Spanagel v Easy Auto 123 - [2023] QCAT 23

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

Spanagel v Easy Auto 123 & Anor [2023] QCAT 23

PARTIES:

Peter spanagel

(applicant)

v

Easy auto 123

(first respondent)

Volkswagen group Australia

(second respondent)

APPLICATION NO/S:

MVL 113 – 21

MATTER TYPE:

Motor vehicle matter

DELIVERED ON:

16 January 2023

HEARING DATE:

10 November 2022

HEARD AT:

Brisbane

DECISION OF:

Member Howe

ORDERS:

Volkswagen Group Australia pay Peter Spanagel the sum of $23,034.55 within 14 days of order.

CATCHWORDS:

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – GUARANTEES, CONDITIONS AND WARRANTIES IN CONSUMER TRANSACTIONS – GUARANTEES, CONDITIONS AND WARRANTIES – where a consumer purchased a motor vehicle subject to manufacturer’s warranty – where the vehicle was involved in an accident shortly after purchase which caused panel damage but not motor damage – where the body repairer performed body repairs - where the engine broke down shortly after leaving the repairer’s shop – where the breakdown was due to the engine oil lacking viscosity – where it was found that neither the consumer or motor dealer who sold the vehicle or the body repairer changed the oil – where the applicant satisfied the onus of proof in respect of a claim for damages for breach of the manufacturer’s guarantee that it would comply with its warranties – where the manufacturer failed to satisfy the onus of proof then placed on the manufacturer to prove the oil was not the original oil added by the manufacturer justifying refusal to honour the warranty

Competition and Consumer Act 2010 (Cth), Schedule, s 59, s 102, s 271(5)

Fair Trading Act 1989 (Qld), s 50A

Currie v Dempsey (1967) 69 SR (NSW) 116

APPEARANCES & REPRESENTATION:

Applicant:

Self-represented

First respondent:

Self-represented by J Toohill and M Branch

Second respondent:

Self-represented by A Dowling

REASONS FOR DECISION

On 14 October 2020 the applicant, Mr Spanagel, purchased a used 2019 V6 Volkswagen Amarok from the first respondent (‘123’). The second respondent (‘VW’) is the manufacturer of the vehicle.
The vehicle had only travelled 957 km as at date of purchase. It had been used as a demonstrator vehicle by 123.
Mr Spanagel had an accident in early December 2020. He had stopped the vehicle and turned the engine off but had not applied the hand brake and the car had rolled down Toohill approximately 200 metres and crashed into a wooden fence. The vehicle had done 2,860 kms by that time.
Mr Spanagel claimed for the repairs on his insurance (RACQ). There was only damage to the body work, not to the motor. The repairs were not finished however until February 2021.
Mr Spanagel collected the vehicle from the body work shop on 12 February 2021 and was driving home when the engine produced a loud knocking noise after travelling only about 9 kms from the repairer’s workshop.
Mr Spanagel contacted 123. They told him to take the vehicle to a specialist VW dealer, Austral VW, which he did on about 15 February 2020. He was also referred to VW.
In March Austral VW had the oil analysed and then in April, so did VW. Analysis showed that the oil lacked adequate viscosity. It was 50% less viscous than standard.
Mr Spanagel asked VW to repair the motor under warranty. VW refused.
VW said there was damage caused to engine bearings due to oil starvation attributable to the reduction of viscosity. VW and 123 suggested someone had changed the oil, probably the body shop repairer, but denied it had been either of them.
The repairer denied changing the oil.
Mr Spanagel denied changing the oil.
Mr Spanagel commenced the within proceedings joining both 123 and VW and initially claiming $28,000 as the estimated cost of repair of the engine, plus $5,000 “damages”. Subsequently Mr Spanagel’s insurer, RACQ paid him out on the insurance on the basis the vehicle was a write off, but refused to pay an amount of $23,034.55 representing the cost of repairing the motor.
Mr Spanagel has reduced his claim against the respondents to the cost of repair of $23,034.55 plus damages of $5,000.

