Smith v J&C Whyte Family Trust & Anor
[2016] ACAT 132
•29 November 2016
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
SMITH v J&C WHYTE FAMILY TRUST & ANOR (Appeal) [2016] ACAT 132
AA 26/2016 (XD 1158/2015)
Catchwords: APPEAL – civil dispute - appeal dealt with as new application arising from admission of new evidence – product purchased not supplied – fundamental breach of contract – order for costs consequent upon obstruction before the tribunal – order for costs consequent upon contravention of an order of the tribunal
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 48, 82
Legislation Act 2001 s 142
Cases cited: Appellants v Council of the Law Society of the ACT and Legal Practitioner [2011] ACTSC 133
The Auburn Municipal Council v Ivanoff (1964) 10 LGRA 258
Bell v De Castella and Rob De Castella’s Smartstart For Kids Ltd [2013] ACAT 66
Boon v Maher (1980) 7 NSWLR 232
Carew-Neill v Bower [2016] ACAT 54
CIC Australia Ltd v ACT Planning and Land Authority and Ors [2013] ACTSC 96
Williams Love & Nicol Lawyers Pty Ltd v Wearne [2016] ACAT 123
Tribunal: Presidential Member G McCarthy
Date of Orders: 29 November 2016
Date of Reasons for Decision: 29 November 2016
AUSTRALIAN CAPITAL TERRITORY ) AA 26/2016
CIVIL & ADMINISTRATIVE TRIBUNAL ) (XD 1158/2015)
BETWEEN:
GARRY SMITH
Appellant
AND:
J&C WHYTE FAMILY TRUST TRADING AS MITCHELL SERVICE CENTRE
First Respondent
ENGINE REBUILDERS CANBERRA PTY LTD
Second Respondent
TRIBUNAL: Presidential Member G McCarthy
DATE:29 November 2016
ORDER
Within 35 days, the first respondent pay the appellant $7,865.58 comprised of:
(a) $5,690.16 by way of damages for breach of contract.
(b) $140 for the original application filing fee.
(c) $499 for the appeal application filing fee.
(d) $1,536.42 interest.
Within 28 days, the second respondent pay the first respondent $7,865.58.
Within 28 days, the second respondent pay the appellant $1,053.99
………………………………..
Presidential Member G McCarthy
REASONS FOR DECISION
For reasons that follow, this appeal was dealt with as a new application.[1]
[1] ACT Civil and Administrative Tribunal act 2008, section 82 (a)
The appellant, Mr Garry Smith, owns a Ford motor car. It was manufactured in May 1991.[2] In mid August 2012, concerned about a bad rattle, Mr Smith took his car to the workshop of the first respondent, the trustee of the J&C Whyte Family Trust, which carries on a business known as Mitchell Service Centre (MSC).
[2] Certificates of registration
The engine was found to be worn. Among other problems, it had a bent pushrod valve on one cylinder. Someone at MSC advised Mr Smith that the ‘bottom end’ of the engine had been previously reconditioned, could not be rebuilt a second time and that his best (or only) option was to replace the bottom end. Mr Smith accepted that advice.
I was told at the appeal hearing that the ‘bottom end’ is a generic term used in the automotive industry to mean the engine block (or casting) and all its ‘internals’ meaning the pistons, rotating parts, bearings and the sub-assembly, but not the engine’s cylinder heads or sump.
After Mr Smith accepted the advice to replace the bottom end, a mechanic at MSC removed the engine and sent it to the second respondent, Engine Rebuilders Canberra Pty Ltd (Engine Rebuilders), for reconditioning including replacement of the bottom end.
Engine Rebuilders is wholly owned by Mr Chris Whittaker. He and Mr Simon Murphy are the directors of the company, although at the appeal hearing Mr Murphy described Mr Whittaker as his ‘employer’ and his ‘boss’.
MSC delivered Mr Smith’s engine to Engine Rebuilders in late August 2012. In early September 2012, Engine Rebuilders returned what it says was Mr Smith’s reconditioned engine with a replaced bottom end, where a mechanic fitted it into Mr Smith’s car.
Mr Whittaker said he was overseas at the time this occurred, and that he had no role in the transaction. At the appeal hearing, he said he never saw the engine that was delivered, or the engine that was returned to MSC. Mr Murphy handled the whole transaction, including assembling the reconditioned engine. I accept Mr Whittaker’s evidence.
Engine Rebuilders contends that it purchased a replacement bottom end for Mr Smith’s car from Eagle Auto Parts Pty Ltd (Eagle Auto), which is a parts supplier in Melbourne. Engine Rebuilders provided a copy of Eagle Auto’s tax invoice dated 30 August 2012, which describes the bottom end purchased as follows:
RECO 5.8/351W FRMS
ENGINE STAMPED #4192
12 MONTH 20,000 K WARRANTY **
OIL PRESSURE MUST BE CHECKED PRIOR TO START UP
CAMSHAFT MUST BE RUN IN FOR 20 MIN @ 2000 RPM
COOLING SYSTEM MUST BE FLUSHED
WARRANTY WILL BE VOID IF THESE STEPS ARE NOT FOLLOWED
WARRANTY DOES NOT COVER LABOUR
**** NEW ENG NO ENG NUMBER ****
At the original hearing, Mr Whittaker said that the engine “is quite rare in Australia.”[3]
[3] Transcript of Proceedings 30 March 2016, page 15, line 35
Mr Whittaker provided the appeal tribunal with a photograph of a bottom end nestled in a wooden crate, and said “That’s how it came from Eagle.” Where Mr Whittaker had explained that he was overseas at the time and the photograph was a generic photograph of a bottom end downloaded from the internet, I infer him to mean that the photograph displayed a bottom end of the kind ordinarily delivered by Eagle Auto, suitable for Mr Smith’s car, and what he expects was delivered on this occasion.
At the appeal hearing, Engine Rebuilders contended that it (meaning Mr Murphy) reassembled the entire engine, which included attaching the cylinder heads from Mr Smith’s original engine to the bottom end supplied by Eagle Auto, and then returning the reassembled engine to MSC.
Engine Rebuilders sent a tax invoice dated 7 September 2012 to MSC for the reassembled engine, described as a ‘Recon Long Motor’, for a sale price of $3,960, although Mr Whittaker explained that the invoice was back-dated because he was ‘catching up on [his] paperwork’ after returning from overseas and that MSC didn’t get the invoice ‘until October’.[4]
[4] Transcript of original hearing, 30 March 2016, page 33, lines 10-12
After completing all the work on Mr Smith’s car, including refitting the reassembled engine provided by Engine Rebuilders, MSC gave Mr Smith a tax invoice dated 25 September 2012 for $6,995.
The invoice included many parts costs, one of which was for the reconditioned engine. The entry read as follows:
Reconditioned engine with new bottom end $4,000.00
Mr Smith paid MSC’s tax invoice in full.
Soon after collecting his car, Mr Smith reported mechanical problems. Mr Smith was particularly concerned about the engine’s low power and its excessive oil usage.
Although not to Mr Smith’s satisfaction, I accept that MSC worked with Mr Smith in an endeavour to address the problems but was unsuccessful at least in respect of the engine’s low power and excessive oil usage.
On 19 October 2012, MSC invoiced Mr Smith $149 for work which included ‘Check over after replacing engine. All OK’. At the same time, MSC carried out a 1,000 km service, at which time the car had travelled 1,310 kms. MSC did this service without charge.
