WAH & IMEX GOODS NETWORK PTY LTD TRADING AS IMEX MOTORS (Civil Dispute)
[2017] ACAT 54
•28 July 2017
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
WAH & IMEX GOODS NETWORK PTY LTD TRADING AS IMEX MOTORS (Civil Dispute) [2017] ACAT 54
XD 1279/2016
Catchwords: CIVIL DISPUTE – sale of second hand motor vehicle by dealer – motor vehicle breaks down after three weeks – consideration of effect of statutory warranty under Sale of Motor Vehicles Act 1977 on the Australian Consumer Law – meaning of acceptable quality in Australian Consumer Law – major failure – motor dealer liable
Legislation:ACT Civil and Administrative Tribunal Act 2008 ss 6, 7, 16, 22, 36
Australian Consumer Law ss. 54, 64, 259, 260, 261, 262, 263
Motor Dealers Act 1974 (NSW) s 24
Sale of Motor Vehicles Act 1977 ss 20, 23, Sch 1
Consumer Guarantees Act 1993 (NZ)
Subordinate
Legislation:Motor Dealers Regulation 2010 (NSW) cl 28
Cases cited:Burton v Crystal Cars (Motor Vehicle) [2013] NSWCTTT 234
Burton v Chad One Pty Limited [2013] NSWDC 301
Nesbit v Porter [2000] 2 NZLR 465
Tribunal: Presidential Member E Symons
Date of Orders: 28 July 2017
Date of Reasons for Decision: 28 July 2017
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 1279/2016
BETWEEN:
MU KLER WAH
Applicant
AND:
IMEX GOODS NETWORK PTY LTD
TRADING AS IMEX MOTORS
Respondent
TRIBUNAL:Presidential Member E Symons
DATE:28 July 2017
ORDER
The Tribunal orders:
1.Judgment for the applicant in the amount of $4,852.00 plus interest from 27 June 2016 to 28 July 2017 of $296.63 plus the filing fee of $145.00 and the search fee of $9.00 which totals $5,302.63.
2.The respondent pay the judgment monies of $5,302.63 to the applicant by close of business 11 August 2017.
3.The respondent collect the motor vehicle from the applicant’s premises by close of business 11 August 2017.
………………………………..
Presidential Member E Symons
REASONS FOR DECISION
Background
1.The applicant purchased a second hand 2004 Kia Carnival motor vehicle (vehicle) from the respondent on 13 April 2016 for $4,300. The vehicle was manufactured in August 2004 and had travelled 184,761 kilometres.
2.As the vehicle was manufactured more than 10 years before the date of sale and had been driven for more than 160,000 kilometres it was not covered by a warranty under section 20 of the Sale of Motor VehiclesAct 1977 (SMV Act). The respondent provided an extended aftermarket 12 month warranty with the vehicle from the National Warranty Company (NWC), which was included with the purchase.
3.The parties agreed that the vehicle left the respondent’s dealership in good condition and good working order.
4.On or about 4 May 2016, while the applicant was driving the vehicle, it broke down and was left on the side of the road.
5.The applicant’s brother contacted the respondent who advised him to contact NWC. NWC authorised the applicant’s brother to take the vehicle to Jaws Automotive. The applicant drove the vehicle to Jaws Automotive on or about 7 May 2016.
6.Jaws Automotive completed the repairs at a cost of $1,217. The applicant collected the vehicle from Jaws Automotive on 9 May 2016. She paid $217 to Jaws Automotive towards the cost of repairs.
7.On 10 May 2016 while the applicant was driving the vehicle it broke down again. The applicant arranged, at her expense, to have the vehicle towed back to Jaws Automotive. She paid the balance of Jaws’ cost of the initial repairs of $1,000.
8.Jaws Automotive advised the applicant the vehicle required a second hand engine at a cost of $6,475. The repairs have not been commenced as the applicant cannot afford to pay for them.
9.The applicant sought assistance from the Consumer Law Centre (CLC) on 14 June 2016. On 27 June 2016 CLC wrote to the respondent and rejected the vehicle under the Australian Consumer Law. CLC also requested the respondent make arrangements to collect the vehicle.
The proceedings
10.On 15 December 2016 the applicant filed a civil dispute application in the tribunal in which she claimed that the vehicle did not meet the guarantee as to acceptable quality under section 54(1) of the Australian Consumer Law (ACL). The applicant alleged that the vehicle was not of acceptable quality because it had substantial defects which prevented it from being driven and it was not safe or durable.
