Motor vehicles case studies

Consumer and Commercial Division 

The following case studies reflect decisions made by the former Consumer, Trader and Tenancy Tribunal, which became the Consumer and Commercial Division of NCAT from 1 January 2014.

These case studies should not be viewed as precedents.  They are provided as a general guide only and should not be treated as legal advice or relied upon as such.  All Tribunal matters are determined on the merits of the individual case and the supporting evidence.

Car auction 

The benefit of purchasing a car at auction is that you can pick up a real bargain. However, the risk with buying at auction is that the vehicle is not covered by a statutory warranty, and you can’t take it for a test drive.

A man was looking to purchase a motor vehicle on eBay, when he came across a listing by a motor dealer for an unregistered vehicle which included the offer of a mechanic’s inspection report for an additional $150. After some negotiation with the dealer, the man agreed to purchase the vehicle for $6,250 through the eBay site, on the understanding that a pre-condition inspection report would be provided. He then attended the dealership and paid for the vehicle in person, and drove the car away.

Shortly afterwards, the man lodged an application with the Tribunal seeking an order for damages against the dealer and the mechanics who had undertaken the inspection of the vehicle prior to purchase. The man was claiming $11,000 for repairs and out-of-pocket expenses as the vehicle was found to be unroadworthy and could not be registered.

At the Tribunal hearing, the dealer argued that as the car was sold ‘at auction’ they were not liable for any damages. They provided statutory declarations and other documents that supported their claim that that sale was indeed a ‘sale by auction’. Despite this, the dealer had offered to give the man his money back and allow him to return the car. This offer was rejected as the man had already spent a large amount of money on repairs and other inspections. As the dealer had proved that the sale was by auction, the Tribunal Member dismissed the application against the dealer.

The Tribunal Member then considered the man’s claim against the mechanics who provided the pre-inspection report. The mechanics advised they were only asked to provide a report on an unregistered vehicle which they did. They did not pass the vehicle as roadworthy, nor did they agree to produce a report listing every defect. After examining all the evidence the Tribunal Member was not satisfied that the contract terms in evidence would give rise to the contractual damages as claimed. The application against the mechanics was also dismissed.

Contaminated fuel 

Consumer claims for damage to a vehicle caused by contaminated fuel may be determined by the Tribunal up to the value of $30,000.

The applicant before the Tribunal claimed that his car had experienced mechanical problems and then broken down after filling his 4WD vehicle with biodiesel fuel on two occasions from the same petrol station. The car owner took the vehicle to be repaired and, following a diesel fuel injection service inspection, it was reported that the fuel system of the vehicle had been damaged by contaminated fuel. 

A sample of the fuel was taken for examination by an expert analyst who confirmed that the water and sediment levels in the sample was higher than the specified limits. When the applicant approached the operator of the petrol station about the contaminated fuel, the operator denied any responsibility.

During the Tribunal hearing the petrol station operator provided no documentary evidence. The Tribunal member accepted the evidence produced by the applicant and found that the contaminated fuel was the cause of the damage to the fuel system and that it was more probable than not that it was supplied by the operator.

The operator was found liable for the damage, and was ordered to pay the applicant the repair costs.

Consumer guarantees 

Under the Australian Consumer Law, a ‘major failure’ is a failure to comply with a consumer guarantee if the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure. The consequence of a major failure is that a consumer is entitled to reject the goods and obtain a refund.

A consumer purchased a used car from a motor dealer for $3,000 which she thought had air conditioning and power steering. She found that the car did not have these features, and had various defects such as a broken indicator arm, faulty headlight lever, broken sun visor clips, and inoperative CD player. The passenger side door handle and vent also needed repair, as did the ignition surround, driver’s side tail light, interior light and seat lever.

She took the vehicle back to the dealer and asked for a refund but the dealer refused. The consumer continued to drive the vehicle for some months thereafter before making an application to the Tribunal seeking an order for a refund of the $3,000 purchase price.

At the Tribunal hearing, the dealer denied having ever promised or making any representations that the car had air conditioning and power steering. Because of the vehicle’s age and mileage, it was sold without any warranty under the Motor Dealers Act 1974, but the dealer said he was willing to pay for the repairs as quoted by the consumer’s expert report, excluding the power steering and air conditioning, totalling $905.

The Tribunal Member was not satisfied that it was part of the contract of sale that the vehicle had air conditioning and power steering. However, the Member was satisfied that at the time of the sale the vehicle had the other defects identified by the consumer. Also, although the vehicle was sold without warranty under the Motor Dealers Act 1974, the transaction was governed by the Australian Consumer Law.