On 17 December 2012, in response to Mr Smith’s continued dissatisfaction with the engine, MSC referred Mr Smith’s car to an engine tuning specialist and invoiced Mr Smith $165 for ‘dyno tuning of vehicle’.
In April 2013, Mr Smith arranged for an oil consumption test to be conducted. The test showed the engine was using approximately one litre of oil for every 1,000 kms travelled. He reported the results to MSC. At this stage, the car had travelled approximately 14,000 kms. At the appeal hearing, MSC and Engine Rebuilders accepted that the oil usage was excessive, but challenged the cause of the usage and denied responsibility.
In May 2013, Mr Smith arranged for another oil consumption test to be conducted, which produced the same result. Mr Smith reported that result also to MSC.
In October 2013, MSC conducted an oil consumption test (or arranged for it to be conducted) which again showed that the engine was using approximately one litre of oil per 1,000 kms travelled.
On 2 December 2014 MSC invoiced Mr Smith $138, which included a charge for labour described as follows:
Check compression in cylinders. Check inside cylinder with borescope. Check oil leaks. Oil leaking from power steering box and sump plug... Results of compression test: all cylinders have 120 psi except no. 6 which has 110 psi.
Mr Plasto on behalf of MSC told the original tribunal “we were going to bat for him [meaning Mr Smith] because it shouldn’t be using oil ... we felt for him because it shouldn’t be doing it, even though it is out of warranty.” Mr Plasto said that Engine Rebuilders wanted to see receipts to show the engine had been serviced, and that when Mr Smith did not produce receipts Engine Rebuilders would not consider the issue further, notwithstanding that MSC had conducted the important 1,000 km service.[5]
[5] Transcript of Proceedings 30 March 2016 page 75, 33 - page 76, line 26
Mr Smith disputed the failure to carry out further maintenance, and stated that a car mechanic, Mr Morschel, changed the oil filter and oil when the car had travelled approximately 15,000 kms. Mr Smith provided a copy of Mr Morschel’s invoice dated 18 May 2013 which stated:
1 oil filter - $10.50
5 Oil - $60
Inspect engine found oil leak coming from sump rear main and possible timing cover
Customer complaint about lack of power and oil usage
Compression test engine found cylinders 5 and 3 to be 30 psi lower than all other cylinders
Suggest engine rebuild.
MSC and Engine Rebuilders contended that Mr Morschel’s invoice was fraudulent because, they said, Mr Smith had previously told them that he had not changed the oil, and because Smith had added Mr Morschel’s ABN to the invoice sometime after the invoice had been provided. Mr Smith denied ever saying he had not changed the oil.
I was not persuaded that the invoice is fraudulent. Mr Smith says he added the ABN to the invoice, as evidence to show that Mr Morschel was carrying on a business. It is also illogical that Mr Smith would not have carried out such a basic step as changing the oil after spending $4,000 to obtain a new bottom end.
However, for the reasons that follow, the authenticity of Mr Morschel’s tax invoice was not relevant to the way Mr Smith put his case on appeal or to my decision.
Mr Smith’s efforts to resolve the matter with MSC were unsuccessful. He stated that his car now sits on his front lawn and that he and his partner cannot drive it because fumes from burning oil come into the car and make them sick.
In October 2015, Mr Smith concluded he had ‘hit a brick wall’ and filed an application in the Tribunal. Mr Smith sought payment of $7,398 “being full refund on money spent on faulty motor as it’s obviously not fit for the purpose for which I purchased it” plus interest and costs.
On 17 December 2015, MSC filed a third party notice joining Engine Rebuilders on the grounds that it is “liable for the engine supplied.”
Efforts to resolve the matter through a preliminary conference were unsuccessful, and on 30 March 2016 the original tribunal heard the application.
At the core of Mr Smith’s case was that he had bought and paid for a ‘reconditioned engine with a new bottom end’, and had not received what he had paid for. Referring to MSC’s tax invoice, Mr Smith said:
It says re-conditioned engine with new bottom end. That means the top was put on, the two heads were put on, new bottom end. That’s what I paid for. That’s what I paid $4,000 not $3,200 which I could get anywhere. I paid the money. I paid the money for a new bottom end.
New bottom end, operative word being “new” not re-conditioned.[6]
[6] Transcript of Proceedings 30 March 2016, page 30, line 37 – page 31, line 5
At the original hearing, Mr Whyte agreed with Mr Smith’s description of what Mr Smith had bought and paid for, and claimed that that is what he received. Mr Whyte said:
Everything in it was new. The block had never been used, it was brand-new. The crankshaft had never been used, it was brand-new. Like all the parts were - it’s brand-new, but there’s been an issue in the factory and they generally repair them in-house. They’ve never been on the road.[7]
[7] Transcript of Proceedings 30 March 2016, page 31 lines 22 - 26
For reasons explained below, I am satisfied that Mr Whyte’s understanding was not factually correct. Rather, it reflected (at best) his understanding of what he had bought from Engine Rebuilders and then on-sold to Mr Smith.
I pause here to comment on Mr Whyte’s evidence that “there’s been an issue in the factory and they generally repair them in-house. They’ve never been on the road.”
At the appeal hearing, consistent with Mr Whyte’s evidence, Mr Whittaker explained that from time to time the bottom end of an engine produced at a factory is found to have a defect of one kind or another. The defect is repaired, which may involve replacement of a component or components in the bottom end, but the factory does not stamp the engine block or install it into a car. Rather, the block and all its ‘internals’ that make up the bottom end is sold unstamped to a parts dealer such as Eagle Auto who in turn sells it to someone seeking a ‘new’ bottom end. In lay terms, I understood an engine of this kind to be a ‘factory second’. For these reasons, I understood Mr Whittaker to have contended at the original hearing that the bottom end was reconditioned, rather than new.[8] Irrespective of how it is described, it is a bottom end that has not been used to drive a car on a road.
[8] Transcript of Proceedings 30 March 2016, page 31, line 36 and page 32, lines 25- 28
I am satisfied that through this process Eagle Auto, from somewhere and at some time, obtained an unstamped bottom end of a kind suitable to be installed in Mr Smith’s car. This also explains the entry ‘**** NEW ENG NO ENG NUMBER ****’ on its tax invoice to Engine Rebuilders, meaning it was a new engine bottom end but with no factory engine number stamped on the block. The invoice also states in the second line that Eagle Auto (or someone on its behalf) stamped the number ‘4192’ into the engine block, as an identifier of the bottom end referred to in its tax invoice.
At the original hearing, there was no dispute that the engine was using one litre of oil per 1,000kms or that the compression tests showed different readings for different cylinders. In issue was why the engine was performing in this way.
At the original hearing, MSC’s defence was that the bottom end and all its component parts were new at the time MSC refitted the supplied engine into Mr Smith’s car, but the problem was now Mr Smith’s because he had not changed the oil as required, and because the warranty period had expired.
Mr Whittaker took a similar attitude, stating that the 20,000 km warranty had expired; that Mr Horshel’s invoice was “phoney”; and that Engine Rebuilders “would have nothing to do with it.” Mr Whittaker said there were many possible explanations for why the engine was using oil, and for the compression test results, and that “there is no reference to what is actually wrong with the engine. There is nothing wrong with the engine.”[9]
[9] Transcript of Proceedings 30 March 2016, page 65, lines 22- 23
The original tribunal was satisfied that there was ‘something wrong’ with the engine, but dismissed Mr Smith’s application essentially because it was not satisfied that Mr Smith had proved his case. At the end of the hearing, the original tribunal gave oral reasons for its decision which included:
I’m unfortunately not satisfied on the evidence that the engine or the way it’s been fitted is not fit for use and therefore a breach of a consumer guarantee. There is no expert evidence to tell me why this engine is using the amount of oil it does or why there is now a fumey smell, a reason which probably wasn’t reported or noted earlier on, and even [if] I was satisfied that there was a problem with this engine, the difficulty is that if the goods were not fit for purpose, if you want a full refund you have to reject those goods within the rejection period, and I’m not satisfied that a rejection has ever occurred, let alone within the rejection period.