11.The applicant alleged that the breakdown on 10 May 2016 was a major failure pursuant to section 259(3) of the ACL. Alternatively, the applicant alleged if the failure to comply with the guarantee in section 54(1) of the ACL can be remedied and is not a major failure then the respondent failed to remedy the failure within a reasonable time and the applicant had the right to reject and did reject the vehicle under section 259(2)(b)(ii) of the ACL.
12.In this application the applicant sought, in addition to rejecting the vehicle and seeking a refund of the purchase price or compensation, damages of $1,592.90 pursuant to section 259(4) of the ACL. This amount represents the cost of the first repairs, $1,217.00 plus the replacement battery, $172.00 plus towing costs, $135.00 and $68.90 for cost of registration and third party insurance not paid by the respondent.
13.The applicant’s total claim against the respondent was for $5,892.90 plus interest.
14.The respondent opposed the application. The respondent attached the following documents to its response - the ‘PASS” stamped and signed certificate (number 894276) dated 13 April 2016 issued on behalf of the Road Transport Authority, the receipt for the deposit paid by the applicant, the ‘Section 20 Dealer’s Notice C6843’, the tax invoice from Jaws Automotive number 20162169 for $1,217 and the ‘National Warranty Company Grand Warranty Booklet’.
15.The respondent submitted that it was required to comply with the SMV Act, as it dealt with motor vehicles, and that the ACL did not apply. The respondent submitted that it had complied with the SMV Act and had affixed the completed Section 20 Dealer’s Notice to the vehicle. That notice provided that there was a warranty of three months or 5000 kilometres (whichever occurs first) for a motor vehicle that had not been driven for more than 160,000 kilometres and was manufactured not more than 10 years before the date of sale. Relevantly, the notice stated that “No warranty if the vehicle exceeds either of these requirements” (emphasis in original). There was no mandatory warranty under the SMV Act for this vehicle. Further, the respondent had provided the applicant with a warranty from the National Warranty Company.
16.The respondent also submitted, if I found that the ACL applied, that the vehicle was of acceptable quality under section 54 of the ACL as “on the day of the sale it was tested by an independent qualified and authorised mechanical garage that is licensed and certified by the ACT Road Transport Authority. Whatever faults were there, all were eliminated and a mechanical pass certificate was issued ... and therefore the vehicle was in good and acceptable quality ... This kind of mechanical inspection or Road Worthy Certificate is the only inspection and the only mechanism available and required by the law on the sale of a used motor vehicle”.[1]
Preliminary issue
[1] Letter dated 9 January 2017 from Imex Motors annexed to the response at [12]
17.A preliminary issue arose which related to whether the tribunal is required to provide the applicant with an interpreter for the proceedings. The ACT Human Rights Commissioner lodged written submissions as Amicus Curiae on the preliminary issue. It transpired that the CLC arranged for a Karen interpreter to attend the hearing and did not proceed with this interim application. It was not necessary for the tribunal to determine the preliminary issue.
Amended application
18.Prior to the hearing the applicant sought to amend the application by reducing the total amount claimed to $5,652.00 being purchase price of $4,300.00 plus repairs of $1,217.00 and towing of $135.00.
Amended response
19.The respondent filed a further document in the form of a letter addressed to the tribunal dated 18 May 2017 in which it alleged:
We believe that the applicant’s lack of experience and as a first time driver and her unfamiliarity with the driving mode of the car, negligence and misuse of the vehicle has caused the damage to the engine after a month of purchase.
The hearing
20.The substantive application was heard on 31 May 2017. Mr Thompson, solicitor with CLC appeared for the applicant. Dr Wali Nozhat appeared for the respondent pursuant to an Authority to Act for a Corporation. Mr Than Soe, the applicant’s brother, gave evidence under oath and was cross examined. The applicant gave evidence and was cross examined in the Karen language. The Tribunal was assisted by an interpreter with the Translating and Interpreter Service. Both parties made submissions and at the conclusion of the hearing I reserved my decision.