Further, the Tribunal Member found that the faulty mirrors and headlights when taken together with the other faults amounted to a major failure in that a ‘reasonable consumer’ would not have acquired the vehicle if they had known of the nature and extent of the faults.

As a consequence the consumer was entitled to a refund. The order made by the Tribunal was, taking into account the fact that the consumer had driven the vehicle for approximately 3,000 kilometres, for a partial refund of $2,500 and for the dealer to pick up the car from the consumer.

Exhaust system repairs 

Under the Fair Trading Act 1987, there is an implied warranty that services will be provided with due care and skill and that materials provided will be reasonably fit for the purpose for which they are supplied.

A motorist broke down on the side of the road and called a mobile mechanic for assistance.  The car was towed to a street near the motorist’s home.

The motorist took the car to a local mechanic who gave him a quote on how much it would cost to repair the car.  The mechanic worked on the car.  After the motorist had collected it from the mechanic, the car broke down again and “exploded”.  The motorist drove the car to a specialist mechanic who told him steel wool had been used as a gasket and that it had damaged the exhaust system.  A dispute about the cost of the repairs arose between the motorist and the local mechanic who had done the original work.  This resulted in the motorist lodging an application at the Tribunal.

The Tribunal accepted the evidence of the specialist mechanic that the damage to the exhaust system was caused by the use of the steel wool as a gasket.  The Tribunal considered whether the local mechanic had used due care and skill in providing his services to the motorist (as required under section 40S of the Fair Trading Act 1987).  An issue in dispute at the Tribunal was whether the local mechanic or the motorist suggested, or insisted, that the steel wool be used in place of a gasket.  The local mechanic denied that it was his suggestion and he claimed the motorist insisted the steel wool gasket be used to repair the vehicle.  The Tribunal noted that even if the motorist insisted the steel wool should be used, the mechanic should not have complied.

On the evidence provided, the Tribunal concluded that the local mechanic had failed to provide the services to the standard of due care and skill required under the Fair Trading Act 1987.  The local mechanic was ordered to pay the motorist $400 which was assessed on the basis of evidence provided by both parties.

Misleading and deceptive conduct 

Section 42 of the Fair Trading Act 1987 provides that a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Section 24 of the Motor Dealers Act 1974 requires a dealer who offers or displays for sale a second-hand motor vehicle, to attach to the vehicle a notice containing the true particulars of the vehicle.

A man purchased a second-hand car from a car dealer. Several months later, he discovered that the vehicle had been imported from England and the odometer reading was in miles, not kilometres as he had thought. He calculated the vehicle had travelled almost 45,000 kms more than he had originally thought, and considered a fair value for a vehicle having travelled that distance would be $5,000 less. He contacted the dealer to complain about the odometer reading. The dealer denied there had been any misrepresentation, asserting that he had clearly told the man that the odometer was in miles.

The man lodged an application to the Tribunal seeking orders for a refund of $5,000 from the dealer. At the hearing the man brought a copy of the vehicle warranty form, signed by the dealer, which displayed a distance travelled in kilometres. The contract of purchase document, also signed by the dealer, confirmed the same odometer reading but did not indicate whether it was measured in kilometres or miles. The man told the Tribunal Member he was led to believe the distance travelled was in kilometres and was not told anything different when purchasing the vehicle. The dealer replied that the reference to kilometres in the signed ​​documents was just a typographical error and that the man was made fully aware the odometer reading was in miles during their discussions.

The Tribunal Member referred to the Motor Dealers Act 1974, noting that the onus of ensuring notices attached to vehicles are filled out appropriately and accurately falls upon the car dealer.

The Tribunal Member decided that the warranty form signed by the dealer displayed a distance travelled by the vehicle in kilometres, and did not represent the true distance travelled by the vehicle. The Member found this information was false and misleading and, when combined with the oral evidence of the applicant, was sufficient to persuade the Tribunal on the balance of probabilities that the man was misled. The dealer provided no evidence to the Member to refute the applicant’s evaluation of $5,000 in damages or to provide evidence of a different valuation. The Tribunal Member was therefore satisfied the amount claimed was reasonable and made an order in accordance with the applicant’s claim.

Motorhome 

Goods supplied to a buyer must be of merchantable quality and the Tribunal considers the evidence submitted by both parties to determine whether the goods reach this standard.

A prospective traveller bought a demonstration motorhome from a builder and supplier of motor-homes and campervans. He was happy with the new purchase until he noticed some parts on the motorhome required repair. These parts were subsequently repaired but the traveller was unhappy with the result and he noticed that other repairs were needed. He decided to lodge an application at the Tribunal, and asked the Tribunal to order the supplier to provide a refund of the full purchase price of the vehicle or to replace his existing motorhome with a new motorhome. He also claimed the motorhome did not comply with required standards and was not of merchantable quality.

