Veltri v Jacay Pty Ltd

[2017] NSWCATCD 27

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Veltri v Jacay Pty Ltd [2017] NSWCATCD 27
Hearing dates:	29 March 2017
Date of orders:	11 April 2017
Decision date:	12 April 2017
Jurisdiction:	Consumer and Commercial Division
Before:	P French, General Member
Decision:	1. Pursuant to sub-section 79N(a) of the Fair Trading Act 1987 the Respondent, Jacay Pty Ltd trading as NSW Automotive Wholesale, (...) is to pay Maria Caterina Veltri, (...), the sum of $500.00 by 19 April 2017.
Catchwords:	MOTOR VEHICLES –– claim for refund of holding deposit – where no written contract for sale of the motor vehicle had been entered into by the parties – where there was an oral agreement to purchase the motor vehicle and pay the holding deposit – where the terms upon which the motor vehicle was held and the holding deposit paid under that oral agreement are disputed between the parties – where the Tribunal must do its best to give effect to the parties oral agreement – where certainty as to the terms on which the holding deposit was paid cannot be ascertained from all the surrounding circumstances - where this term cannot be enforced in these circumstances
Legislation Cited:	Fair Trading Act 1989 Civil and Administrative Tribunal Act 2013
Cases Cited:	Hillas and Co Ltd v Arcos (1932) 147 LT 503 Safi v Heartland Motors Pty Ltd trading as Heartland Crysler [2016] NSWAP 80 Whitlock v Brew (1968) 118 CLR 445
Category:	Principal judgment
Parties:	Maria Caterina Veltri, Applicant Jacay Pty Ltd trading as NSW Automotive Wholesale, Respondent
Representation:	Applicant in person Mr Stephen Castelino, Director, for the Respodent
File Number(s):	MV 16/55495
Publication restriction:	Nil

reasons for decision

Introduction

1. This is an application by Maria Caterina Veltri (the Applicant) for an order from the Tribunal pursuant to sub-section 79N(a) of the Fair Trading Act 1979 (FT Act) that would require Jacay Pty Ltd trading as NSW Automotive Wholesale (the Respondent) to pay her the sum of $500.00, being the refund of a holding deposit she paid the Respondent is respect of the prospective purchase of 2004 Audi A6 Sedan (the motor vehicle). This application was made to the Tribunal on 10 December 2016 (the Application).

2. The Tribunal has concluded that the Respondent has not established to the requisite standard of proof that it has any contractual or other basis upon which it is entitled to retain the holding deposit. This is because there was no written contract for the sale of the motor vehicle concluded between the parties. The agreement for the purchase and the terms upon which the Applicant paid the holding deposit were oral only. There is a dispute between the parties as to the terms upon which the holding deposit was paid, and no objective evidence that is capable of establishing the certainty of these terms. In these circumstances the oral agreement cannot be enforced. The Tribunal has therefore ordered the Respondent to pay the Applicant the sum of $500.00 within 7 days of the date of these orders.

Procedural history

3. The Application was first listed before the Tribunal for Conciliation and Hearing on 18 January 2017 by telephone. The Applicant attended that hearing in person. Mr Stephen Castelino, a Director of the Respondent, attended on behalf of the Respondent by telephone. In accordance with the Tribunal’s usual practice where both parties are present, the Tribunal Member attempted to assist the parties to resolve the dispute by conciliation. Those efforts were not successful. When the conciliation was concluded, the Member adjourned the Application for hearing and gave directions to the parties for the filing and service of evidence. Both parties have complied with those directions.

Evidence before the Tribunal

4. The Applicant’s documentary evidence is constituted by a chronology of events; a current company extract for the Respondent; a Carpoint Advertisement for the motor vehicle dating to 8 November 2016; the Respondent’s tax invoice for the purchase of the motor vehicle dated 10 November 2016 (which is unsigned); a copy of email correspondence between the Applicant and Mr Castelino dating to the period 10 to 14 November 2016; a copy of a tax invoice rendered by a motor vehicle inspector (State Roads) in relation to an inspection of the motor vehicle carried out on 10 November 2016; a copy of the State Roads inspection report dated 11 November 2016 which has associated photographs; a statement signed by the the State Roads motor vehicle inspector who carried out the inspection of the motor vehicle dated 7 December 2016; and a copy of correspondence to the Applicant from NSW Fair Trading confirming the outcome of the Applicant’s complaint about the Respondent’s refusal to refund her the holding deposit dated 1 December 2016.