Jurisdiction
21.The Tribunal is a statutory body established by the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) and only has such jurisdiction and powers as are conferred on it by the legislature. The Tribunal’s jurisdiction to hear civil disputes is set out in Part 4 of the ACAT Act. A ‘civil dispute’ is defined in section 16 of the ACAT Act, relevantly, as follows:
civil dispute means a dispute in relation to which a civil dispute application may be made.
civil dispute application means an application that consists of 1 or more of the following applications:
...
(j) an application stated to be a civil dispute application in an authorising law
22.Section 22 of the ACAT Act provides that the tribunal has, in relation to civil dispute applications, the same jurisdiction and powers as the Magistrates Court has under the Magistrates Court Act 1930, part 4.2 (Civil Jurisdiction).
23.Section 36 of the ACAT Act provides that the tribunal must hear each application made to it.
24.The objects and principles of the ACAT Act are set out in sections 6 and 7. The objects include:
...
(c) to ensure that applications to the tribunal are resolved as quickly as is consistent with achieving justice; and
(d) to ensure that the decisions of the tribunal are fair.
...
25.Section 7 states:
In exercising its functions under this Act, the tribunal must—
(a) ensure the procedures of the tribunal are as simple, quick, inexpensive and informal as is consistent with achieving justice; and
(b)observe natural justice and procedural fairness.
26.The applicant is alleging that the respondent has failed to comply with consumer guarantee in section 54 of the ACL. The ACL is an authorising law pursuant to section 16(j) of the ACAT Act. The Tribunal has jurisdiction to hear this civil dispute.
Issues
27.The issues for determination are:
(a)Where the vehicle was sold by a dealer, what is the relevance of the statutory warranty provisions under the SMV Act? This requires me to consider whether the statutory warranty provisions detract from the ACL or whether they work side by side with the ACL (the first issue).
(b)Whether the vehicle was of acceptable quality. This requires me to determine whether the consumer guarantee of ‘acceptable quality’ under the ACL continues after the time of purchase and if so, whether the vehicle was of acceptable quality when it broke down on 4 May 2016 and again on 10 May 2016 (the second issue).
(c)If the vehicle was not of acceptable quality, what are the applicant’s rights and remedies? This requires me to consider whether the failure to comply with the consumer guarantees is or is not a major failure (the third issue).
Consideration
The first issue
28.The applicant contended that the ACL applied to the sale of the vehicle and that while the SMV Act also applied it did not restrict, modify or detract from the ACL; rather it operated side by side with the ACL. Pursuant to section 64 of the ACL the guarantees cannot be excluded by contract.
29.The respondent submitted that the ACL did not apply to motor vehicles and that it was for goods people buy in shops. He emphasised that the ACL did not specifically refer to used motor vehicles or the distance travelled as the SMV Act did. He urged the Tribunal to find that the SMV Act was specifically written for motor vehicles, including second hand vehicles, and that the ACL did not apply to the sale of used motor vehicles.
30.It is clear that the respondent had complied with its obligations under the SMV Act. It had attached the Section 20 Dealer’s Notice to the vehicle. There was no allegation that any of the information provided in that notice was not accurate. Section 23 and schedule 1 of the SMV Act set out the obligations of dealers to repair defects in second hand vehicles in item 3 of column 1 which meet the requirements in columns 2, 3 and 4, namely:
Column 1 Column 2 Column 3 Column 4
3 second-hand motor vehicle (other than a motorcycle) that has been driven for not more than 160 000 km and was manufactured not more than 10 years before the time it is sold by dealer 5 000 (after sale) 3 months 31.Due to the vehicle’s age or the number of kilometres travelled the respondent was not required to provide a mandatory statutory warranty for the vehicle under the SMV Act. This was clearly stated in the Section 20 Dealer’s Notice affixed to the vehicle. In other words the dealer was able to avail itself of the statutory exception in the SMV Act to repair defects based on the vehicle’s age and kilometres travelled.
32.The respondent drew the Tribunal’s attention to and I noted the fact that, notwithstanding it was not required to provide a mandatory statutory warranty under the SMV Act, the respondent provided an extended aftermarket one year warranty with the vehicle at no cost to the applicant.
33.Do the statutory warranty provisions in the SMV Act detract from the ACL?
34.Mr Thompson referred me to the New South Wales District Court decision in Burton v Chad One Pty Limited[2] which considered an appeal from the decision of the Consumer, Trader and Tenancy Tribunal Motor Vehicle Division (CTTT) in Burton v Crystal Cars[3]. The facts in that case and the present case are remarkably similar.