..
The difficulty is that although I’m satisfied the [Australian] Consumer Law applies and I’m satisfied there is something not right, I accept, Mr Smith, that you would not be here if it wasn’t for the fact there is something not right, something not right about that engine or the rebuild or there something not right going on, but the difficulty is it falls to the applicant to satisfy the tribunal what it is that’s not right, that it is a major failure or a minor failure and what relief flows from that.
..
I’m not satisfied that within a reasonable rejection period there was any requirement to take the goods back such that you could now ask for a refund of the amount of the goods. You haven’t had the goods repaired so you can’t ask [for] them to be rectified even if I was satisfied that it’s a minor failure. I’m not even satisfied on the evidence that it’s a minor failure. We simply do not know. I do accept there’s something wrong with it, it’s not quite right. But is it a minor failure or is it as simple as something that needs to be adjusted? I really cannot say.
It’s clearly a situation where you’re very dissatisfied with the item that you’ve got and the way it’s operating at this point in time but until unfortunately you take that next step of having it diagnosed and rectified, I couldn’t be satisfied to order whose fault it is that it is not working exactly as you expected it to.
Mr Smith was not to be deterred. Acting on the original tribunal’s reasons, Mr Smith appealed from the tribunal’s decision and produced new evidence in an effort to prove that he did not get what he paid for: a new bottom end.
In particular, Mr Smith engaged Mr Peter Schliebs of Top Spec Automotive Repairs who removed the cylinder heads and other necessary parts in order to establish, one way or another, whether the engine in Mr Smith’s car had a new bottom end as MSC contended, or a reconditioned and defective bottom end, as Mr Smith contended.
Mr Schliebs provided a report dated 27 April 2016 in which he stated:
I have inspected internally, by removing cylinder heads, the engine in [Mr Smith’s car] and have noted the cylinders have been bored 0.030” oversize, indicating this engine has at some time been reconditioned.
Mr Schliebs provided a photograph of the piston on which the detail “.030” is written, meaning the cylinders had been bored out and the pistons were therefore oversized by that amount.
At the appeal hearing, Mr Schliebs explained that when stating the engine “has at some time been reconditioned” he meant that to rectify worn cylinders and/or pistons the cylinders had been bored out and that oversized pistons had been installed to fit the widened diameters of the cylinders. This work had been done to extend the life of the bottom end.
Mr Schliebs gave evidence that a ‘new bottom end’ (as opposed to a reconditioned bottom end) entails a new block, new pistons and new internal workings that is delivered by a parts supplier in a wooden crate. He explained it is all ‘new’, or ‘standard’, meaning unused. That evidence was consistent with Mr Whyte’s and Mr Whittaker’s evidence.
It follows that however Engine Rebuilders was using the word ‘reconditioned’, when describing the bottom end Mr Murphy attached to the heads from Mr Smith’s original engine and returned to MSC, it was not new in the sense of not previously used to drive a car on a road.
That fact is enough to establish Mr Smith’s claim against MSC. Mr Smith bought and paid for a reconditioned engine “with new bottom end” and did not receive what he paid for. The question remained as to how this came about.
Relevant to that question, Mr Schliebs’ tax invoice dated 6 May 2016 stated:
Engine number located at back of passenger side cylinder head on engine block: AH1JML46235
At a directions hearing on 26 May 2016, Mr Smith explained that Mr Schliebs was able to see the engine number but could not photograph it because of its difficult location.
Mr Smith also produced certificates of registration for his car expiring 22 September 2011 and 28 September 2016, both of which recorded “Engine number: AH1JML46235”.
The new evidence changed the whole case. Where Mr Smith’s complaint was previously that he had bought and paid for a ‘new bottom end’ but received a reconditioned bottom end, now his concern was that his old, original and defective bottom end had been put back in his car.
MSC and Engine Rebuilders strenuously denied that this had occurred. Mr Whittaker said that that was impossible because the old engine had been thrown away. The basis for this claim was uncertain, especially where Mr Whittaker was overseas at all relevant times.
In an endeavour to clarify the issue, on 2 June 2016 ACT Road Transport Authority (RTA) inspectors carried out an inspection of Mr Smith’s car. The RTA provided a vehicle identity check report, which stated that the engine block in Mr Smith’s car is stamped with engine number AH1JML46235. The report also stated:
Checked ... And inspected vehicle inc all identifiers. NB:-Engine Number appears Original all ok
This was consistent with Mr Schliebs’ evidence, who explained that the engine number and chassis number (although different) could be matched in a way that established that the engine and chassis were manufactured and assembled as parts of the car at the same time.
The RTA also provided a colour photograph of the engine block which showed the serial number AH1JML46235, verifying the statement in its report.
Neither MSC nor Engine Rebuilders objected to the appeal tribunal receiving the new evidence that had been produced subsequent to the original decision. However, the new evidence had so significantly changed the case that I decided MSC and Engine Rebuilders should be given a full opportunity to respond. The case was no longer about the quality of the replacement bottom end sourced from Eagle Auto, but whether the bottom end in Mr Smith’s car had been replaced at all.
I therefore decided that the appeal hearing should be dealt with as a new application. On 1 July 2016, I made orders (in summary):
(a)that the matter be heard on 14 September 2016 as a new application;
(b)that Mr Smith give to the Tribunal, MSC and Engine Rebuilders by 13 July 2016 a written timeline of events (as he saw them); a copy of all the documents he wished to rely upon at the hearing; and a statement by every witness that he wished to call to give evidence at the hearing; and
(c)that MSC and Engine Rebuilders likewise give to the Tribunal, Mr Smith and each other by 27 July 2016 a written timeline of events (as each of them saw it) a copy of all the documents each wished to rely upon at the hearing; and a statement by every witness that each wished to call to give evidence at the hearing.
On 13 July 2016, Mr Smith gave to the Tribunal, to MSC and to Engine Rebuilders:
(a)a timeline of events (as he claimed them to be);
(b)the certificates of registration for his car expiring September 2011 and September 2016, as referred to in paragraph 54 above;
(c)a tax invoice for a compression test conducted on 1 February 2016 by One Stop Automotive & Tyres, which reported:
Compression tested on all cylinders between115psi and 125psi
Advised Customer to revisit installing workshop [to] rectify low compression and oil usage
Suggest engine rebuild or recondition due to oil consumption and compression issues
(d)the vehicle identity check carried out by the RTA and attached photographs, as referred to in paragraphs 57 and 59 above;
(e)MSC’s tax invoices, as referred to in paragraphs 14, 19, 20 and 24 above;
(f)Mr Schliebs’ report and tax invoice, as referred to in paragraphs 46 and 52 above;
(g)an entry from Mr Whittaker’s ‘Police Book’ recording Engine Rebuilders’ purchase of an engine from ‘Eagle’ having engine number 4192 and the sale of the engine to ‘Mitchell SC’ on 7 September 2012 for a sale price $3,960;
(h)a statement from Mr Murphy dated 18 February 2016 in which Mr Murphy stated:
I found a reconditioned long engine from one of our suppliers that were imported in from the USA and would be around the same price ... I was given the go-ahead and got it in and sent it to MSC.
