mechanical abrasion, sand and debris in the air resulting in microchipping, scratching (not visible to the naked eye) allowing for moisture penetration. Ian Johnston was asked why photos of rusting door hinges, inside the boot and doorjambs were not included in the BASF report. He indicated he did not see all report photos but rather the person Shaun O’Connor collated inspection material and he reviewed it.
With respect to the primer coat that is the initial anti corrosive coat, he indicated that was applied robotically and, he would have thought, evenly.
Dr Santini suggested a deficiency in the overall film build as low as 43 microns as initially identified he said by Mr Barlow at the time of inspection but not reflected in the BASF report. He contended that the BASF report did not properly reflect measurements taken at the time of the inspection. Rather he said it was more likely to be a case of poor application of anticorrosive coat at point of manufacture. Two persons, Troy Johnston and Mark Taylor of Keys Motors made statements decrying the poor state of the vehicle on about 24 September 2020 making assumptions about how the vehicle was being used to that point in time and alleging lack of proper care and maintenance.
Dr Santini stated the vehicle was on its way to the Townsville Car Care Centre for a full detail at that time.
Conclusions
The timeline is disturbing, rusting identified as early as May 2019 less than 2 years after purchase. Subaru’s assistance was sought about the rust concerns. There was no reply. In July 2019 Office of Fair Trading assistance was sought. That prompted a reply from Keys Motors to the effect that any warranty had been voided because the vehicle had been driven on a coastal road. That could be just about anywhere and everywhere in Australia. On the face of it that is nonsense. The tribunal accepts Dr Santini’s evidence that the vehicle was never driven on the sand or in sea water.
In September 2019 the rusting complained of was fixed. In January 2020 some storm fresh water reached the underside of the vehicle. The vehicles performance was not affected. In February 2020 Keys Motors recommended underside anti-corrosion protection by Townsville Car Care Centre. Covid intervened and on 11 September 2020 that was finally done. Even more disturbing were Townsville Car Care Centre’s Craig Chapman’s observations of rusting throughout including paintwork above the doors where rust bubbling was occurring. There is nothing expert about that, those observations could have been made by anyone with a good eye. Observations and assumptions by Troy Johnston and Mark Taylor on one day in the course of some three years are of no help here.
Most disturbing however was the assessment of the vehicle on 2 October 2020 as a write off by Keys Motors own motor body repairer Douglas & Miller less than 3 years after purchase. At about this time a Ben Davies of Gemini Townsville observed rust occurring on both sides of the vehicle cant rails causing paint to bubble and crack. He helpfully provided good colour photos. Once again these observations could have been made by anyone with a good eye.
But most damming is the BASF report itself. It is probably observationally accurate as far as it goes but that is not far at all. There are observed corrosion rust type defects and film build measurements suggesting more than adequate film build depth or layering but not the constitution of each layer i.e. primer coat, base coat and clear coat. That leads to the first conclusion which is for want of a better expression that the exterior paintwork was consistent with originating equipment manufacturer finish. That being so the exact cause of corrosion (rust) was unknown.
Then some factors likely to cause such defects are proffered
(a)The vehicle being garaged in a coastal location only a short distance from the open beach. There is nothing unusual about that.
(b)Then a follow on assertion about harsh environmental elements such as high salinity in the air and salt water. There was no evidence about the degree of salinity in the air nor about the correlation of salt water to the vehicle.
(c)Then a statement about a light covering of salt residue being present on the film build. There is nothing unusual or exceptional about that. That could happen anywhere in any coastal area in Australia close to the water or as more abruptly put by Dr Santini “so what”.
(d)Finally, most likely mechanical damage to the paint surface that is stone chips, scratches are put forward as compromising the film build. But there was no evidence either in the report or in the oral evidence of this sort of damage having actually occurred. Quite the contrary good gloss retention and even metallic placement. For clarity if it is the sand and debris penetrating the film build, that is, what might be termed micro scratching there is nothing to support that proposition. It is nothing more than a latter-day assumption or guess about possible causes of rust. In any event one would have thought that there was some sort of testing available to BASF given the reported adequacy of the film build.