[2] [2013] NSWDC 301
[3] [2013] NSWCTTT 234
35.In that case the applicant had purchased a second hand 1998 model Nissan Patrol motor vehicle from the respondent on 19 October 2012 for $16,990. At the time of sale the odometer recorded that the vehicle had travelled 250,816 kilometres. Just over three months later the vehicle broke down and had to be towed. It had travelled just over 3,000 kilometres since its purchase. The cost of repairs ranged from $11,997 to $12,278. The respondent relied on the document known as a ‘Form 8’ created pursuant to section 24 of the Motor Dealers Act 1974 and clause 28 of the Motor Dealers Regulation 2010 which had been affixed to the vehicle displayed for sale. That form provided that no warranty in schedule 1 of the Motors Dealers Act 1974 applied to the vehicle as it was manufactured more than 10 years before the sale or because it had an odometer reading of more than 160,000 kilometres. The applicant in that case argued that, contrary to section 54 of the ACL, the vehicle was not of acceptable quality and the defendant had breached the guarantee provided in section 54 of the ACL.
36.The CTTT found the claim failed under the ACL and dismissed the applicant’s claim. At [25] of the District Court decision Olsson SC DCJ set out the CTTT’s process of reasoning and construction of the ACL:
28. At first blush, there appears to be tension between the ACL guarantee of acceptable quality and the dealer's obligations, or lack thereof, under the Motor Dealers Act.
29. The Tribunal is of the view that the ACL guarantee has to be flexible as it covers a vast range of goods, whose durability may be as short as only hours or days, while other goods have the potential to remain durable for years. On the other hand, the fixed terms of the Motor Dealers Act applies to one class of goods only: second hand motor vehicles.
30. The crux of this litigation is the question of acceptable quality.
31. Section 54(2) of the ACL defines "acceptable quality". Five criteria are contained in subclauses. But 54(2) is qualified by 54(3).
32. Section 54(3) sets out five qualifications. The major one, for the purpose of this litigation, is subclause (e) which allows acceptable quality to be subject to "any other relevant circumstances relating to the supply of the goods".
33. The Tribunal is of the view that a relevant circumstance would encompass the circumstances involving the requirement of the dealer to affix a Form 8 to the vehicle to be sold, and for the consumer to sign that form.
34. The Tribunal is of the view that any reasonable consumer, on signing a Form 8, could be considered to be fully acquainted with the state and condition of the vehicle, including any hidden defects, and realise that the vehicle is sold, as is, perhaps with defects either apparent, hidden or latent, and that by purchasing the vehicle, the purchaser assumes the risk of the vehicle being in an acceptable quality under the guarantees given by the ACL.
35. The Tribunal is reinforced in adopting this conclusion due to the applicant obtaining, at no cost, an extended warranty. He did not decline that bonus. He must have realised that there may have been defects which would appear in the vehicle later, and so accepted that possibility, realising that should such defect manifest itself, he could rely on that warranty. There was no evidence before the Tribunal about any claim made by the applicant on that extended warranty. The applicant was aware that by signing the Form 8, there could be future problems with the mechanics of the vehicle, but nevertheless, took advantage of that situation by being covered by an extended warranty.
37.The District Court considered the following issues:
(a)The construction of the ACL and in particular, section 54.
(b)Whether the facts found fell within the proper construction of the ACL, in particular section54(3).
(c)The construction of the statutory warranty provisions of the NSW Motor Dealers Act 1974.
38.Olsson SC DCJ stated at [34] and following:
34. The purpose of the ACL is the protection of consumers, in particular in the present case by the implication of guarantees as to quality in consumer contracts.
35. The tension between the MDA and the ACL identified by the Tribunal in paragraph 28 is only an apparent one. The Form 8 document on its face makes clear that there is no warranty under the MDA and that the dealer is not required by the MDA to repair any defect.
36. This does not signify to a purchaser that all warranties are excluded. In any event, s. 63 of the ACL renders void any term of a contract which purports to exclude or modify a guarantee under the ACL.
…
46. Moreover, if this document (the Form 8) alone was able to invest the hypothetical consumer with qualitative information about the vehicle (“fully acquainted with the state and condition of the goods including any hidden conditions”) it would give the ACL in this context no work to do.
47. I am satisfied that the Tribunal’s decision involved an error of law, being the proper construction of section 54(3) of the ACL.