5. The Respondent’s documentary evidence is constituted by an Affidavit deposed by Stephen Castelino which is dated 14 February 2016, which annexes: a copy of the carsales.com.au data base entry for the Applicant’s enquiry about the motor vehicle; a copy of the registration papers for the motor vehicle; a copy of the carsales.com.au data base entry for a second enquiry made about the motor vehicle during the holding period; a copy of the receipt for the Applicant’s payment of the holding deposit; a copy of the invoice for the purchase of the motor vehicle dated 10 November 2016 (which is unsigned); a copy of the inspection report in respect of the motor vehicle prepared by State Roads; a copy of emails between the Applicant and Mr Castelino between 10 and 14 November 2016; and a copy of the Authorised Inspection Station e-Safety Check Report for the motor vehicle which is dated 29 September 2016.

6. Ms Veltri and Mr Castelino also both gave oral evidence under a solemn promise to tell the truth. This included the opportunity for each of them to ask questions of the other.

Material Facts

7. The material facts to emerge from the evidence may be summarised as follows:

7.1   The motor vehicle at the centre of the dispute is a 2004 Audi A6 Sedan. At the material time for this dispute it had 133061kms on its odometer. It was advertised for sale at a price of $6,999.00. It was last passed for registration on 29 September 2016.

7.2   On 30 October 2016 the Applicant telephoned the Respondent to make enquiries about the motor vehicle, it having come to her attention on the carsales.com.au website. She spoke to Mr Castelino. The call concluded without the Applicant expressing any specific intention to inspect or purchase the motor vehicle.

7.3   On 5 November 2016 the Applicant telephoned the Respondent and spoke to Mr Castelino again. She requested an opportunity to inspect the motor vehicle, which was arranged for the following day, Sunday 6 November 2016.

7.4   On 6 November 2016, the Applicant travelled by train from her home in Mount Druitt in Sydney to North Wollongong Station where she was met by Mr Castelino and driven to the Respondent’s motor dealership in Fairy Meadow. The Applicant inspected the motor vehicle and took it for a test drive within a period of approximately 30minutes. Following the inspection, Mr Castelino dropped the Applicant back to North Wollongong Station and she returned to Sydney.

7.5   On 10 December 2016, the Applicant contacted the Respondent and spoke to Mr Castelino again to indicate her interest in purchasing the motor vehicle subject to it being inspected by a licensed motor mechanic. Mr Castelino agreed to the purchase and the inspection. However, he indicated to the Applicant that he had received another enquiry about the motor vehicle from a person he considered to also be seriously interested in purchasing it. Because of this, he informed the Applicant he required her to pay a holding deposit of $500.00 to hold the motor vehicle – that is, not to sell it to anybody else – prior to this inspection being carried out. The Applicant agreed to pay the holding deposit, and did so by credit card prior to concluding the call.

7.6   After concluding this call, Mr Castelino sent the Applicant by email an invoice for the purchase of the motor vehicle. This invoice details a number of terms of the sale, including the agreed sale price ($6,490.00), the cost of the National Warranty Company Sentinel Plan C 60 ($1,000.00), and the agreement to touch up scratches and rectify the sun-roof (no-cost). The invoice records the receipt of $500.00 but does not identify it as a holding deposit. There are no terms and conditions on the invoice that relate to a holding deposit.

7.7   The agreement between the parties pursuant to which the Applicant agreed to purchase the motor vehicle subject to the inspection being carried out, and pursuant to which the holding deposit was paid, was wholly oral. There is no direct objective evidence of it in writing. There is now a controversy between the parties as to the terms upon which the Applicant agreed to purchase the motor vehicle and pay the holding deposit.