The evidence

The applicant

Mr Spanagel claims no expertise concerning engines and engineering. He gave evidence that he had not changed the oil in the vehicle during the period of his ownership, and signed a statutory declaration to that effect.

123

123 denies changing the oil whilst the vehicle was in its possession. Mr Toohill, the general manager of 123, gave evidence at hearing that he had made enquiries amongst staff and workers and could confirm that.
Mr Toohill also provided a statement of evidence in which he said 123 had not performed any service on the vehicle because the next scheduled service was not until it had travelled 15,000 km or 12 months had passed from the date the compliance plates were fixed.
He provided photographs of the vehicle as at time of sale showing a service sticker on the windscreen stating that the next service was at 15,000 km or by no later than 21 January 2021. But he points out 123 had sold Mr Spanagel the vehicle 3 months before that.
Mr Toohill said there was no need for 123 to do any service on the vehicle before it was sold. If 123 had performed a service on the vehicle, 123 would have attached a new service sticker (with a new 12 month date added).

VW

VW filed a Response to the claim brought by Mr Spanagel and attached to the Response is an oil test analysis and a document entitled Vehicle Inspection Report dated 4 March 2021.
The oil analysis mentions failed bearings and notes that the viscosity was 50% below ISO standard.
The Vehicle Inspection Report states:
The oil filter was found to be different than that of the service filter cartridge. The oil was noted to be clean considering the amount of white bearing material in the sump and filter. A paper drip test showed little soot content. The cleanliness of the oil suggest it has been replaced recently.
Then there appears the following note:
Inspecting the scene of the accident suggested it unlikely the non-running engine was damaged as a result. There no (sic) known reason why the oil was replaced and there is no manufacturing fault found with any component to cause the failure.
The author of the Vehicle Inspection Report goes on to suggest the insurer who paid for the panel repairs (RACQ) should cover the cost of damage to the engine as consequential damage attributable to the accident:
You can explain to the customer that the oil delivery system on this vehicle was found to be without fault. Bearings only fail when they are not lubricated. So something has happened during the accident, whilst being towed or at the smash repairer. You can explain that it appears the oil has been changed without reason.
Unless a manufacturing fault can be found, no warranty will (sic) provided.
In the Response, VW says this about observations made and advised to them about the vehicle by Austral VW when Austral VW inspected it:
Austral Volkswagen confirmed customer’s complaint of severe knocking noise from engine, no warning lights on dash. Carried out GFF no faults logged. Checked oil level okay, tested physical oil pressure and found 2 bar at idle. Took oil sample and found very black and smelling burnt. Removed sump from vehicle to inspect and found swarf and bearing material in sump, found multiple connecting rod bearings damaged and spun causing damage to crankshaft and connecting rods.
After an initial diagnosis from Austral Volkswagen, the service manager advised that the client had an accident and the vehicle had front ennd repairs carried out and after collecting the vehicle from the repairer the engine noise started. The dealer advised that they can see a non genuine oil filter has been fitted to the vehicle and when the oil was drained there wasn’t the correct amount of oil that should have been there. Dropped the sump and found the big end bearing has failed due to poor oil flow and it appears that the oil has been changed to see if the problem goes away. At this stage the service manager advised that repairs would not be considered warranty as no manufacturing defect has been identified with the vehicle.
Then in an email from Ms Gerogiannis for VW to Mr Spanagel on 17 May 2021 there is this comment:
There is room to suggest that oil could have been changed by the Easyauto team as the vehicle was over 12 months old at the time even though the mileage was low however cannot verify if this is the case.