The Tribunal considered each of the defects very carefully by listening to the evidence of the parties and an automotive consultant’s report which was submitted by one of the parties. After considering all the evidence, the Tribunal found that some of the motorhome’s problems could not be considered defects. For example, the roof was not defective as it was made in a standard and acceptable way at the time the vehicle was manufactured. Whilst the Tribunal found that some items could be considered defective, including the water tank bracket and the frame of the gas bottle door, these were not sufficient to justify a full refund or replacement. The motorhome supplier told the Tribunal that it would carry out all of the work to rectify the alleged defects.

The Tribunal then considered the traveller’s allegation that the vehicle was not of merchantable quality. The Tribunal found that the supplier had obtained a compliance certificate from the relevant government body for the motorhome and that the motorhome could be considered roadworthy on the basis of that certificate. The Tribunal found that the motorhome was of merchantable quality.

Odometer reading 

A woman living in South Australia purchased a 10 year old used car from a NSW car dealer for $5,500 over the internet. The odometer reading advertised was 134,000km.

The car was shipped interstate to her and she had driven it for about one year when she had the car serviced. During the service the mechanic found that the engine installed was from a different model car and had actually travelled 270,000kms. The woman lodged an application with the Tribunal seeking a full refund and compensation from the car dealer as the vehicle specifications were different to those advertised.

During the hearing, the woman gave her evidence by telephone and the car dealer appeared in person. The Tribunal found it was clear on the evidence that there was a breach of the contract by the car dealer as the vehicle did not comply with the advertisement.

The Tribunal considered that the appropriate amount of compensation would be the difference in value between what was advertised and what was received.

Paintwork 

The Consumer Claims Act and Fair Trading Act give consumers protection through conditions and warranties. Suppliers must guarantee that their goods are acceptable in appearance and finish.

A consumer purchased a new car for $25,000 from a licensed motor dealer after viewing the demonstration model in the showroom. When the new vehicle was delivered a couple of days later, the consumer found several paint scratches in sections of the vehicle’s bonnet and roof.

The applicant contacted NSW Fair Trading and a motor vehicle inspector attended to inspect the damage to the vehicle. The inspection report indicated there were many fine long straight scratches across the roof consistent with a car wash, but that these scratches were not deep and they could be rectified with polishing or buffing.

The applicant also sought an expert report before and after attempting to remove the scratch marks. The expert’s report indicated there were light scratches detectable under artificial light and that buffing undertaken by a well-trained professional could eliminate these scratches without devaluing the vehicle. After the attempted repair, the expert’s report indicated that a significant proportion of the scratches were removed but some were still visible in several locations. The expert’s report also indicated that any further removal of the clear coating could compromise the UV protection of the entire coating system.

The car owner then made an application to the Tribunal seeking orders for compensation. At the hearing, although the parties’ opinions differed as to the extent and seriousness of the scratch marks, it was found that the applicant did not get ‘what he bargained for’ notwithstanding the respondent’s efforts to remedy the defect. The issue considered by the Tribunal Member was whether the defect constituted a breach of a condition. Having taken all the evidence into account, the Member found that compensation equal to 15% of the purchase price was reasonable given the devalued state of the vehicle and a sum of $4,000 was awarded to the vehicle’s owner.

Reconditioned engine 

Under the Fair Trading Act 1987 a term is implied into every consumer contract that any services supplied will be provided with due skill and care.

The owner of a vintage camper bus engaged an engine reconditioning company to supply and fit a reconditioned engine. The engine was installed but when the bus was road tested a fire broke out causing substantial damage. The bus was hauled back to the company’s premises where various inspections were carried out. The bus owner paid the invoice for the work carried out by the company but later lodged an application with the Tribunal alleging the installation of the reconditioned engine was not undertaken with due skill and care, causing the fire and the damage to the bus.

At the Tribunal hearing, a report by a forensic expert commissioned by the company’s insurer was tendered. It concluded that the fire began beneath the floor in the engine area towards the rear of the automatic transmission. The fire was said to have spread from the rear exhaust pipe. The report concluded that automatic transmission fluid had leaked from the transmission and ignited on contact with the exhaust pipe.