7.8   The Applicant contends that she was serious about purchasing the motor vehicle but only intended to proceed with the purchase if she considered the inspection report to be satisfactory. She says that she explained this to Mr Castelino and that he accepted payment of the holding deposit on this basis. She contends that Mr Castelino agreed that the holding deposit would be refunded if she was not happy with the motor vehicle following its inspection. She is adamant that this agreement was not limited to a circumstance where the motor vehicle was assessed by the inspector as being un-roadworthy. In the course of the hearing, the Applicant was subject to cross-examination by Mr Castelino on behalf of the Respondent in relation to this account of the agreement and she did not waiver from it.

7.9   The Respondent sets out what it believes was agreed between the parties in relation to the purchase of the motor vehicle and the payment of the holding deposit at paragraphs 16 and 17 of Mr Castelino’s Affidavit dated 14 February 2017:

16. On 10 November 2016, I received a call from the applicant. She stated that she would like to purchase the Audi A6 under the following circumstances:

16.1 Vehicle would be delivered to her home in Mount Druitt

16.2 The respondent would arrange touch ups to the scratches on the vehicle

16.3 The sunroof would be rectified so that it would open and close

16.4 A ‘National Warranty Sentinel Plan C 60 month’ would be included in the sale at the cost of $1,000.00.

17. During the phone call on 10 November 2016, we had a conversation to the following effect:

She said:   “I would like to get a pre-purchase inspection done. I have booked it for tomorrow.”

I said:      “That’s fine. But I do have another customer looking at this car tomorrow, and I won’t hold it for you unless there is a deposit.”

She said:   If I am not happy with the report and change my mind, would I get my deposit back?”

I said:      “No. The only times we have refunded a deposit is if the sale was subject to finance, and we are unable to get the customer finance. We don’t refund the deposit for change of mind.

In the course of the hearing, Mr Castelino also gave oral evidence to the same effect. He was subject to cross examination from the Applicant in relation to this account and he did not waiver from it.

7.10   The Respondent’s evidence does establish that it received a competing purchaser enquiry about the motor vehicle on 1 November 2016. Mr Castelino gave evidence that he first made contact with this competing purchaser on 8 November 2016 which resulted in an arrangement for the competing purchaser to inspect the motor vehicle on 11 November 2016 at 9am. Mr Castelino contends that he cancelled this appointment when he took the Applicant’s holding deposit. He says that he attempted to contact the competing purchaser after the Applicant advised him that she would not be proceeding with the purchase, but the competing purchaser was no longer interested in the motor vehicle, having purchased a motor vehicle elsewhere.

7.11   On 11 November 2016 the motor vehicle was inspected as arranged by the Applicant’s mechanic, Mr Staiklos, who was from an entity trading as State Roads. The Inspection type was described as “Platinum”, which I take to mean that it was a very detailed inspection. The Applicant paid $382.79 for this inspection. Following the inspection, State Roads provided the Applicant with an inspection report constituted by six written pages and 42 pages of photographs. The report included the following critical comments:

Water stains/coolant leak was found during cooling system testing, possibly plastic hoses or fittings may be brittle – further assessment required/repairs. Engine has oil dampness at time of inspection – monitor / clean / reassess / repair. Service is due, also timing belt possibly due replacement – further investigation required. Electronic diagnostic scan showed several faults recorded and will need further workshop assessment and fault clearing/repairs.

Suspension and steering including brushes are fair however show general aging/wear and will need monitoring and repairs as required. Minor kerb scrapes/damage to wheels. Front tyres are getting low, showing greater shoulder wear and will need replacing in the near future, recommend check wheel alignment when fitting new tyres.

Vehicle has had panel and paint repairs to various panels – no evidence of any chassis or structural repairs found … Shopping type dents/chips/scratches/marks to various panels … Front and rear bars are scraped. Headlights are tarnished. Passenger mirror is scraped.

This car performs reasonable for age and km showing mostly consistent wear and audible wear for age/mileage. However, test drive shows that transmission seems to thump into gear, slight delay in the gear change – further assessment required / repairs.

Then in a section headed “Inspection Report Summary” the following comments are made:

Body rating         Mechanical Rating      Interior Rating

45%             55%            65%

General Overview

This vehicle is in average or reasonable general condition for its age and mileage. Vehicle requires servicing/repairs as mentioned in the report. Pictures attached form part of the inspection report. Service books sighted and show service history – due servicing and other mechanical work as mentioned in report. This report is in conjunction with the detailed verbal report given and if you would like a more detailed understanding of this report contact your inspector.