(i)Eagle Auto’s tax invoice, as referred to in paragraph 9 above.
On 22 July 2016, Mr Whittaker (on behalf of Engine Rebuilders) provided a submission as to why the appeal should be dismissed as against Engine Rebuilders; a timeline of events (as he claimed them to be); and four documents on which he relied, being a dictionary definition of ‘big end’ being another way of describing a bottom end, a photograph of a factory stamped engine number (per paragraph 100 below) and the documents referred to in paragraphs 11 and 14 above. Mr Whittaker also stated in his submission that ‘Mr Simon Murphy from Engine Rebuilders will be attending the hearing to give evidence’ but did not provide a witness statement from Mr Murphy or any indication of what his evidence would be.
On 27 July 2016, Mr Whyte (on behalf of MSC) provided a submission as to why the appeal should be dismissed as against MSC. MSC relied on four documents, being the documents referred to in paragraphs 26, 47, 57 and 59 above.
The central question at the appeal hearing was whether the bottom end in Mr Smith’s car was the same one that MSC had taken out, as evidenced by the engine number stamped into the block, or a bottom end sourced from Eagle Auto.
For this reason, questions of warranty, fitness for purpose or responsibility for defects in the engine now in Mr Smith’s car became irrelevant. Mr Christensen, solicitor who appeared for Mr Smith, did not press Mr Smith’s claim with reliance on any of those issues. Mr Smith accepted that the appeal should be dismissed if he got a replacement bottom end, regardless of whether he “got a bad engine” or it was in some way damaged after the event, or Eagle Auto supplied a ‘dud’ to use Mr Whittaker’s term.[10]
[10] Transcript of Proceedings 30 March 2016, page 81, lines 32-35
I do not know what became of the bottom end referred to in Eagle Auto’s tax invoice, but for several reasons I am satisfied that it is not in Mr Smith’s car.
First, Mr Schliebs gave evidence that a reconditioned engine with a ‘new bottom end’ entails a new engine block and new internals including the pistons. In other words, all the parts and the block should be new or ‘standard’ even if it was rebuilt using new parts to correct any prior defects. That, he said, is what comes out of the wooden crate. This evidence was consistent with the invoice from Eagle Auto that described important steps to ‘run in’ a new engine and its description of the supplied part as a “New Eng”. It was also consistent with Mr Whyte’s evidence about the refitted engine that (he thought) MSC installed in September 2012.
That evidence does not describe the bottom end that Mr Schlieb saw in Mr Smith’s car, which had bored out oversized cylinders and a block that “looked to be original”, meaning it looked like it had been in the car since 1991 or at least looked like it had been in the car for quite some time.
Second, the Eagle Auto tax invoice states that the engine referred to in its invoice is stamped ‘#4192’, meaning the block is stamped with the number 4192. The invoice also states ‘new eng no eng number’, meaning it did not carry any factory engine number.
That evidence corresponds with the extract from what Mr Whittaker described as his ‘Police Book’ in which he enters the details of every engine that Engine Rebuilders buys and sells, including its engine number. I was told these details are to assist police, and perhaps others, in tracing vehicles and engines that might be re-birthed or transferred. The Police Book records the engine bought from Eagle Auto and sold to MSC as having engine number 4192, not AH1JML46235.
Mr Schliebs and the RTA independently examined the engine block of the engine in Mr Smith’s car, and neither report seeing the number ‘4192’. Rather, both identified a different engine number: AH1JML46235. Towards the close of the appeal hearing, Mr Whyte suggested a further inspection be conducted to ascertain or check that engine number 4192 was not on the block. I saw no reason to further adjourn the hearing to accommodate the possibility of such further evidence. Mr Whittaker had had more than three months since receiving the RTA’s inspection report to ask for a further inspection to find that number if he had thought it was on the block. He never did. With the information from his Police Book, he could have asked at the time of the inspection on 2 June 2016 for the RTA inspectors to look for engine number 4192. He never did. Mr Schliebs and the RTA independently examined the block for the express purpose of identifying an engine number or numbers on the block. In my view it is inherently improbable that both missed seeing the number 4192. The sensible explanation is that that number is not on the block. The record in Mr Whittaker’s Police Book is wrong.
Third, at least one thing is clear: engine number AH1JML46235 is stamped on the block of the engine in Mr Smith’s car. It is also clear by reference to the registration papers that that number was stamped on the block that MSC took out of Mr Smith’s car.
That would ordinarily be proof positive that the blocks are ‘one and the same’, yet towards the close of the hearing on 14 September 2016, four years after the event, and after Mr Schliebs had given his evidence about the block in Mr Smith’s car and the number on it, Mr Whittaker called Mr Murphy who gave evidence that in 2012 he noted the number on the old block and stamped it onto the new block before returning the reassembled engine to MSC. Mr Whitaker also produced a freshly folded witness statement from Mr Murphy dated 30 June 2016 in which this claim was made, yet neither the statement nor any hint of this evidence had ever been previously disclosed.
Mr Whittaker gave no explanation for why he withheld this information until the appeal hearing and contrary to the order that he provide a witness statement of any witness he intended call, except to apologise and say that he did not realise he needed to do so. It was an extraordinary response where the key issue in the case was whether Mr Smith’s original engine block had been put back in his car, as evidenced by the serial number stamped into the block.
I found Mr Murphy to be an unreliable witness who displayed a willingness to say whatever he thought would assist his case.
For example, in his statement dated 18 February 2016, Mr Murphy said he “found a reconditioned long engine [meaning a bottom end with the cylinder heads on it] from one of our suppliers that were imported in from the USA and would be around the same price as the initial job ($4,400.00). I was given the go ahead and got it in and sent it to Mitchell Service Centre.” Yet at the appeal hearing he said he had spent a couple of days reassembling the engine which included putting the heads from Mr Smith’s original engine onto the bottom end purchased from Eagle Auto.
As another example, in aid of his claim that he stamped the number from the old block into the new block and that it was not the original block, he said that factory numbers are placed in a single line unlike the numbers on the block in Mr Smith’s car. However the example Mr Whittaker gave to the appeal tribunal of a so-called factory number[11] has the numbers stamped on two lines.
[11] Photographs marked "A4" attached to Engine Rebuilders response document dated 22 July 2016
I reject Mr Murphy’s evidence that he noted the number on the old block and stamped it into a new block. I have concluded that Mr Murphy’s evidence, four years after the event, was given solely in an attempt to explain away the recently discovered and unarguable fact that the number stamped into the block removed from Mr Smith’s car is the same as the number stamped into the block refitted to the car. It is also inconsistent with other evidence in the case.
First, Mr Murphy’s evidence is inconsistent with the fact that the block refitted into Mr Smith’s car is original or near original regardless of when the numbers were stamped into it or by who.
Second, it is implausible if not fanciful that Mr Murphy would stamp engine number AH1JML46235 onto an engine block that already carried an engine number (meaning 4192) to create two engine numbers on the one block, or that he would not mention he had done so for Mr Whittaker to record that additional number in his Police Book.
I also reject Mr Murphy’s evidence that he did not think he was doing anything wrong by copying the unique identifying number of an engine and stamping it into a different engine. A person with no understanding of the significance of engine numbers might do such a thing, but it is nonsense to think that the director of a company that is in the business of providing reconditioned, replacement or second hand engines would not appreciate that the whole purpose of an engine number is to provide an indelible identifier record of a particular engine.