48. In my view the Tribunal erred in:
(i)failing to consider each of the elements in the subsection, in particular that of the price in the context and circumstances of the evidence regarding value and price, and
(ii)by investing the consumer with knowledge of the state and condition of the vehicle solely from a form which provided no qualitative information about the vehicle.
49. In doing so, the Tribunal erred in the proper interpretation of application of s. 54(3) and moreover, failed to give effect to a construction that would best achieve the consumer protection purpose of the ACL by failing to give it beneficial construction.
39.Olsson SC DCJ quashed the decision of the CTTT and remitted the matter to the Tribunal for hearing. No result of the rehearing was available at the time of the hearing.
40.While the decision of the District Court in Burton is not binding on me I find that it is highly persuasive. For this reason and the reasons set out above I am unable to accept the respondent’s submission in [15] above.
Findings
41.I find that the warranties that the SMV Act provide on used vehicles that meet certain criteria are in addition to the consumer guarantees in the ACL. The warranties do not change the dealer’s responsibilities under the ACL. These responsibilities apply regardless of whether a vehicle is covered by a manufacturer’s warranty, an express warranty or an extended warranty.
42.I also find that the fact that the respondent had affixed a Section 20 Dealer’s Notice to the vehicle, which made clear that there was no warranty under the SMV Act and that the respondent was not required to repair any defect under the SMV Act, did not signify that all warranties are excluded. As stated above, section 64 of the ACL provides that the guarantees cannot be excluded by contract.
The second issue
43.While it is true that there was no issue that the vehicle had been tested and issued with a road worthy certificate on 13 April 2016 and the parties agreed that the vehicle left the respondent’s dealership in good condition and good working order the issue for the Tribunal in determining whether goods are of acceptable quality requires the Tribunal to determine the duration of time after sale that the goods are to be of acceptable quality pursuant to the ACL.
44.The applicant submitted that a purchaser has a right to have the reasonable use of the vehicle before having to pay for repairs. The fact that the vehicle first broke down on 4 May 2016 three weeks after the sale and then on 10 May 2016 being the day following the vehicle being repaired and required the engine to be replaced meant that the vehicle was not of acceptable quality.
45.The respondent submitted that if the sale of the vehicle to the applicant was subject to the ACL:
All the steps stated by the Sale of Motor Vehicle Act 1977 and the Australian Consumer Law as well as business ethic were applied and carried out by Imex Motors prior to releasing the vehicle to the applicant.
…
…the vehicle was in acceptable quality under 54(1) of the consumer law, as it was tested by an independent qualified and authorised mechanical workshop that is licensed and certified by the ACT Road Transport Authority. Whatever faults were there, all were eliminated and a mechanical pass certificate was issued … and therefore the vehicle was in good and acceptable quality. The section 54(2) of the Australian Consumer Law along with other related laws were also applied exactly as the vehicle was free from defects and has been safe.[4]
[4] Respondent’s letter to Tribunal dated 18 May 2017 on page 2 at [6] and [8]
46.The ACL is found in schedule 2 of the Competition and Consumer Act 2010. All goods sold in Australia are subject to the ACL when purchased from a person who supplies, in trade or commerce, goods to a consumer. Consumer guarantees as to the supply of goods are set out in part 3.2, division 1, Subdivision A of the ACL. Relevantly, for this matter the guarantee of acceptable quality is set out in section 54, which provides:
54 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.
47.The test for acceptable quality is found in section 54(2) of the ACL which takes into account the matters in section 54(3) of the ACL. The test is whether a reasonable consumer fully aware of the motor vehicle’s condition including any hidden defects would find it fit for all purposes that such goods are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable.
48.I am satisfied that the respondent in selling the vehicle to the applicant was a person supplying, in trade or commerce, goods to a consumer in accordance with section 54(1)(a) of the ACL and that there is a guarantee that the goods sold are of acceptable quality.
49.There was no dispute that the vehicle first broke down on 4 May 2016, some three weeks after the sale to the applicant and broke down again on 10 May 2016, the day following the repairs being carried out for the first break down. The evidence of the cost of repairs for the second breakdown was that a second hand motor was required and that the work would cost a total of $6,475.00. The applicant had not had the repairs for the second breakdown carried out as she could not afford to pay for them.
