Frost v Matusik[2018] QCAT 192

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

Claim

1. [1]
   By application to the Tribunal filed 23 May 2017, Kevin Frost seeks orders that the respondents pay him $25,000.00 as compensation for expenses incurred in connection with his purchase of a Mustang 2800 Sports Cruiser. Mr Frost also seeks reimbursement of his legal costs of $5,500.00 and his filing fee of $315.70.
2. [2]
   The first, second and third respondents deny liability to Mr Frost.

Applicant’s Submissions

3. [3]
   On 17 July 2015, Kevin Frost signed an Offer to Purchase and Sales Agreement (‘the Agreement’) to purchase a Mustang 2800 Sports Cruiser named ‘Sagittarius 2’ (‘the Vessel’) for $46,000.00. The Agreement was between Mr Frost as buyer and the Vessel’s former owner, Mr Peter Matusik (the first respondent) as seller.
4. [4]
   The Agreement was brokered by Peter Hansen Yacht Brokers Raby Bay (‘Peter Hansen’), the second respondent in these proceedings, as noted at Item B of the Agreement. Peter Hansen was not otherwise a party to the Agreement.
5. [5]
   Settlement of the Agreement was to take place on or before 24 July 2015, subject to Mr Frost’s satisfaction with a sea trial of the Vessel and pre-purchase inspection,^[1] each to take place on or before 20 and 23 July respectively, as noted at Items I and J of the Agreement.
6. [6]
   The sea trial was taken on 20 July 2015, with Mr Frost, his wife Roby Frost, Mr Matusik and Mr Mitchell (representing the second respondent) on board. Mr Frost made the following points about the sea trial:

   1. (a)
      The engine was not turned off and remained in idle when the Vessel was not in motion;
   2. (b)
      The following representations were made by Mr Matusik, or by Peter Hansen as Mr Matusik’s agent:

      1. The Vessel had only done 130 hours of sea time;
      2. The Vessel had never given Mr Matusik any trouble; and
      3. The Vessel was in great condition considering its age.
7. [7]
   Mr Frost says he relied on the representations made by Mr Matusik and Peter Hansen (together with the pre-purchase inspection report, discussed below) in deciding to purchase the vessel.
8. [8]
   The pre-purchase inspection was done on 22 July 2015 by Frans Carinus, director of SBM Business Holdings Pty Ltd trading as Aquasure Marine (the third respondent) (‘Aquasure Marine’).^[2] Mr Frost says that Aquasure Marine was recommended to him by Peter Hansen.
9. [9]
   Mr Frost says the pre-purchase inspection report prepared by Mr Carinus dated 22 July 2015 (‘the Aquasure Report’) indicated that the Vessel was free of faults and defects, other than a little rust on some parts of the Vessel’s exterior.
10. [10]
    In support of this, Mr Frost submitted the Aquasure Report to the Tribunal. The Aquasure Report comprises seven pages, including photographs.
11. [11]
    Page 3 of the Aquasure Report has the following list:

Checks/Tests: As Per Work Order

Oil levels: Good

Gear case oil: N/A (can’t inspect)

Gear case anodes: Good

Bellows: N/A (can’t inspect)

Oil Pressure: Good

Gas & Fire Alarm systems: No Gas detectors

Engine Fire exhausters: No Engine room Fire Exhausters

Rpm Gauges: Not work good [sic] (Resistor in gauge) May need to change all gauges if you want them to be the same

Starting: Good

Charging: Good

Battery power: Good

Run Temp at dock and sea trail [sic]: Good

Header Bottle: Good

Coolant condition: Good

Belts: Good

Pulleys condition: A little Rusty

Raw water pumps: Good

Fuel condition: N/A

Injector Condition: Good

Carburetor: N/A

Engine Mounts: Good

Prop condition: Good

12. [12]
    Despite use of the words ‘As Per Work Order’, no work order or similar document was submitted to the Tribunal by Mr Frost or Aquasure Marine.
13. [13]
    Page 4 of the Aquasure Report notes ‘the Engine & Gear case is in good condition for its age,’ and includes a photograph (‘Picture 2’) with the notation ‘A little rust on Pulleys.’
14. [14]
    Page 5 includes two photographs, the first of which notes ‘A little rust on Fuel brackets.’
15. [15]
    Picture 5 on page 6 notes ‘Exhaust and Raisers (sic) (No leaks from exhaust raiser (sic). Bit of rust on Surface/de rust & paint will fix that).’
16. [16]
    Page 7 includes the following disclaimer:

While we have taken all reasonable care when carrying out the inspection to which this report relates and in producing the information in this report, the inspection did not and the report does not consider the condition of every part of the revenant (sic) craft. In particular, this report relates only to the parts of the craft which were able to be inspected without us undertaking major work, including (but not limited to) (Insert relevant areas of the vessel).

Please note: That this inspection is only a visual inspection and will not cover any hidden damages or Cost as per Aquasure Marine’s Terms and condition (sic) 

17. [17]
    Mr Frost said he had not received any document from Mr Carinus containing Aquasure’s terms and conditions, nor any checklist of what the pre-purchase inspection would cover.^[3]
18. [18]
    Mr Frost says that, in reliance on Mr Carinus’s expertise, the Aquasure Report which represented that the Vessel was in good condition and free from faults and defects, and the representation made by Mr Matusik (noted above), he proceeded to purchase the Vessel.
19. [19]
    Mr Frost collected the Vessel from Mr Matusik on 8 August 2015. Mr Frost says that after making a stop on the journey from Mr Matusik’s home at Raby Bay to the Gold Coast he had difficulty restarting the Vessel. Mr Frost says that on several occasions during August 2015 the Vessel failed to restart when the engine was hot. 
20. [20]
    Around 28 August 2015 Mr Frost again had trouble starting the Vessel. He engaged Mr Troy Ilic (who operates a marine mechanic business called Amberjack Marine) to inspect and make repairs to the Vessel.
21. [21]
    Mr Ilic prepared a written report (‘the Ilic Report’) for Mr and Mrs Frost. The Ilic Report is undated, but Mr Ilic said it was prepared in November 2015.^[4] It noted the following about inspections and repairs Mr Ilic undertook to the Vessel between 28 August and 11 November 2015:

    1. (a)
       Removal of the engine’s spark plugs showed that water had gained entry into the engine’s cylinders, and removal of the exhaust system confirmed that the port and starboard saltwater exhaust jackets had both failed, letting saltwater into the cylinders;
    2. (b)
       The exhaust system was replaced, but the engine would not start. A compression test showed low compression on four of eight cylinders;
    3. (c)
       On removal of the engine it was evident that:

       1. the air intake manifold was corroded indicating that saltwater had entered the engine’s air system;
       2. the bottom of the oil sump pan was covered in a thick, watery, oily sludge which (in Mr Ilic’s opinion) had been there for some time and was generally indicative of salt water jackets failing; 
    4. (d)
       On removal of the engine’s bobtail drive coupler and flywheel there was a distinctive saltwater tide mark half-way up the flywheel, indicating the engine had been half submerged;
    5. (e)
       The distributor was full of salt and the points heavily corroded;
    6. (f)
       There was contaminated fuel in the engine requiring replacement of fuel injectors, stripping down of the entire fuel system and draining and cleaning the fuel tank; and
    7. (g)
       The old plastic style pump was leaking saltwater into the bilge.   
22. [22]
    Photographs were submitted to the Tribunal showing some of the problems noted in the Ilic Report.
23. [23]
    Invoices totalling $21,681.70 were also submitted to the Tribunal, dated between 2 September and 26 November 2015. Mr Frost says this work was necessary to put the Vessel into the condition he had expected it was in at the time he purchased it.