7.12   The Applicant also received a detailed oral report from Mr Staiklos following his inspection of the motor vehicle on 11 November 2016. The Applicant gave evidence that Mr Staiklos advised her against purchasing the motor vehicle telling her it had serious mechanical problems and required repairs that would cost approximately $7,000.00 which was more than its value. In support of this contention the Applicant has submitted into evidence a statement submitted by State Roads and signed by Mr Staiklos and another person dated 7 December 2016. This statement states in part:

John [Mr Staiklos] recommended/advised with his discussions with Maria Veltri for her not to purchase the vehicle. This is due to the many problems and the cost involved to rectify the faults. The cost would be over AUD $7,000.00 which would be the cost of the vehicle two-fold.

7.13   The Applicant telephoned the Respondent on 12 November 2016 and spoke to Mr Castelino. She told Mr Castelino that the inspection had revealed that the motor vehicle had serious mechanical and other problems and for this reason she had decided not to proceed with its purchase. She asked Mr Castelino to refund her holding deposit immediately. He declined to do so, stating that the holding deposit was non-refundable. He asked the Applicant to send him a copy of the inspection report so that he could assess if any of the mechanical problems identified by Mr Staiklos could be fixed. The Applicant refused to send Mr Castelino a copy of the inspection report, but did send him an email summarising 18 problems with the motor vehicle identified by Mr Staiklos. On 14 November 2016, Mr Castelino replied to this email rejecting Mr Staiklos’ assessment in part and otherwise claiming that the issues identified had or could be rectified and/or did not affect the motor vehicle’s road worthiness.

7.14   In the same email Mr Castelino again refused the Applicant’s request for the refund of the holding deposit, stating it was non-refundable. In this respect he states: “I took the deposit in good faith, and held the vehicle for you despite other interest. I have fulfilled my obligations as a trader.” However, Mr Castelino offered to apply the holding fee as a credit against the purchase of the motor vehicle or any other of the dealerships’ motor vehicles.

7.15   The Applicant subsequently complained to Fair Trading NSW about the Respondent’s refusal to refund her the holding deposit. However, this did not lead to any resolution of the dispute, resulting in the institution of these proceedings.

Jurisdiction

8. I am satisfied that I have jurisdiction to deal with this Application under Part 6A of the FT Act (sections 79I and 79J) as a “consumer claim” as that term is defined in section 79E of the FT Act in that it is a claim for a specified sum of money that arises from the Respondent’s supply of the motor vehicle to the Applicant.

9. The Applicant is a consumer as that term is defined in section 79D of the FT Act in that she is a natural person (sub-section 79D(a)). No attempt has been made to prove the contrary (section 79H of the FT Act).

10. The motor vehicle supplied by the Respondent to the Applicant is “goods” as that term is defined in section 79D of the FT Act, in that it is a tangible thing that is or may be the subject of trade or commerce. The Respondent “supplied” the motor vehicle to the Applicant in a manner required by section 79G of the FT Act in that it was provided for valuable consideration.

11. Section 79L of the FT Act provides that the Tribunal does not have jurisdiction to hear and determine a consumer claim, relevantly to this case, if the cause of action giving rise to the claim first accrued more than three years before the date on which the claim is lodged. The Applicant’s cause of action is discussed further below. However, the earliest date upon which any cause of action was capable of vesting in this case was 10 November 2016, which was the date the Applicant made an oral agreement with the Respondent for the purchase of the motor vehicle and paid the holding deposit. As noted above, this Application was made to the Tribunal on 10 December 2016. Therefore, on any analysis, this action has been brought within the time period allowed by section 79L of the FT Act.

12. Section 79S of the FT Act provides that the Tribunal does not have jurisdiction to make orders in any application in favour of an applicant that have a relevant total value that exceeds a prescribed monetary limit of $40,000.00. The total relevant value of the Applicant’s claim is $500.00. It is therefore within the prescribed monetary limit on the Tribunal’s order making power.