(e)Nor does the asserted Keys Motors denial of warranty on the basis that water damage is not a manufacturing fault gain traction. Presumably, that is a reference to the fresh water flash flooding event. There was no evidence anywhere of any ongoing damage to the vehicle referable to that occurrence. On the contrary full functionality of the vehicle was maintained and if anything one would have thought enhanced this Subaru vehicles claimed rugged durability.
Australian Consumer Law (ACL) Provisions
The tribunals jurisdiction to bring a guarantee claim under the ACL is grounded in section 50A of the Fair Trading Act 1989 (Qld).
Section 54 of the ACL provides that goods supplied are guaranteed to be of “acceptable quality”. Here that included the vehicle being free from defects safe and durable. The vehicle exhibited corrosion/rust within 2 years of purchase. Within 3 years of purchase Keys Motors own motor vehicle repairer Douglas & Miller categorized the vehicle as a virtual write off due to rust, all in the face of lauded rugged durability. The vehicle was not durable in any accepted sense of the word. Simply not being able to identify the cause of corrosion/rust or having a guess about what might be the cause does not serve to disentitle Dr Santini from the benefit of the guarantee. The vehicle was brand new, the price paid $29,990.00
Section 55 of the ACL provides that goods supplied are reasonably fit for any disclosed purpose. Here the tribunal accepts that Dr Santini was advised by Keys Motors salesman that the vehicle was suitable for use on Magnetic Island.
Section 56 of the ACL provides that goods supplied correspond with the description. Here Dr Santini drove a similar Subaru vehicle at Port Melbourne as the precursor to his purchase from Keys Motors. The tribunal accepts Dr Santini’s evidence that the similar Subaru vehicle was driven over steep, rutted, unsealed tracks and through water demonstrating its durability and sophistication. Such a description is at odds with the vehicle being categorised as a virtual write off within 3 years of purchase due to corrosion/rust.
To be clear the tribunal considers the Subaru vehicle test driven at Port Melbourne can, as well, be construed as a demonstration model for the purposes of section 57 of the ACL, that is, the vehicle here was supplied by reference to a demonstration model as well as by description.
Remedies
Section 260 of the ACL addresses when a failure to comply with a guarantee is a major failure. That includes where the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure or goods when sold by description depart from that description or if supplied by reference to a demonstration model depart from that description. Here it is clear from the distress exhibited in Dr Santini’s material and his evidence that he would not have purchased the vehicle knowing it would be a virtual write off within three years.
Dr Santini seeks a refund. In order to do so he is required to reject the vehicle within the rejection period as defined in section 262 (2) of the ACL.
(2) The rejection period for goods is the period from the time of the supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to:
(a)the type of goods; and
(b)the use to which a consumer is likely to put them; and
(c)the length of time for which it is reasonable for them to be used; and
(d)the amount of use to which it is reasonable for them to be put before such a failure becomes apparent.
In Nesbit v Porter [2000] 2 NZLR 465 at [39], the New Zealand Court of Appeal held that the rejection period was one that:
…suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of breakage or malfunction is not apparent, the consumer can be expected to do by taking the goods to someone, usually or preferably the supplier, for inspection. In this context, therefore, a defect is not ‘apparent’ until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial.
Dr Santini was not only proactive on his own account to identify the cause of the corrosion/rust but he did everything conceivable to engage with Keys Motors and Subaru in the period May 2019 through November 2020 to correctly identify the cause of the corrosion/rust. It is not until October 2020 that the vehicle is categorised as a virtual write off, unrepairable. This proceeding was commenced on 2 November 2020. In these circumstances the tribunal is satisfied Dr Santini rejected the vehicle within the rejection period.
Given the aforesaid Dr Santini is entitled to a refund of the purchase price of $29,990.00 upon return of the vehicle to Keys Motors the supplier.
Dr Santini’s application can not be construed as an action for damages against the manufacturer Subaru pursuant to sections 271, 272 and 273 of the ACL. This claim is properly categorised as based on ACL guarantees which accompanied the vehicles supply by Keys Motors in the first instance.
Orders
Mark Santini shall return the motor vehicle the subject of these proceedings to Northern Trading Pty Ltd trading as Keys Motors within 14 days of the date hereof in exchange for payment by Northern Trading Pty Ltd trading as Keys Motors of $30,342.00 to Mark Santini ($29,990.00 plus filing fee $352.00).
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