Third, as Mr Whittaker observed, it ‘makes no sense’ that Mr Murphy would have copied the number from the old block onto the new block. If Mr Smith had asked for an inspection of the refitted engine to ascertain the new engine number in order to correct that detail about his car’s registration, and the number from his old engine had then been discovered, Engine Rebuilders would have quickly received a phone call from the ACT Motor Vehicle Registry seeking an explanation. It is one thing for the anomaly to have been discovered. It is quite another for Mr Murphy to have actively stamped the number from the old block into the new block to create the anomaly.
I do not know whether Mr Murphy did any work to rectify the defects in Mr Smith’s engine, but I am satisfied that he received Mr Smith’s original engine and returned it to MSC with at least the same block and passed it off as a reconditioned engine with a replaced bottom end. Whether the replacement would be described as a new bottom end (as Mr Whyte contended) or a reconditioned bottom end (as Mr Whittaker contended) is not to the point: it was neither.
I expect Mr Whittaker has had a serious conversation with Mr Murphy about this transaction. That is between them. My finding is that the company, Engine Rebuilders, did not provide MSC with a reconditioned engine with a replaced bottom end as it purported to do.
I was unable to determine when Mr Whittaker realised what may have occurred. It remains puzzling that at the hearing on 14 September 2016 Mr Whittaker produced Mr Murphy’s statement dated 30 June 2016 in which Mr Murphy states that he stamped the number on Mr Smith’s old block onto the new block, yet Mr Whittaker said nothing about this when he was in the tribunal the next day (1 July 2016) and did not provide a copy of the statement with his documents filed on 22 July 2016.
I accept Mr Whyte’s evidence that for MSC this was a routine circumstance where it sent the engine to a third-party specialist (Engine Rebuilders) for work to be done, and refitted the engine upon its return, in the same way that it sent the transmission and the torque converter to other third party specialists for reconditioning, return and reassembling into Mr Smith’s car. Mr Whittaker confirmed that he would not expect anyone at MSC to check that the returned engine was anything other than what they expected it to be.
Engine Rebuilders’ conduct, however, does not absolve MSC from its breach of contract with Mr Smith. My finding that Mr Murphy, on behalf of Engine Rebuilders, returned Mr Smith’s engine to MSC with the same bottom end necessarily leads to the fact that MSC breached its contract with Mr Smith by not providing that which it had intended to provide: a reconditioned engine with a new bottom end.
Whilst there was some debate at hearing about whether Mr Smith dealt directly with Engine Rebuilders, I find from the tax invoices that MSC contracted with Engine Rebuilders for it to supply MSC with a reconditioned engine with a new (or at least replacement) bottom end in order for MSC to fulfil its contract with Mr Smith. It follows, as a matter of contract, that MSC is liable to Mr Smith and Engine Rebuilders is liable to MSC.
I pause here to address the five grounds upon which Mr Whittaker submitted that Mr Smith’s claim should be dismissed.
The first was that, he said, Mr Smith had ‘tampered’ with MSC’s tax invoice dated 25 September 2012 by writing the words “short motor” on the invoice alongside the typed entry “reconditioned engine with new bottom end”. I reject that submission. Mr Smith did not overwrite any of the words typed on the invoice: it was merely his notation of another way to describe a bottom end. In any event, I had a clean copy of the tax invoice, and relied on the typed entry on the invoice, not Mr Smith’s handwritten notation.
The second ground was that Mr Smith had ‘tampered’ with Mr Morschel’s tax invoice, by later writing Mr Morschel’s ABN on the tax invoice. That addition is irrelevant for the reasons discussed in paragraph 28 above.
The third ground was that the words “with new bottom end” in MSC’s tax invoice ‘does not make any sense’. Mr Whittaker referred to the earlier words in the invoice: “Car towed in with bad rattle. Found bent pushrod valve on one cylinder”, and the later words describing what was supplied - reconditioned engine ‘with new bottom end’, and submitted “You could not get two things further away from each other in an engine, does not make any sense.”
A bent pushrod valve and a bottom end may be different parts of an engine, but that has no relevance to the essential question: when Mr Smith bought a new bottom end, did he get what he paid for? Mr Whittaker’s third ground is not relevant to that issue.
The fourth ground had two parts. First, Mr Whittaker said that for Mr Smith to engage Mr Schliebs to disassemble the engine in order to show it was a reconditioned engine was “a waste of money when a borescope could have had the same result in ten minutes.” Second, Mr Whittaker referred to Mr Schliebs’ photograph of the piston after the engine had been disassembled, quoted the full number on the piston (463P. 030 166-02-05-B) which, he said, “I believe is the date of manufacture” and said “it certainly looks like a new piston to me. ... I believe he was looking for something wrong and did not find it.”[12]
[12] Engine Rebuilders response document dated 22 July 2016
Regarding the first part, I am not persuaded that Mr Smith could have proved his case with a borescope. I was told that a borescope is a tool that simply “lets you have a look.” It is not a measuring tool to determine whether a cylinder or piston is oversized. Also, MSC’s tax invoice dated 2 December 2014 states that MSC checked the inside of the cylinder with a borescope. If this checking had shown or could show that the cylinder was oversized, or that the bottom end had been reconditioned, Mr Whyte would or could have known that fact and said so two years ago. He never did. Instead, he maintained that a new bottom end was installed and that everything in it was new, not reconditioned and oversized.
I recognise Mr Schlieb’s evidence included a photograph showing a piston marked “.030”, meaning .030″ oversized. I recognise also that if this marking was visible it could (potentially) have been seen with a borescope. However there is no evidence that it was visible, and perhaps it was covered with carbon, hence Mr Whyte maintaining at the original hearing that everything was new, not reconditioned, because MSC did not and could not see the marking when it checked the inside of the cylinder with a borescope.
The second part of Mr Whittaker’s fourth ground was mischievous. The marking “.030” displayed in the photograph indicates that the piston is oversized. It has nothing to do with the date of manufacture, and Mr Whittaker who has been in the engine rebuilding business for years must have known that. He must also have known that an oversized piston is to fit a bored out cylinder.
The fifth ground was a contention that the engine number found stamped on the engine block in Mr Smith’s car is ‘not factory’. Mr Whittaker submitted:
It may appear to be original, mainly because the surface it is on is still original (has not been ground away) and there is no evidence of underlying numbers (over stamping).
Mr Whittaker provided a photograph of, he said, a factory stamped engine number (AH4KMS46578) to illustrate the differences in font and layout between it and the number stamped on the engine block in Mr Smith’s car.
I did not decide whether the number stamped on the engine block in Mr Smith’s car was ‘factory stamped’, nor did I think it necessary to do so. The question I had to decide was whether the engine block refitted into Mr Smith’s car was the same one was taken out, regardless of whether the number on it was a factory number or when it may have been placed on the block. In this regard, Mr Whittaker accepted that the surface of the block “is still original”, meaning so too is the block. I reject the fifth ground.
I turn to MSC’s submissions. Mr Whyte contended that the claim against MSC should be dismissed on the grounds that the engine number stamped on the engine block in Mr Smith’s car is not original; that Mr Smith had contended that his original engine had never been reconditioned yet the photographs of the pistons indicate that the pistons are .030″ oversized indicating that the engine has been reconditioned; and that Mr Morschel’s invoice was fraudulent.