Assessor

The Tribunal appointed an independent assessor to inspect and report on the vehicle.
The assessor was unable to access the internal components of the vehicle for detailed investigation but made this observation:
The respondent is also claiming that it appears the vehicle has just had an oil change but upon my inspection the oil sample was of an engine that has travelled in excess of 1,000 kms. It does not have the visual appearance and feel of freshly changed oil. It would make more sense if either the vehicle had an oil change at its 1,000 km service (if carried out at all) or if this is the original oil from factory. There would be no logical reason for the claimant to have had an oil change since purchasing the vehicle which leaves either the insurance company repairer or the dealership.

Consideration

The evidence adduced is limited. The parties had ample opportunity to obtain expert evidence prior to directions made on 1 September 2021 appointing an assessor to do that, but such efforts as made were desultory at best and the assessor is unable to offer very much in addition.
It is not in contention between the respondents that the engine failed because of oil starvation, meaning the oil failed to properly lubricate the moving parts. VW obtained a test and report of the oil concerned on 27 April 2021. It says the viscosity of the oil was 50% less than ISO (International Standards Organisation) standard and I accept that was the case.
Mr Spanagel does not know why the motor failed and says neither respondent dismantled the engine to properly investigate.
VW said their investigations showed the oil delivery system was working.
The assessor reported he was only able to inspect a bearing and a main cap and obtain a few drops of oil given he had no access to the internals of the motor. He said the engine required stripping and inspection, and in the absence of that he could make no definite findings.
The assessor did dispute the claim by the respondents that the condition of the oil suggested a recent oil change however. He thought his oil sample suggested an engine that had travelled in excess of 1,000 km (with the oil). He said in his report:
It does not have the visual appearance and feel of freshly changed oil. It would make more sense if either the vehicle had an oil change at its 1,000 km service (if carried out at all) or if this is the original oil from factory. There would be no logical reason for the claimant to have had an oil change since purchasing the vehicle which leaves either the insurance company repairer or the dealership.
Mr Spanagel says he didn’t change the oil, and the oil that was in the vehicle hadn’t been changed from date of purchase.
Mr Spanagel said he had no reason to change the oil. He purchased the vehicle when it had only travelled 957 kms and the accident occurred less than 2 months later. At time of accident the vehicle had only travelled 2,860 kms when he put the vehicle in for panel repairs. The vehicle broke down when he collected it from the repairer and was driving it away.
I accept his evidence that he did not change the oil.
VW says the oil found in the damaged motor was clean, suggesting that the oil had only recently been changed when the motor failed. Both respondents suggest the most likely entity to have been responsible for the oil change was the body repairer.
In support of that contention the Vehicle Inspection Report of VW dated 4 March 2021, which preceded the test of the oil done on 27 April 2021, said:
The oil filter was found to be different than that of the service filter cartridge. The oil was noted to be clean considering the amount of white bearing material in the sump and filter. A paper drip test showed little soot content. The cleanliness of the oil suggest it has been replaced recently. A parts ticket was submitted to the factory regarding the oil filter origin but they could not provide any information.
In its Response VW also refer to the non-genuine filter being discovered, suggesting the oil had been changed after the vehicle left the manufacturer’s plant by someone not associated with VW or 123. The evidence about the non-genuine filter came from the service manager for Austral VW.
Mr Spanagel filed a statutory declaration on 9 February 2022 however, in which he said three weeks after the engine failed, the Austral VW service manager had informed him that the oil filter on the vehicle was not an aftermarket item.
Mr Spanagel was not challenged about that by either respondent at hearing and I accept the filter on the vehicle was of a type that was normally used or could have been used by VW in the manufacture of the vehicle.
I note that Austral VW also advised VW that Austral VW had found the oil in the vehicle to be “very black and smelling burnt.”
This coincides with the findings of the assessor and is at odds with claims made by VW that the oil was found to be clean.
I do not accept that the oil in the vehicle showed clean after it broke down. I find it was as the assessor determined, oil that had been used to lubricate the vehicle for some significant period of time, and had not been recently added to the vehicle.
Mr Spanagel provides a copy of the repairer’s tax invoice for the body work done. There is no mention there of oil being added, and all the listed work concerns panel beating repair and spray painting. There was no reason for the repairer to change the oil in the course of the panel repairs.
There are photographs of the damaged panels in course of the panel repair work tendered by Mr Spanagel. There is no suggestion of any damage having been done to the motor when looking at them.
RACQ, the insurer who authorised body repairs, said in an email to Mr Spanagel dated 27 April 2021 that there was no relationship between the damage done to the vehicle in the accident and the damaged motor.
The finding by the assessor that the oil was not new and clean supports a finding that the repairer was not responsible for changing the oil.
It would perhaps have been of some assistance if both the service manager of Austral VW and the panel repairer had provided evidence, but they did not. Mr Spanagel said he asked the repairer to provide evidence but the repairer did not want to be involved.
I find that the repairer did not change the oil.
The vehicle was manufactured in July 2019 and fitted with a compliance plate in Australia in December 2019. Given the vehicle was purchased by Mr Spanagel in October 2020, it was more than one year old at that time, but Mr Toohill said the 12 month period for a change of oil started from the compliance date, which was December 2019.
Mr Toohill also points to the change of oil reminder sticker shown in photographs. It is a manufacturer’s sticker entitled Volkswagon Service. The next service is noted as 15,000 kms or by no later than 21 January 2021. That was not challenged at hearing by VW. Mr Dowling for VW said he agreed with the statements made by Mr Toohill about servicing dates.
As previously noted, Mr Toohill gave evidence that he had made enquiries with his staff at 123 and no one at 123 had changed the oil. I accept that.
I find that 123 did not change the oil.
I accept however that the damage done to the engine was due to poor lubrication of moving parts caused by low viscosity oil.