13. A consumer claim made under Part 6A of the FT Act may be pursued on the basis of a number of causes of action. As I apprehend it, the Applicant’s cause of action in this case is breach of contract. That is, she sets out to prove that the Respondent breached a term of the oral agreement between them for the purchase of the motor vehicle, being a term that the holding deposit would be refunded if she decided not to proceed with the purchase.

14. However, in large part the Respondent’s defence to the claim rests on the terms of the consumer guarantee as to acceptable quality contained in section 54 of the Australian Consumer Law (ACL). In this respect, section 28 of the FT Act provides that the ACL applies as a law of New South Wales and is a part of the FT Act. It is to be applied, as relevant, in the determination of a consumer claim brought under Part 6A of the FT Act. The consumer claims jurisdiction under the ACL is not identical to that conferred on the Tribunal by Part 6A of the FT Act. However, for the purpose of this proceeding there is no material distinction to be drawn between the two regimes.

8. Chapters 2 and 3 of the ACL provide consumers with a number of general and specific protections in consumer transactions. This includes in Part 3.2 guarantees in relation to the supply of goods and services, including the guarantee as to acceptable quality. Section 54 of the ACL is in the following terms:

Guarantee as to acceptable quality

(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 goods are of acceptable quality.

(2)  Goods are of acceptable quality if they are as:

(a)  fit for all the purposes for which goods of that kind are commonly supplied; and

(b)  acceptable in appearance and finish; and

(c)  free from defects; and

(d)  safe; and

(e)  durable;

as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3).

(3)  The matters for the purposes of subsection (2) are:

(a)  the nature of the goods; and

(b)  the price of the goods (if relevant); and

(c)  any statements made about the goods on any packaging or label on the goods; and

(d)  any representation made about the goods by the supplier or manufacturer of the goods; and

(e)  any other relevant circumstances relating to the supply of the goods.

(4)  If:

(a)  goods supplied to a consumer are not of acceptable quality; and

(b)  the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer's attention before the consumer agreed to the supply;

the goods are taken to be of acceptable quality.

(5)  If:

(a)  goods are displayed for sale or hire; and

(b)  the goods would not be of acceptable quality if they were supplied to a consumer;

the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to a consumer's attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent.

(6)  Goods do not fail to be of acceptable quality if:

(a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and

(b)  they are damaged by abnormal use.

(7)  Goods do not fail to be of acceptable quality if:

(a)  the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and

(b)  the examination ought reasonably to have revealed that the goods were not of acceptable quality.

16. In summary, and relevantly, goods must be of acceptable quality in terms of being fit for the purpose for which they are commonly supplied, they must be acceptable in appearance and finish, they must be free from defects, and they must be safe and durable. The test for these qualities is an objective one. It is what a “reasonable consumer” fully acquainted with the state and condition of the goods (including any hidden defects) would regard of acceptable quality having regard to the nature of the goods, the price paid for them, any statements made about the goods in advertising materials, any representations made about the goods by the supplier or manufacturer of the goods and any other relevant factors.

17. Goods will not fail to be of acceptable quality if the supplier brought the relevant defect to the attention of the consumer before they were supplied, or if it is conduct by the consumer that causes the goods to become of unacceptable quality, or if the defect could have been discovered by the consumer upon reasonable examination.

18. Section 259 of the ACL set out the remedies that may be available to a consumer against a supplier of goods if a supplier fails to comply with a consumer guarantee relating to goods:

259   Action against suppliers of goods

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

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

(b)  a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than sections 58 and 59(1)) is not complied with.

(2)  If the failure to comply with the guarantee can be remedied and is not a major failure:

(a)  the consumer may require the supplier to remedy the failure within a reasonable time; or

(b)  if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time--the consumer may:

(i)     otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or

(ii)     subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection.

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

(a)  subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection; or

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

(4)  The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.

(5)  Subsection (4) does not apply if the failure to comply with the guarantee occurred only because of a cause independent of human control that occurred after the goods left the control of the supplier.

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

(7)  The consumer may take action under this section whether or not the goods are in their original packaging.