Mr Whyte also maintained his position that Mr Smith had not changed the oil as required; the engine was out of warranty; the car had travelled 23,000 kms since the replacement engine was fitted; and that MSC should therefore not be responsible for any defects that the engine now displayed.
I reject Mr Whyte’s submissions as to why MSC is not liable. That the engine number stamped on the engine block in Mr Smith’s car may not be original is irrelevant: what matters is that it corresponds with the number on the engine block taken out of Mr Smith’s car. Whether Mr Smith’s original engine had ever been reconditioned is also irrelevant: the question is whether the bottom end was replaced with a new bottom end. That the pistons in the bottom end now in the car are oversized indicates, as Mr Whyte states, that the engine now in the car has been reconditioned. Whilst I do not accept that Mr Morschel’s invoice was fraudulent, that too is irrelevant. Whether Mr Smith had not changed the oil, or the engine was out of warranty, or the car had travelled too far for Mr Smith now to claim for defects is also irrelevant: the question is whether Mr Smith received what he paid for, not what defects might have occurred after the event or their cause.
Remedy
The question is what damages should be awarded for the breaches of contract.
Mr Christensen submitted that MSC is liable not just for a refund of the money paid for the engine that was not supplied, but also all the ancillary costs that Mr Smith incurred and that were wasted as a result of MSC refitting his old and defective engine.
There was little dispute from Mr Whittaker or Mr Whyte on that question of principle. Their submission was primarily directed to what the costs should be.
Referring to MSC’s tax invoice dated 25 September 2012, I had very little evidence or submission about what portion of the parts and labour should be attributed to MSC removing and refitting the engine into Mr Smith’s car.
Regarding parts, doing the best I can, I accept Mr Whyte’s submission that most of the parts listed on the invoice were purchased and fitted in order to perform work that was independent of removing and refitting the engine. I allow:
(a)Reconditioned engine with new bottom end - $4,000 plus GST.
(b)Spark plugs - $42.19 plus GST.
(c)Engine mounts - $160 plus GST.
(d)Exhaust manifold gasket set - $15.45 plus GST.
(e)Oil filter - $12.73 plus GST.
(f)Oil - $42.50 plus GST.
Regarding labour, MSC charged Mr Smith for 14 hours of work at $100 per hour: $1,400. The description of work done was follows:
Car towed in with bad rattle. Found bent pushrod and valve on one cylinder. Remove engine and send to be reconditioned. Remove radiator for servicing. Remove transmission and send for reconditioning. Send torque converter for reconditioning. Reassemble engine using new water pump, gaskets and hoses. Add engine air filter, oil and oil filter. Replace spark plugs. Remove and replace engine mounts. Refill cooling system, bleed and pressure test. Remove LPG tanks and have tested. Refit and add LPG. Check for leaks.
Doing the best I can, I attribute nine hours, meaning $900 of these labour costs plus GST, to removing and refitting the engine.
I therefore assess Mr Smith’s claim for breach of contract against MSC, referenced to the tax invoice dated 25 September 2012 in an amount totalling $5,172.87 plus GST, being $5,690.16.
I have reviewed MSC’s further invoices dated 19 October 2012, 28 November 2012, 17 December 2012, 17 April 2013, 2 December 2014 and 12 December 2014. I allow only the invoices dated 17 December 2012 ($165) and 2 December 2014 ($138) on the grounds that only these costs are unlikely to have been incurred had a new bottom end been supplied and fitted.
I therefore assess Mr Smith’s damages for breach of contract against MSC in the sum of $5,993.16.
Mr Christensen submitted that Mr Schliebs’ costs ($1,889.80) should be included as part of Mr Smith’s damages. I reject that submission. Mr Schliebs’ costs were not caused by MSC’s breach of contract. They were costs incurred for the purpose of Mr Smith proving his claim. They were, in character, the same as Mr Christensen’s costs (if any) and the appeal fee which Mr Smith incurred for the purpose of presenting his case. I have therefore considered Mr Schliebs’ costs in this context.
Costs
The first question is whether I have power to order MSC and/or Engine Rebuilders to pay Mr Smith’s costs at all, meaning reimburse Mr Smith for Mr Schliebs’ costs.
The tribunal’s powers to award costs are set out in section 48 of the ACT Civil and Administrative Tribunal Act 2008, which states:
48Costs of proceedings
(1) The parties to an application must bear their own costs unless this Act otherwise provides or the tribunal otherwise orders.
(2) However—
(a) if the tribunal decides an application in favour of the applicant, the tribunal may order the other party to pay the applicant––
(i) the filing fee for the application; and
(ii) any other fee incurred by the applicant that the tribunal considers necessary for the application; or
Examples––subpar (ii)
a fee for a business name or company search
a filing fee for a subpoena
hearing fees
Note An example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
(b) if the tribunal considers that a party to an application caused unreasonable delay or obstruction before or while the tribunal was dealing with the application—the tribunal may order the party to pay the reasonable costs of the other party arising from the delay or obstruction; or
(c) subject to section 49, if a party to the application contravenes an order of the tribunal—the tribunal may order the party to pay the costs or part of the costs of the application to the other party; or
(d) if the application is an application for review of a decision under the Heritage Act 2004, the Planning and Development Act 2007 or the Tree Protection Act 2005, and the tribunal makes an order under section 32 (2) (Dismissing or striking out applications)—the tribunal may order the applicant to pay the reasonable costs of the other party arising from the application.
(3) For subsection (2) (d), reasonable costs of the other party arising from the application include reasonable legal costs but do not include holding costs.
Examples—holding costs
interest and lender imposed charges associated with a loan
costs of engaging workers and subcontractors and hiring equipment for a development
In CIC Australia Ltd v ACT Planning and Land Authority and Ors,[13] Penfold J considered the tribunal’s powers to award costs and concluded by reference to section 48(1) that the tribunal does not have any general power to make a costs order. Its only powers to make costs orders are in the circumstances found in section 48(2).[14]
[13] [2013] ACTSC 96
[14] see also Williams Love & Nicol Lawyers Pty Ltd v Wearne (Appeal) (Costs) [2016] ACAT 123, in which the tribunal noted the limits on the tribunal's powers to award costs
The question therefore is whether Mr Schliebs’ costs, which formed part of Mr Smith’s costs in this case, could and (if so) should be the subject of an order under section 48(2).
Section 48(2)(a) and (d) are not relevant.
Sections 48(2)(b) and (c) are, in my view, relevant.
Section 48, and its divide between the general proposition in section 48(1) that the parties “must bear their own costs” and the exceptions to that proposition in section 48(2), must be construed in the context of the ACAT Act as a whole. In particular, two of the objects of the ACAT Act in sections 6(b) and (c) must be taken into account. They state:
b. to ensure that access to the tribunal is simple and inexpensive, for all people who need to deal with the tribunal; and
c. to ensure that applications to the tribunal are resolved as quickly as is consistent with achieving justice.
Particularly in claims for small monetary amounts, parties usually want their dispute resolved quickly and inexpensively. The objects of the ACAT Act in sections 6(b) and (c) recognise that those wishes should be met to the extent practicable. Justice is frustrated when the parties’ time and costs outweigh the amount in dispute.
That parties must bear their own costs, in the ordinary course, is intended to make justice more accessible. In Maylor (No 2) v Mid North Coast Area Health Service[15] at [21] – [25], the NSW Administrative Decisions Tribunal said:
21. In their attempts to make justice more accessible, governments throughout Australia over the last 25 years or so, have created a number of administrative tribunals. One of the features of what was known in the 1970s and 1980s as ‘the New Administrative Law’ was the cost regime.