Finding
50.Applying the test in section 54(2) and (3) of the ACL I am satisfied and find that a reasonable consumer fully aware of the vehicle’s condition including any hidden defects would find it did not meet each of the factors (a) to (e) in section 54(2) of the ACL. I find that the vehicle was not of acceptable quality when it broke down on 10 May 2016 and that the applicant was entitled to exercise her right to reject the vehicle pursuant to section 262 of the ACL.
Right of rejection
51.The right to reject goods is subject to a rejection period. The CLC wrote to the respondent on 27 June 2016 rejecting the vehicle. This was a period of a little over two months since the vehicle was sold and a period of seven weeks from the second breakdown on 10 May 2016. The question which then arises is whether the applicant rejected the vehicle within a reasonable period of time.
52.The rejection period in the ACL is stated in section 262(2) as:
(2) The rejection period for goods is the period from the time of the supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to:
(a)the type of goods; and
(b)the use to which a consumer is likely to put them; and
(c)the length of time for which it is reasonable for them to be used; and
(d)the amount of use to which it is reasonable for them to be put before such a failure becomes apparent.
53.Mr Thompson referred the Tribunal to, as persuasive authority, the New Zealand Court of Appeal decision in Nesbit v Porter[5] (Nesbit) which considered what was a reasonable time within which to exercise the right of rejection.
[5] [2000] 2 NZLR 465
54.The New Zealand consumer law, Consumer Guarantees Act 1993 (NZ) has been in place since 1993 and is substantially identical with the ACL. In Burton v Chad One Pty Limited[6] Olsson SC DCJ referred to the following excerpt from the Second Reading Speech of the ACL on 24 June 2010 at page 4284 noting that the consumer guarantees law is closely aligned to the existing New Zealand law:
A single set of statutory consumer guarantees replaces the existing system of implied conditions and warranties in the Trade Practices Act under State and Territory laws. Statutory consumer guarantees will give consumers clearer and more effective laws regarding their rights when buying goods and services...The consumer guarantees law is closely aligned to the existing New Zealand Law...
[6] At [37]
55.In the absence of any other authorities the Tribunal proposes to draw guidance from New Zealand authorities when interpreting and applying the ACL.
56.The facts in Nesbit concerned a second hand motor vehicle, notice of rejection and the interpretation and application of the Consumer Guarantees Act 1993 (NZ).
57.The Nesbits had purchased an 11 year old Navara motor vehicle from the respondent, a motor dealer, on 14 July 1995. By December 1995, some five months later, the appellants found that the vehicle had some small problems. It also required panel beating as the result of a minor accident in November 1995. The panel beater pointed out that there was a problem with rust. The Nesbits also became aware at this time that the vehicle had defective shock absorbers and bushes. On 16 January 1996 the Nesbits had the wheel alignment checked and discovered problems with the steering box. Three days later the vehicle failed a ‘Warrant of Fitness’ check because of the rust in the door hinges, a member below the radiator, front inner sills (both sides) and the cab mount at the driver’s feet.
58.The Nesbits took their case to the Motor Vehicle Dealers Institute and the Disputes Tribunal however after a hearing it transpired that the Disputes Tribunal had exceeded its jurisdiction and on 15 April 1996 cancelled orders made following the hearing on 10 April 1996. On 13 April 1996 the Nesbits returned the vehicle to the respondent having written the previous day advising that they would do so.
59.The Nesbit’s solicitors wrote to the respondent on 17 April 1996 stating that they regarded the previous cancelled order of 10 April 1996 and the letter preceding the return of the vehicle as notification of rejection of the goods.
60.The Nesbits did not reject the vehicle until nine months had elapsed from their purchase of the vehicle. The Warrant of Fitness check had been conducted six months after the purchase.
61.The Court of Appeal found that a reasonable period for rejection expired one month after the warrant of fitness check had detected the defects. The Court said:
[34] The period runs from the date of supply (here 14 July 1995), not from the date on which any defect was, or ought to have been, detected. The Nesbits did not reject the vehicle until nine months had elapsed.