Claim under warranty

Mr Spanagel claimed under the vehicle warranty for the damaged engine but the claim has been refused by VW. He points out in his initiating application that the vehicle is near new and still has the remainder of the new car warranty applying.
Whilst details of the warranty are lacking, he clearly raised a claim on the warranty in an email he sent to VW on 27 April 2021 when he wrote:
The oil was supposedly analysed 3 weeks ago, why are we still waiting for the results?
VW have always claimed the oil was changed, but can’t come up with when it was changed nor why it was changed.
You still haven’t answered my main question, what was the cause of the oil starvation you are claiming caused the engine failure. Engines don’t just fail, there is a cause, which you have failed to show, so I still ask you to honour the warranty and supply a new engine.
Section 102 of the ACL deals with defect warranties, a particular type of express warranty:
102 Prescribed requirements for warranties against defects
(1) The regulations may prescribe requirements relating to the form and content of warranties against defects.
(2) A person must not, in connection with the supply, in trade or commerce, of goods or services to a consumer:
(a)give to the consumer a document that evidences a warranty against defects that does not comply with the requirements prescribed for the purposes of subsection (1); or
(b)represent directly to the consumer that the goods or services are goods or services to which such a warranty against defects relates.
Note: A pecuniary penalty may be imposed for a contravention of this subsection.
(3) A warranty against defectsis a representation communicated to a consumer in connection with the supply of goods or services, at or about the time of supply, to the effect that a person will (unconditionally or on specified conditions):
(a) repair or replace the goods or part of them; or
(b) provide again or rectify the services or part of them; or
(c) wholly or partly recompense the consumer;
if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.
VW raises no dispute about the existence of such a warranty here. At minimum, under the warranty, VW agreed to repair the vehicle if it suffered a major manufacturing failure during the term of warranty.
VW refused to pay under the warranty however, saying they had found no evidence of a manufacturing defect and there had been no evidence adduced by Mr Spanagel categorically proving that a manufacturing defect had occurred.
By s 59(1) of the Competition and Consumer Act 2010 (Cth) Schedule 2 Australian Consumer Law (‘ACL’):
59 Guarantee as to express warranties
(1) If:
(a)a person supplies, in trade or commerce, goods to a consumer; and
(b) the supply does not occur by way of sale by auction;
there is a guarantee that the manufacturer of the goods will comply with any express warranty given or made by the manufacturer in relation to the goods.
A consequence of a breach of s 59(1) is provided for in Part 4-5 of the ACL, which Part deals with remedies, with s 271(5) providing:
271 Action for damages against manufacturers of goods
…
(5) If:
(a) the guarantee under section 58 or 59(1) applies to a supply of goods to a consumer; and
(b) the guarantee is not complied with;
an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer.
A claim under s 271(5) for damages against the manufacturer of goods for failure to comply with an express warranty may be pursued in the Tribunal.[1]
[1]s 50A Table Fair Trading Act 1989 (Qld).
I am satisfied that the sale of the motor vehicle was a supply of goods by VW to Mr Spanagel as a consumer in trade or commerce, and by s 59(1) VW guaranteed it would comply with its warranty as manufacture of the goods.
I am satisfied there has been a failure of the engine during the term of warranty attributable to poor lubrication of moving parts caused by low viscosity oil. I have determined that the oil in the engine was not changed by Mr Spanagel, nor 123, nor the body repairer.