22. To encourage a resort to law, and to make government authorities more accountable to the citizens of Australia and the various States and Territories, many if not most administrative tribunals established on the model of the Commonwealth Administrative Appeals Tribunal generally expect the parties to bear their own costs. This is particularly so where the respondent party is usually a government authority.
23. Public interest considerations are very much part of the texture of all aspects of proceedings in this Tribunal, including applications for costs orders ...
24. The public policy underlying such a divergence away from the time-honoured practice in courts is obvious. While a balance of interests has always to be struck, in these cases it is generally struck in favour of the citizen rather than the government authority. It is recognised, of course, that many complaints will ultimately not be substantiated or adequately established, the complainant bearing the onus of proof.
25. ... The informality of procedures, and the removal of the disincentive of costs orders in the ordinary run of cases, are intended to introduce into the proceedings a measure of fairness and equality which is not generally to be found in traditional courts. (emphasis added)
[15] [2001] NSWADT 118, cited with approval in Appellants v Council of the Law Society of the ACT and The Legal Practitioner [2011] ACTSC 133 at [92]
However, that parties should bear (or pay) their own costs is not unconditional. There are exceptions in section 48(2).
Especially relevant to claims for small monetary amounts, sections 48(2)(b) and (c) state circumstances in which the tribunal may depart from the general rule. When sections 6(b) and (c) and 48(2)(b) and (c) are read together, it becomes clear that each party is expected to participate in tribunal proceedings in a manner that promotes the objects in sections 6(b) and (c) - and may be ordered to pay another party’s costs if it does not do so.
Litigation in the tribunal’s small claims jurisdiction is not about sharp practice, withholding relevant information, half-truths, ambush, surprise or delay - in short “unreasonable delay or obstruction.” It is about each party bringing the dispute to the table as quickly as practicable with all of the relevant facts, evidence and arguments laid bare so that the dispute can be resolved as quickly and as inexpensively as the case permits. In my view, the tribunal’s power to order costs under section 48(2)(b) is engaged when a party does not participate in this way.
The tribunal routinely orders that parties give the tribunal and the other parties, in advance of the hearing, a witness statement setting out the intended evidence of any witness they intend to call, a copy of any document they intend to rely on and an outline of their case. These orders are sometimes criticised as onerous. I disagree. The intention is to oblige the parties to prepare and disclose their cases in advance of the hearing, to avoid surprise and to enable the dispute to be resolved quickly and fairly.
In my view, the tribunal’s powers to order costs under section 48(2)(c) is engaged when a party does not participate as ordered, especially where the party’s non-compliance with an order defeats the tribunal’s ability to deal with the dispute efficiently and quickly and/or increases the time and/or costs of other parties.
This story of Mr Smith’s motor car is a good illustration of how the administration of justice can be significantly frustrated when a party chooses to duck and weave in the way it presents its case, to contravene the tribunal’s orders and to prolong a dispute.
Mr Smith has been endeavouring to resolve his concerns about his defective engine for more than four years. From the beginning, the central question was whether the bottom end was new, or at least had not been used to drive a car on a road.
Mr Whyte on behalf of MSC defended the claim in the belief that MSC had bought a new bottom end from Engine Rebuilders and sold it to Mr Smith, yet from the beginning Mr Murphy knew, or should have known from having assembled the engine that he returned to MSC, that the pistons were marked “.030” oversized (meaning the cylinders been reconditioned).
On his own evidence, Mr Murphy also knew from the beginning that the engine he returned to MSC was stamped with the same engine number as the engine he received.
Engine Rebuilders did not reveal either of those crucial facts, and only tried to deal with them when they were discovered by others. Its behaviour caused delay, obstruction, wasted time and additional cost for everyone. I give some examples:
(a)The original hearing was a waste of time and effort because everyone, except Engine Rebuilders, was unaware of the essential facts.
(b)Mr Schliebs’ costs of disassembling the engine to prove that the replacement engine was reconditioned were unnecessary because Mr Murphy knew, or should have known, from the beginning that it was reconditioned and could have said so. He said nothing.
(c)I expect Mr Plasto from MSC would have ‘gone into bat’ for Mr Smith much more forcefully and effectively had he known that the engine returned to MSC was a reconditioned engine and had the same engine number as the engine that MSC sent to Engine Rebuilders for work that included replacement of the bottom end. I expect his efforts would have been successful, and this litigation would never have been necessary.
(d)The RTA’s inspection of Mr Smith’s engine to verify the number on the engine block, and everyone’s time-consuming attendance at the RTA, was a waste of time because Mr Murphy knew from the beginning that the block was stamped with the number AH1JML46235 and could have said so. He said nothing.
Engine Rebuilders’ obstruction continued before the Tribunal. On 1 July 2016, the appeal tribunal held a directions hearing to address how the case should proceed consequent upon the late discovery of the engine number on the block of Mr Smith’s car. That hearing could have been avoided if Engine Rebuilders had previously disclosed the relevant facts.
At the directions hearing on 1 July 2016, Engine Rebuilders was ordered to provide a statement of any witness it intended to call by 27 July 2016. Apparently it already had a witness statement from Mr Murphy, signed 30 June 2016, containing Mr Murphy’s evidence about how (he said) the same number came to be on the engine block, yet Mr Whittaker said nothing about the statement or its content on 1 July 2016 and then contravened the tribunal’s order that it produce a statement by 27 July 2016. He did not disclose the statement or its content until the close of the hearing on 14 September 2016, to the detriment of the process generally.
This conduct notwithstanding, the tribunal does not have a general power to order a party (and Engine Rebuilders in this case) to pay the other parties’ costs. Any costs order must be referrable to a provision in section 48(2). There are limits.
Section 48(2)(b) empowers the tribunal to order Engine Rebuilders to pay another party’s costs where it has caused obstruction, but only the reasonable costs of other parties arising from that obstruction.
The same situation arises where a party has caused unreasonable delay.
The proviso that delay needs to be “unreasonable” before section 48(2)(b) is engaged does not apply to obstruction. Delay can sometimes be minor or occur unintentionally and/or unavoidably. A party should not be penalised with a costs order in such a circumstance. By contrast, it is a nonsense to suggest that a party may cause obstruction but not be exposed to a costs order unless the obstruction is “unreasonable”.
Section 48(2)(c) empowers the tribunal to order a party to pay the costs of other parties consequent upon its contravention of orders, but only in the circumstances set out in section 49 which provides:
49 Costs for contravening an order
(1) The tribunal may award costs against a party for contravening an order under section 48 (2) (c) only if satisfied that it is in the interests of justice to do so.
(2) In deciding whether it is in the interests of justice to award costs, the tribunal must consider the following:
(a) whether the contravention was deliberate or could easily have been avoided;
(b) whether (and if so, the extent to which) the contravention has affected the tribunal’s ability to hear the application promptly;
(c) the importance to the community of people being able to afford to bring applications to the tribunal.
(3) The tribunal may consider any other relevant matter.
(4) Costs are payable in accordance with the scale of costs in the rules under the Court Procedures Act 2004 applying in relation to the Supreme Court.
With respect, I do not agree with the views of the tribunal in Bell v De Castella and Rob De Castella’s Smartstart For Kids Ltd[16] or in Carew-Neill v Bower,[17] that delay or obstruction encompasses bringing an unmeritorious action, or where bringing an action amounted to bad faith or abuse of process. Conduct of that kind is dealt with separately in section 32 of the ACAT Act, and costs are not payable for such conduct except in the case of applications for review of a decision under one of the Acts stated in section 48(2)(d).