[35] Section 20(2) speaks of the defect, meaning the defect actually encountered by the consumer whose right of rejection is under consideration. The period must be reasonable in relation to the particular defect or combination of defects causing the buyer to reject the goods. Within what time would it be reasonable to expect such defect(s) to become apparent? The actual experience of the particular consumer is obviously relevant but the section requires that reasonableness is to be tested against certain objective criteria. Para (a) refers not to the particular article which was supplied but to the type of goods. Para (b) requires consideration of the use to which a consumer (not the actual buyer) is likely to put them, that is, that type of goods, and paras (c) and (d) require regard respectively to the length of time for which it is reasonable for that type of goods to be used and the amount of use to which it is reasonable for that type of goods to be put before the defect becomes apparent. So the Nesbit’s actual use of the Navara has for this purpose to be considered against the use to be expected from a notional consumer of that type of vehicle.
[36] In many, if not most, cases the period will be longer for new goods, which a buyer is entitled to expect to be defect free when first used, than it will be for second-hand goods of the same type. As a general rule, the older the goods, the shorter is likely to be the reasonable time. The period may also be longer if the goods are likely to be used infrequently or only at a particular time of year. For example, one would not expect any defect in skis purchased during summer to become apparent until the next winter.
[37] Another factor which will influence the period to be allowed for exercise of the right of rejection is whether regular inspections of the goods for defects are customary or, as in the case of motor vehicles, required by law. But for defects which cannot be expected to be revealed by such inspections the reasonable time may be longer.
62.The Court of Appeal reached the conclusion that the reasonable time for the exercise of the right of rejection expired by the middle of February 1996 and ran out before the date of the actual rejection by the Nesbits. Their right of rejection had been lost and the purported rejection was legally ineffective.
Finding
63.In the present case I note that the vehicle was rejected a little over two months after it was supplied. During this time the applicant drove the vehicle approximately 1,900 kilometres until it failed on 4 May 2016. The vehicle failed again on 10 May 2016. Considering the factors in section 262(2) of the ACL and the matters set out above, I am satisfied that the applicant acted reasonably promptly in rejecting the vehicle. I find that, unlike in the Nesbit decision, the period of a little over two months between the sale of the vehicle and the notice of rejection is a reasonable period.
The third issue
64.The applicant contends that either the combination of the breakdown incidents on 4 May 2016 and 10 May 2016, the day after the applicant collected the vehicle following the first repairs, amounted to a major failure or that the breakdown on 10 May 2016 was a major failure. The applicant seeks $4,852.00 being refund of the purchase price ($4,300.00) plus balance of the cost of repairs after warranty payment of $800.00 by NWC ($417.00) plus towing ($135.00).
65.Remedies relating to guarantees under the ACL are found in part 5-4 of the ACL. Copies of sections 259, 260, 261, 262 and 263 of the ACL are attached to this decision.
66.Section 260 specifies when a failure to comply with a guarantee is a major failure. If the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure, the failure is a major failure. If goods are substantially unfit for a purpose for which the goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose the failure is a major failure. If the goods are not of acceptable quality because they are unsafe the failure is also a major failure.
67.I am satisfied that, in this case, a reasonable consumer knowing about the full extent of the vehicle’s problem as became apparent on 10 May 2016, would not have bought the vehicle from the respondent. I find that the vehicle’s failure to meet the consumer guarantees is a major failure.
68.What is the applicant’s remedy? Is there merit in the respondent’s contention that the applicant’s negligence and misuse of the vehicle caused the damage to the vehicle?
69.The ACL provides in section 259(3) of the ACL that where there is a major failure the consumer (the applicant) may notify the supplier that she rejects the vehicle. The CLC notified the respondent by letter dated 27 June 2016 that the applicant rejected the vehicle. I have already found[7] that the period between the vehicle being supplied and the notice of rejection is reasonable.
[7] [62]
70.Pursuant to section 259(4) of the ACL the applicant may, by action taken 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 failure. The applicant seeks a refund of the purchase price she paid for the vehicle and compensation for the other expenses she has incurred when the vehicle broke down.
71.The respondent submitted[8] that the applicant’s lack of experience, her being a first time driver, her unfamiliarity with the driving mode of the vehicle, her negligence and misuse of the vehicle had caused the damage to the engine a month after the purchase.
[8] Letter from respondent to tribunal dated 18 May 2017
72.Section 262(c) of the ACL provides that a consumer is not entitled to notify a supplier of goods that the consumer rejects the goods if “the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply.”
73.I heard evidence from the applicant’s brother and the applicant. They were cross examined by the Mr Nozhat. I am unable to find from the evidence that the applicant mistreated the vehicle while she was driving it. While she was a first time driver I find that she had enough experience to drive the vehicle. She had previously driven her brother’s vehicle. I reject the respondent’s submission that it was the applicant’s negligence and misuse of the vehicle that caused the damage to the engine approximately a month after she bought it from the respondent.