Onus of proof

It is not always clear where the evidence leads, as in the matter before me. In such circumstances the burden or onus of proof may become important. Where does the burden of proof lie here?
The following statement of principle about such made by Walsh JA in Currie v Dempsey (1967) 69 SR (NSW) 116 has often been referred to with approval:
In civil litigation, the burden of proof lies on a plaintiff to prove a fact which is an essential element of the cause of action, and the burden is on the defendant to prove a fact alleged by it, not as a denial of an essential ingredient in the cause of action, but one which would constitute a good defence to a claim which, prima facie, the plaintiff has.[2]
[2]Currie v Dempsey (1967) 69 SR (NSW) 116 at 125 cited with approval by McMurdo JA in QCoal Pty Ltd & Anor v Isaac Regional Council [2022] QCA 237 [61].
Mr Spanagel has the burden of proving all elements of the cause of action he now pursues. He has done that.
VW denies that the failure of the engine was attributable to any manufacturing fault on its part. However VW does not deny any of the essential elements of Mr Spanagel’s cause of action, namely the warranty, the failure of the engine due to low oil viscosity, the claim made under warranty and the refusal of VW to honour the warranty.
VW rather seeks to avoid liability under the guarantee on the basis that someone else changed the oil added to the vehicle by VW as manufacturer.
This, if proven, would be a good defence to the claim by Mr Spanagel. But it is, in the words of Walsh JA in Currie v Dempsey, an avoidance of the prima facie claim established by Mr Spanagel, and the onus of proof of this defence lies on VW.
I find VW has failed to discharge that onus.
I am satisfied that the vehicle’s engine failed because of low viscosity oil in the motor. I am not satisfied that that oil was not the original oil added by VW. I am not satisfied that someone else changed the oil added by VW as manufacturer.

Conclusion

Mr Spanagel is entitled to damages against VW for breach of manufacturer’s guarantee to comply with its warranty.
Mr Spanagel’s original claim was for $28,000 representing the cost of a motor plus damages of $5,000.
There is no explanation what the basis of claim for $5,000 damages said to have been suffered is for or how the amount is calculated. In correspondence to the Tribunal Mr by email dated 30 June 2022 he said it was the cost of running two vehicles and time and energy spent in getting the engine fixed under warranty. Damages must be proven. It is unclear what he means by “costs of running two vehicles”. The claim is not explained or supported by evidence and is not allowed.
Mr Spanagel’s claim for $28,000 for the cost of repair of the motor was reduced in course of the proceedings to $23,034.55 based on the amount by which the payout by RACQ for the vehicle (as a write off) was reduced in respect of the cost of repair of the engine. I accept Mr Spanagel is entitled to that amount as damages.