19. In summary, and relevantly, a consumer may take action against a supplier if the supplier contravenes the guarantee as to acceptable quality. If the failure to comply can be remedied and it is not a major failure the consumer may require the supplier to remedy the failure within a reasonable period. If the supplier refuses or fails to do so, the consumer may have the failure remedied elsewhere and recover all reasonable expenses they incur in doing so, or they may notify the supplier that they reject the goods. If the failure to comply cannot be remedied or the failure is a major failure, the consumer may notify the supplier they reject the goods, or take action against the supplier to recover compensation for any reduction in the value of the goods below the price paid. A consumer may also take action against a supplier to recover damages for any consequential loss they have incurred due to the failure to comply provided that loss was reasonably foreseeable.

20. Section 261 sets out the methods by which a supplier may remedy a failure to comply with a consumer guarantee:

261   How suppliers may remedy a failure to comply with a guarantee

If, under section 259(2)(a), a consumer requires a supplier of goods to remedy a failure to comply with a guarantee referred to in section 259(1)(b), the supplier may comply with the requirement:

(a)  if the failure relates to title--by curing any defect in title; or

(b)  if the failure does not relate to title--by repairing the goods; or

(c)  by replacing the goods with goods of an identical type; or

(d)  by refunding:

(i)  any money paid by the consumer for the goods; and

(ii)  an amount that is equal to the value of any other consideration provided by the consumer for the goods.

21. In summary, and relevantly, a supplier may repair the goods, replace the goods with goods of an identical type, or refund to the consumer any money they paid for the goods.

22. In this case, the Respondent contends that the motor vehicle was of acceptable quality in that it was roadworthy. In the alternative, it contends that to any extend that the supply of the motor vehicle did not comply with the guarantee as to acceptable quality this was not a major failure, and that it is there entitled to a reasonable opportunity to rectify these failures. On this basis the Respondent contends that the Applicant is not entitled to reject the motor vehicle and obtain a refund of the holding deposit she had paid towards its purchase.

Consideration

23. In this case, there is no doubt that the Respondent made an offer to sell the motor vehicle to the Applicant, and that the Applicant accepted that offer. It is also clear that this offer and acceptance was subject to consideration, being the agreed purchase price. The parties clearly had an intention to form legally binding relations. However, the terms of the agreement for the sale/purchase of the motor vehicle were oral only. No written contract for the sale of the motor vehicle was ever concluded between the parties.

24. There is now a controversy between the parties as to the terms of the oral contract with respect to the payment, refund and forfeiture of the holding deposit. In brief, the Applicant contends that the parties agreed that the holding deposit would be refunded if she was not satisfied with the results of her mechanic’s inspection of the motor vehicle. The Respondent contends that it was agreed that the holding deposit would be forfeited if the Applicant did not proceed with the purchase of the motor vehicle following the inspection.

25. Both parties now ask the Tribunal to enforce the terms of the agreement that relate to the payment of the holding deposit. An oral contact can be enforced by the Tribunal, but only if its terms are sufficiently certain. In this case, there is a controversy between the parties as to what those terms were. The law requires the Tribunal to do its best to ascertain and give effect to the terms of an oral contract, lest it become the “destroyer of bargains”: Hillas and Co Ltd v Arcos (1932) 147 LT 503 at 512 cited with approval by McTiernan J in Whitlock v Brew (1968) 118 CLR 445. However, it does not permit the Tribunal to impose certain terms were there were none: Whitlock v Brew.

26. To ascertain the terms of an oral agreement when it was made the Tribunal looks to all of the surrounding circumstances and in particular at any contemporaneous objective evidence of the intentions of the parties.

27. In this case, there is no objective contemporaneous evidence of the terms upon which the holding deposit was paid. The Respondent did email the Applicant a sales invoice immediately after the oral agreement for the sale of the motor vehicle was reached but that invoice does not contain any term or condition in relation to a holding deposit. There is no email or other written communication between the parties at the time that sets out, or otherwise assists in ascertaining on an objective basis, the terms upon which the Applicant paid the holding deposit.