Evidence of Troy Ilic

24. [24]
    Mr Ilic attended the hearing of 26 February 2018 in person to give oral evidence for Mr Frost.
25. [25]
    During examination in chief, Mr Ilic confirmed the Ilic Report and made the following additional points:

    1. (a)
       On showing Mr Frost the extent of rust on the exhaust jackets, on or about 2 September 2015, Mr Frost agreed to replace the exhaust;
    2. (b)
       Despite replacing the exhaust, a compression test undertaken on 17 September 2015 showed the engine had been compromised.^[5] Mr Ilic suggested to Mr Frost the he needed a new or reconditioned engine, which Mr Frost agreed to. A reconditioned engine was installed on or about 28 September 2015;^[6]
    3. (c)
       Mr Frost then carried out sea trials and tests and found that the fuel system was badly contaminated with water and sludge;
    4. (d)
       The only explanation for the tidemark on the engine is that the bilge pump was not plugged into shore power, or the battery had run flat and the boat had filled with water from rain or water coming in somewhere;
    5. (e)
       The demise of the engine was the exhaust that had allowed water to enter. The exhaust systems on any marine vessel should be inspected every year and replaced every two to three years;
    6. (f)
       There was sealant used on the gasket which showed that the exhaust system had been apart at some stage. The presence of sealant could have compromised salt water into the engine by allowing water to get underneath the gasket;
    7. (g)
       If he had carried out the pre-purchase inspection he would have uncovered the problems with the Vessel. He would have noted that there was no paperwork supporting when the exhausts were last removed and would recommend that it gets carried out before buying the Vessel;
    8. (h)
       It was obvious that the exhaust and/or risers had been removed and checked, but there was no paperwork to confirm when that had been done so there was no indication as to when it would have to be done again;
    9. (i)
       There is no regulated minimum standard for marine pre-purchase inspections of marine vessels. The pre-purchase inspection done by Mr Carinus for Aquasure included most of the relevant checks, but his inspection should not only have checked the health of the engine, it also should have included an indication of the vessel’s next service, or when the exhausts had last been removed or replaced; and
    10. (j)
        The rust and sludge found indicated water had entered the engine for a longer period of time than Mr Frost had owned the vessel, possibly over few years.^[7] 
26. [26]
    On cross-examination by Mr Carinus, Mr Ilic gave the following additional evidence:

    1. (a)
       When he first checked the oil in the vessel it was a nice golden colour, not milky as would be consistent with saltwater having entered the engine, so he believed the oil had been changed;
    2. (b)
       Visual indications of water entry into an engine are the condition of the spark plugs, the exhaust systems, the colour and condition of the oil, and corrosion on the engine;
    3. (c)
       A compression test and a visual inspection was sufficient to show the engine was in poor health. Mr Ilic did not deem it necessary to plug a computer into the engine to determine its problems; and 
    4. (d)
       Mr Ilic found that the fuel in the tank was contaminated with sludge and water, which he agreed could have happened from refuelling, from condensation caused by the fuel tanks not being kept pressed up, or from water being picked up over a period of years.^[8]

Claims Against the Respondents

27. [27]
    Mr Frost claims that he has sustained costs in excess of $31,000.00 in connection with the problems noted in the Ilic Report and by Mr Ilic in oral evidence. Mr Frost claims that Mr Matusik, Peter Hansen and Aquasure Marine are jointly and/or severally liable to compensate him for these costs on the grounds noted below.

Claim Against Mr Matusik

28. [28]
    Mr Frost’s claim against Mr Matusik is based on the allegation that he engaged in misleading and deceptive conduct because of the representations he made about the standard of the engine and age of the boat,^[9] and because he did not tell Mr Frost about replacement of the risers and manifolds, or that the engine had been substantially submerged.^[10] It is also alleged that Mr Matusik misrepresented the standard, quality and history of the vessel.^[11]
29. [29]
    Mr Frost’s written submissions on this point allege contravention of ss 18(1) and 29(1)(a) of Schedule 2 of the Competition and Consumer Act 2010 (Cth) (commonly referred to as the Australian Consumer Law, or ‘ACL’) which provide, as relevant:

18 Misleading or deceptive conduct

1. (1)
   A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

…

29 False or misleading representations about goods or services

1. (1)
   A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

   1. make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or previous use;

…

30. [30]
    As is clear from the wording of ss 18 and 29, conduct that might give rise to a contravention of those provisions is limited to that done ‘in trade or commerce’. That phrase is defined in s 2 of the ACL to mean:

1. (a)
   trade or commerce within Australia; or

2. (b)
   trade or commerce between Australia and places outside Australia;

and includes any business or professional activity (whether or not carried on for profit).