74.Mr Nozhat also submitted that the applicant had had the use of the vehicle for 26 days and that an amount of $2,600, being $100 per day should be deducted from any monies payable by the respondent. Mr Nozhat submitted that had the applicant rented a seven seater van instead of using the vehicle it would have cost her $100 a day in rent. Mr Nozhat did not provide any evidence to corroborate the sum of $100 a day. The applicant did not give evidence that had she not had the use of the vehicle she would have hired a van or another vehicle. In these circumstances I find that there is no merit in Mr Nozhat’s submission.
75.I have already found that the applicant has proved, on the balance of probabilities, that the respondent failed to comply with the consumer guarantees referred to above and that the vehicle was not of acceptable quality. I am satisfied and find that the applicant is entitled to judgment in the sum of $4,852[9] plus interest from 27 June 2016, being the date of the notice of rejection, to 28 July 2017, of $296.63, plus the filing fee of $145 and the search fee of $9.00 which totals $5,302.63.
[9] See [64] above
76.The respondent is to collect the vehicle from the applicant’s place of residence within seven days.
………………………………..
Presidential Member E Symons
EXTRACTS FROM THE AUSTRALIAN CONSUMER LAW
Part 5‑4—Remedies relating to guarantees
Division 1—Action against suppliers
Subdivision A—Action against suppliers of goods
259Action 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.
260When a failure to comply with a guarantee is a major failure
A failure to comply with a guarantee referred to in section 259(1)(b) that applies to a supply of goods is a major failure if:
(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
(b) the goods depart in one or more significant respects:
(i)if they were supplied by description—from that description; or
(ii)if they were supplied by reference to a sample or demonstration model—from that sample or demonstration model; or
(c) the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
(d) the goods are unfit for a disclosed purpose that was made known to:
(i)the supplier of the goods; or
(ii)a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made;
and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
(e) the goods are not of acceptable quality because they are unsafe.
261How 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.
262When consumers are not entitled to reject goods
(1)A consumer is not entitled, under section 259, to notify a supplier of goods that the consumer rejects the goods if:
(a) the rejection period for the goods has ended; or
(b) the goods have been lost, destroyed or disposed of by the consumer; or
(c) the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or
(d) the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.
(2)The rejection period for goods is the period from the time of the supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to:
(a) the type of goods; and
(b) the use to which a consumer is likely to put them; and
(c) the length of time for which it is reasonable for them to be used; and
(d) the amount of use to which it is reasonable for them to be put before such a failure becomes apparent.
263Consequences of rejecting goods
(1)This section applies if, under section 259, a consumer notifies a supplier of goods that the consumer rejects the goods.
(2)The consumer must return the goods to the supplier unless:
(a) the goods have already been returned to, or retrieved by, the supplier; or
(b) the goods cannot be returned, removed or transported without significant cost to the consumer because of:
(i)the nature of the failure to comply with the guarantee to which the rejection relates; or
(ii)the size or height, or method of attachment, of the goods.
(3)If subsection (2)(b) applies, the supplier must, within a reasonable time, collect the goods at the supplier’s expense.
(4)The supplier must, in accordance with an election made by the consumer:
(a) refund:
(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; or
(b) replace the rejected goods with goods of the same type, and of similar value, if such goods are reasonably available to the supplier.
(5)The supplier cannot satisfy subsection (4)(a) by permitting the consumer to acquire goods from the supplier.
(6)If the property in the rejected goods had passed to the consumer before the rejection was notified, the property in those goods revests in the supplier on the notification of the rejection
HEARING DETAILS
FILE NUMBER:
XD 1279 of 2016
PARTIES, APPLICANT:
Mu Kler Wah
PARTIES, RESPONDENT:
Imex Goods Network Pty Ltd trading as Imex Motors
COUNSEL APPEARING, APPLICANT
N/A
COUNSEL APPEARING, RESPONDENT
N/A
SOLICITORS FOR APPLICANT
Consumer Law Centre of the ACT
SOLICITORS FOR RESPONDENT
N/A
TRIBUNAL MEMBERS:
Presidential Member E Symons
DATES OF HEARING:
31 May 2017