28. Nor is there any certain evidence before the Tribunal as to the Respondent’s usual practice in relation to the payment, refund or forfeiture of holding deposits. For example, there are no standard terms or policy statements in any of the Respondent’s advertising or other business materials in evidence that deal with this issue. In his Affidavit, Mr Castelino states that the Respondent’s practice is to only refund a holding deposit when a motor vehicle is sold subject to finance and finance is not approved. However, in his oral evidence, he contended that the Respondent would also refund a holding deposit if the Applicant established to its satisfaction that the supply of motor vehicle would not comply with the guarantee as to acceptable quality contained in section 54 of the ACL, and that this failure was a major failure. I draw attention to this development in Mr Castelino’s thinking to illustrate that, from an objective perspective, the Respondent had no certain or standard business practice that would enable the Tribunal to ascertain what the Respondent’s policy was in relation to the payment, refund and forfeiture of the holding deposit at the material time.

29. Nor has the Respondent put any evidence before the Tribunal as to any standard practice in relation to the payment, refund and forfeiture of holding deposits in the used motor vehicle industry generally. There may be none. The Tribunal is a commercial tribunal and it is thus in a position to recognise, in general terms, that a holding deposit is a security paid by a purchaser to a vendor to guarantee a purchase will be completed. It becomes liquidated damages if the purchase fails, and compensates the vendor for its loss of opportunity and the transaction costs arising from the failed transaction.

30. However, the general character of a holding deposit is not sufficient to resolve the controversy in favour of the Respondent in this case. This is because it does not illuminate what was specifically agreed between the Applicant and Mr Castelino in relation to the payment of the holding deposit and the terms upon which it would be refunded or forfeited in this case.

31. I am satisfied on the evidence that the Applicant had a serious intention to purchase the motor vehicle provided she was satisfied with the results of her mechanic’s inspection. She was not trifling with the Respondent in respect of this purchase. The cost of the inspection was $384.00. I am satisfied that the Applicant would not have incurred this cost on a whimsy. Her payment of a holding deposit was consistent with her intention to purchase the motor vehicle. There is therefore nothing inherent unlikely, or internally inconsistent, or objectively unreasonable about her version of events.

32. The Applicant presented as a truthful witness. She was subject to cross-examination by Mr Castelino, but did not waver from her version of events. On the other hand, Mr Castelino also presented as a truthful witness. He was subject to cross-examination by the Applicant, but did not waver from his version of events. There is therefore nothing about the credit of either witness that would enable the Tribunal to prefer the oral evidence of either the Applicant or Mr Castelino over the other. This draws the Tribunal towards the conclusion that there was never any meeting of the minds between the Applicant and Mr Castelino in relation to the terms upon which the holding deposit was paid. It is open to the Tribunal to find that at the material time they both honestly believed the other party had agreed to terms which in fact had not been understood and agreed.

33. In his evidence, Mr Castelino went to some pains to portray the agreement to hold the motor vehicle subject to the payment of a holding deposit as one that benefited the Applicant only. He asks the Tribunal to infer that this makes his version of the agreement more likely. I do not agree with that submission. At the time, the payment of the holding deposit also had the commercial benefit to the Respondent of consolidating the purchase of the motor vehicle by a serious purchaser. That purchase did not eventuate. However, viewing the matter retrospectively through the lens of the failed transaction does not assist the Tribunal to prefer one version of events over the other. Both parties had something to gain from the payment of a holding deposit at the material time. In these circumstances it is not inherently unlikely that the Respondent would have offered to refund the holding deposit if the Applicant considered the results of the inspection unsatisfactory as a means of consolidating her intention to purchase the motor vehicle.

34. For the foregoing reasons, the terms of the oral contract between the parties in relation to the payment, refund and forfeiture of the holding deposit cannot be ascertained. It may be that the parties never had a meeting of the minds in respect of these terms. The Applicant and Mr Castelino may have had sincere, but contrary, understandings of what the agreement was, but did not realise this at the time. In the absence of any certainty about what these terms were, they cannot be enforced. It thus follows that the Respondent has no contractual basis upon which it is entitled to retain the holding deposit. Nor has any other basis for it doing so been established in the evidence, or as a matter of law. The Applicant is therefore entitled to an order from the Tribunal that will require the Respondent to pay her an amount equivalent to the holding deposit.