[16] [2013] ACAT 66 at [15]
[17] [2016] ACAT 54 at [22]
Returning to section 48(2)(b), ‘obstruction’ is not defined in the ACAT Act, nor is guidance obtained from the explanatory statements, second reading speeches or other secondary material that may be considered under section 142 of the Legislation Act in order to work out the meaning of this word in section 48(2)(b). I am obliged to rely on the ordinary meaning of the word.
‘Obstruct’ is defined in the Macquarie Dictionary[18] as follows:
1. to block or close up, or make difficult of passage, with obstacles, as a way, road, channel, or the like. 2. to interrupt, make difficult, or oppose the passage, progress, course, etc., of 3. to come in the way of or shut out (a view etc)
[18] fifth edition, 2009
‘Obstruction’ is relevantly defined in the Macquarie Dictionary as follows:
1. something that obstructs; an obstacle or hindrance: obstructions to navigation 2. the act of obstructing. 3. the retarding of business before a legislative group by parliamentary devices, or an attempt at such a retarding.
‘Obstruction of justice’ is defined in the Macquarie Dictionary as follows:
any attempt to impede the due process of the law, as by threatening witnesses, attempting to influence jurors, interfering with evidence, etc.
In Auburn Municipal Council v Ivanoff[19] Maguire J said:
The verb ‘obstructs’ of course can, in various contexts, have different shades of meaning, but a common and natural meaning of the verb ‘to obstruct’ is to impede or hinder, to retard or to oppose the activities of, or to oppose the course of conduct of a person who is seeking to achieve a particular purpose. Those meanings which I have suggested seem to me to be perfectly natural and straightforward synonyms, as it were, of the verb ‘to obstruct’.
[19] (1964) 10 LGRA 258 at 260, cited in Boon v Maher (1986) 7 NSWLR 232 at 236
Whether there has been obstruction will depend on the facts and circumstances in each case. However, by reference to the ordinary meaning of ‘obstruction’, and of ‘obstruction of justice’ in the sense of obstructing the objects of the ACAT Act, I am satisfied that Engine Rebuilders through the conduct of Mr Murphy caused obstruction ‘before’ (meaning in the face of) the tribunal.
Engine Rebuilders also contravened the tribunal’s order by not filing Mr Murphy’s statement by 27 July 2016.
The question is what orders for costs should follow. Mr Smith seeks only that the parties (together or separately) pay Mr Schliebs’ costs ($1,889.80).
Mr Whittaker and Mr Whyte submitted that neither of them should be liable to reimburse Mr Smith for Mr Schliebs’ costs because the work was unnecessary. Mr Whyte submitted that the fact that the pistons were oversized (because the cylinders had been bored out) could have been identified using a borescope for minimal cost, say $60. That, he said, would have been enough to prove that the bottom end had been reconditioned and was therefore not a ‘new bottom end’. I reject that submission for the reasons discussed at paragraphs 95 - 97 above.
Mr Whittaker similarly would not accept that the bottom end was anything other than that supplied by Eagle Auto, meaning an unused bottom end, and that Engine Rebuilders was not responsible for anything because the engine was now out of warranty.
In my view, MSC and Engine Rebuilders’ refusal to accept that the engine did not have a new bottom end, when supplied and installed, forced Mr Smith to obtain proof from Mr Schliebs that the bottom end was reconditioned, not new.
These costs could have been avoided because Mr Murphy knew or should have known from the beginning that the engine had been reconditioned. He caused obstruction by not disclosing that fact, which in all probability would have rendered this litigation unnecessary. Engine Rebuilders should pay these costs.
Mr Schliebs’ tax invoice included a labour component of 8.5 hours at $120 per hour ($1,020 plus GST) for work described as follows:
Remove cylinder heads and all associated parts
Strip all top end of engine to examine bores and dimensions. Engine bores 0.30” (sic) oversize.
Surface grind heads and replace all gaskets and coolant
I received very little evidence or submission as to what portion of Mr Schliebs’ tax invoice should be characterised as a cost incurred for the purpose of this proceeding.
I am unable to see why the cost of surface grinding the heads or replacing the coolant had any connection with establishing that the bottom end had been reconditioned. Doing the best I can, I allow five hours for the cost of stripping the top end of the engine to examine the bores and dimensions and reassembling the engine: $600. I also allow the gasket set as an essential part for reassembling the engine: $358.18. With GST, I allow $1,053.99.
I turn to Engine Rebuilders’ contravention of the order that it file a witness statement of every witness it intended to call by 27 July 2016. At the hearing on 14 September 2016, Mr Christensen properly objected to my receiving Mr Murphy’s evidence on the grounds that he and his client had had no notice of it and no opportunity to prepare for it, for example by leading evidence from Mr Schliebs.
The objection was properly made. The late production of the witness statement forced me to choose between not permitting Mr Whittaker to call Mr Murphy to present this important evidence in his case and permitting the further evidence on the basis that Mr Smith could have an adjournment of the hearing in order to prepare for this further evidence. This may have required recalling Mr Schliebs.
With reluctance, I permitted the further evidence but Mr Smith chose not to seek an adjournment or to recall Mr Schliebs. As a consequence no additional costs were caused by Engine Rebuilders’ breach of the order, but I would have ordered Engine Rebuilders to pay all of Mr Smith’s costs of any further hearing, including his legal costs and any other costs that Mr Schliebs would have sought by having to return to the hearing if this case had needed to be adjourned to yet another day.
Orders
For these reasons, I will set aside the decision of the original tribunal given on 30 March 2016 and order that within 35 days MSC pay Mr Smith $7,865.58 comprised of the following amounts:
(a)$5,690.16 by way of damages for breach of contract.
(b)$140 for the original application filing fee.
(c)$499 for the appeal application filing fee.
(d)$1,536.42 interest on the damages, calculated from 26 September 2012 being the date from which MSC was in breach of its contract with Mr Smith.
Where responsibility for what occurred rests with Mr Murphy, who at all times acted for and behalf of Engine Rebuilders in relation to the whole transaction, I will order Engine Rebuilders to pay MSC within 28 days the amount that MSC must pay Mr Smith ($7,865.58). Engine Rebuilders’ compliance with the order will enable MSC to be in funds to pay Mr Smith, however MSC’s obligation to pay Mr Smith will stand as an independent order. Any enforcement action that MSC might take against Engine Rebuilders for non-compliance with my second order is a matter between those two parties.
I will also order that within 28 days Engine Rebuilders pay Mr Smith’s costs of $1,053.99 caused by its obstruction before the tribunal.
………………………………..
Presidential Member G McCarthy
HEARING DETAILS
FILE NUMBER: | AA 44/2015 |
PARTIES, APPELLANT: | Garry Smith |
| PARTIES, FIRST RESPONDENT: PARTIES, SECOND RESPONDENT | J&C Whyte Family Trust Engine Rebuilders Canberra Pty Ltd |
COUNSEL APPEARING, APPELLANT | Mr P Christensen |
COUNSEL APPEARING, RESPONDENTS | N/A |
SOLICITORS FOR APPELLANT | N/A |
SOLICITORS FOR RESPONDENTS | N/A |
TRIBUNAL MEMBERS: | Presidential Member G McCarthy |
DATE OF HEARING: | 14 September 2016 |
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