The bus owner also tendered an independent report from an automobile engineering consultant. That report agreed the fire was due to an automatic transmission fluid leak, but concluded the transmission fluid was overfilled and caused an excessive fluid pressure build-up, causing the dipstick to be ejected from its sealed location and fluid to escape. It was this consultant’s opinion that checking the roadworthiness of the vehicle before a road test, including all lubricating oils, was an essential procedure which had been neglected in this case. The respondent company argued that because it had done no work to the transmission of the vehicle the fluid leak could not be related to the work they had carried out in replacing the engine, and therefore must have been a pre-existing problem.

In deciding the case, the Tribunal Member agreed with the bus owner’s independent report that it was the responsibility of the installing mechanic to check the transmission fluid levels even if the work carried out only involved linking the new engine to the transmission and nothing else. The Member accepted that the cause of the fire was due to the fluid leak and that the fluid had been overfilled. In failing to check the roadworthiness of the vehicle in this respect, the engine reconditioning company was found to be liable for the damage done to the vehicle.

Roadworthiness 

When a second-hand vehicle is sold by a licensed motor dealer it must be roadworthy at the time of sale. The consumer must also be provided with a Safety Inspection Report, commonly known as a ‘pink slip’, stating that the vehicle is roadworthy. If the vehicle is not roadworthy at the time of sale, the Tribunal can make orders for the dealer to refund the full purchase price of the vehicle and other associated costs.

A man was looking to purchase a second-hand family car for around $10,000. He searched on the internet and found a licensed motor dealer advertising a “family” automatic station wagon for $9,999. The advertisement guaranteed that all vehicles were “work shop tested”. The man called the dealer to enquire about the vehicle and he was told that the vehicle was in “good condition” and that it was “rust free”. Satisfied with the description, he purchased the vehicle over the internet.

Upon delivery of the station wagon, the man found that the vehicle did not match the advertised description and was in poor condition. He arranged for an independent mechanical inspection of the station wagon which revealed that the vehicle had serious rust issues and required extensive mechanical repairs. A further RTA inspection declared the vehicle to be unroadworthy and doubted the validity of the ‘pink slip’ that had been issued only two months prior.

The man made an initial complaint to NSW Fair Trading against the motor dealer. The dispute could not be resolved with the dealer, and the man then lodged an application to the Tribunal seeking orders for a full refund of the purchase price.

At the Tribunal hearing, the man stated that the motor dealer had misrepresented the condition of the vehicle, in particular that it was “rust free”. He presented evidence including the original advertisement and proof of purchase, the inspection reports and subsequent correspondence between himself and the dealer

On the evidence presented, the Tribunal was satisfied that the vehicle was not of merchantable quality as it was sold with numerous faults and did not match the description of the advertisement. The Tribunal was also satisfied that the vehicle was not roadworthy when issued with a pink slip at the time of sale and that the dealer had been misleading in regards to the sale. The man was awarded $10,649 in damages including the cost of the vehicle, cost of the inspections and storage costs. The dealer was also ordered to collect the defective vehicle.

Unregistered vehicle 

A man purchased an unregistered used car for $5,165 from a motor dealer, with the dealer agreeing to some additional repairs and maintenance being carried out before the purchase was finalised. When the man returned to pick up the vehicle, he was assured all of the repairs and maintenance work had been completed. A ‘blue slip’ was give to the man allowing the car to be registered.

On the drive home it became apparent that some of the faults had not been fixed, as the car ran roughly with a lot of vibration.  The man stopped by a local repairer who confirmed that there were a number of serious defects including a broken engine mount and significant wheel bearing noise.  The car was returned to the dealer on the following day for further repairs.  When he returned to collect the car, the dealer again assured the man that the defects had been corrected at no charge.  To be sure, the man arranged for another mechanic to take a look at the car who thought, in his opinion, that the vehicle was unroadworthy. A further RTA inspection revealed that the engine mount was still broken and a CV joint had collapsed, among other defects.  A defect notice was issued and the car could not be registered.

The man lodged an application with the Tribunal seeking an order for the refund of the purchase price and compensation for the inspection costs. During the Tribunal hearing the dealer stated that he was only a salesman, had no mechanical knowledge and relied on a small mechanical shop to carry out the repairs. The dealer offered to carry out the repairs at his own expense but at his choice of workshop. However, the man told the Tribunal that he no longer trusted the dealer and did not have any confidence that the vehicle could be repaired to a roadworthy standard.

The Tribunal found, on the evidence, that the vehicle had serious defects and that major repairs were required. Although the dealer’s offer to repair the vehicle was acknowledged, the Tribunal found that the dealer was not capable of guaranteeing a prompt and competent repair that would be sufficient to have the vehicle pass an RTA inspection. Orders were made for a full refund of the purchase price and that the vehicle be returned to the dealer.

2014-05-20