35. In the absence of any certainty as to the terms upon which the holding deposit was paid, the Respondent’s response to the claim, which relies upon the guarantee as to acceptable quality contained in section 54 of the ACL, is not reached. Even if it had been, on the evidence before me, I would have found that the supply of the motor vehicle did not comply with the guarantee as to acceptable quality and that this failure was a major failure which entitled the Applicant not to proceed with the purchase and to recover the holding deposit.

36. I accept Mr Castelino’s submission that Mr Staiklos’ inspection report does not in terms identify any specific major mechanical failure, and that his overall assessment was that the motor vehicle was in “average or reasonable general condition for its age and mileage.” However, Mr Staiklos also concluded that repairs to the motor vehicle were immediately or imminently required which would cost the Applicant approximately $7,000.00. This is an amount that is significantly more than the motor vehicle’s purchase price and its objective value.

37. Section 260 of the ACL sets out the characteristics that must be satisfied for a failure to comply with a consumer guarantee to constitute a major failure. After reviewing the relevant authorities in this and other jurisdictions, the Appeal Panel of this Tribunal concluded in Safi v Heartland Motors Pty Ltd trading as Heartland Crysler [2016] NSWAP 80 at [101] and [102] that the following principles are relevant in determining if a failure to comply with the guarantee as to acceptable quality is a major failure:

1. a major failure may be constituted by one defect or a series of specific or individual defects which, when taken as a whole, constitute a major failure;

2. the test of whether goods “would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure” is an objective one;

3. a “reasonable consumer” would expect teething problems, even in a new vehicle;

4. the question to ask is whether the reasonable consumer, given the option of acquiring that particular good or alternatively purchasing either nothing or a different model would not have acquired the good;

5. defects which result in goods failing to comply with the guarantee as to acceptable quality will not invariably be a major failure and it will depend on the nature and extent of the failure;

6. the cost of repair, in proportion to the purchase price, and the question of whether the defects can be remedied easily in a timely manner are relevant considerations; and

7. the purchase price for the goods and the nature of the defect are also relevant considerations for a “reasonable consumer”.

38. In this case it is clear that there were multiple defects in the motor vehicle. Some of these defects went to the motor vehicle’s roadworthiness, while others clearly did not. Some of the defects identified are cosmetic only. Nevertheless, it would have been open to me to find on the first limb of the Safi test that there were a series of defects, which when taken as a whole, constitute a major failure. Several of the defects identified, for example, the coolant leak, the engine oil dampness, the low tread on the front tyres, and the transmission thump, constitute far more then “teething problems” even for a second-hand motor vehicle of modest value. As noted, Mr Staiklos estimated the cost of the repairs that would be immediately or imminently required to the motor vehicle to be $7,000.00, which is more than the purchase price and objective value of the motor vehicle.

38. Mr Castelino contended that Mr Staiklos’ estimate of the cost of repairs reflected work that would be required to bring the motor vehicle to “near new” condition, not to roadworthy condition. He contended that the motor vehicle was roadworthy at the material time, as it had been passed for registration in September 2016, just two months previously.

39. Mr Staiklos was not called for cross-examination, and the Respondent submitted no expert report to contradict Mr Staiklos’ opinion. It is not immediately apparent from Mr Staiklo’s report or statement what repairs he is referring to when he estimates their cost at $7,000.00. However, it is clear that a substantial component of these repairs relate to mechanical defects that Mr Staiklos considered affected the roadworthiness of the motor vehicle at the time of his inspection, or which would affect its roadworthiness in the proximate future.

40. In all these circumstances it would have been open to me to find that a reasonable consumer fully acquainted with the nature and extent of these defects would have chosen not to proceed with the purchase of the motor vehicle. The Applicant would thus have been entitled to recover the holding deposit on this basis even if the Respondent had otherwise established a contractual right to retain it.

Conclusion

42. For the foregoing reasons, the Respondent has not established any contractual or other basis upon which it is entitled to retain the Applicant’s holding deposit. The Applicant is therefore entitled to an order that will require the Respondent to refund it to her within seven days.

P French

General Member

Civil and Administrative Tribunal of NSW

12 April 2017

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 06 June 2017