31. [31]
    That phrase has also been judicially considered in a number of Australian cases where it has been held to as referring only to:^[12]

…conduct with the character of an aspect or element of trading or commercial activities or transactions.

32. [32]
    With respect to statements made by individuals, the High Court has held that:^[13]

Statements made by an individual person not himself or herself engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity.

33. [33]
    While ‘in trade or commerce’ is not restricted in its application to transactions or activities done for profit,^[14] the conduct complained of must itself be an element or aspect of a transaction which, of its nature, bears a trading or commercial character.^[15]
34. [34]
    Mr Frost did not allege that Mr Matusik is engaged in the business of selling boats or other marine vessels. Indeed, his submissions (although apparently prepared with the assistance of a solicitor) do not address this point. Rather, Mr Frost appeared to accept that Mr Matusik was a private owner selling his second-hand vessel through a broker in a one-off transaction.
35. [35]
    I find that none of the evidence could lead to the conclusion that Mr Matusik was engaged in trade or commerce by the sale of the Vessel to Mr Frost. Mr Matusik was a private seller to whom ss 18 and 29 of the ACL have no application. Accordingly, even if representations made by him during the trial run were false, misleading and deceptive, a fact which was not proven in any event, Mr Matusik was not selling the Vessel in trade or commerce, so the action against him must fail.

Claim Against Peter Hansen

36. [36]
    Mr Frost also attributes Mr Matusik’s representations and omissions to Peter Hansen as agent for Mr Matusik, and consequently claims that Peter Hansen has also engaged in misleading and deceptive conduct.
37. [37]
    Unlike Mr Matusik, Peter Hansen operates a brokerage ‘in trade or commerce’. Peter Hansen was, however, acting as agent for Mr Matusik—a fact that was known to Mr Frost. As I have found that Mr Matusik has no liability under the ACL, it would be necessary for Mr Frost to prove that Peter Hansen acted outside the scope of its authority as agent for the claim against Peter Hansen to succeed.
38. [38]
    Mr Frost’s submissions about agency are unclear. He claims that Peter Hansen ‘did not simply pass on information’ from Mr Matusik, but ‘endorsed and adopted the representations both oral and in writing acting as more than a mere conduit.’^[16] Mr Frost provides no evidence to support this claim. Mr Frost’s submissions cite extracts from two decisions of the High Court and a reference to a journal article but do not clarify how those citations support his claim against Peter Hansen.^[17]
39. [39]
    Mr Frost further alleges that representatives of Peter Hansen said during the sea trial (together with Mr Matusik or separately):^[18]

The boat had done only 130 hours of sea time; and

The boat had never given Mr Matusik any trouble; and

The boat was in great condition considering its age.

40. [40]
    Allan Mitchell (a director of Peter Hansen) stated that he recalled Mr Matusik saying the Vessel had done ‘about 130 hours’, which was confirmed by the engine test done by Mr Carinus (which showed 131 hours). He said this data could not be changed. Mr Mitchell said 181 hours was put on the brochure because that was what the dash gauge showed at the time of listing.^[19]
41. [41]
    Mr Frost said that the brochure for the Vessel made by Peter Hansen was misleading because the 181 hours stated on the brochure was ‘well below’ the hours claimed by Mr Ilic.^[20]
42. [42]
    I have read Mr Ilic’s affidavit, the Ilic Report and reviewed the invoices. I heard Mr Ilic’s oral evidence and have read the transcript of it. At no point does Mr Ilic state that the Vessel had done more than the 181 hours stated on the brochure. I find that there has been no misrepresentation by Peter Hansen about the number of hours the Vessel had done.
43. [43]
    With regard to the second and third statements above, Mr Mitchell confirms that they were made by him and/or Mr Matusik. There is, however, no evidence that the Vessel had given Mr Matusik ‘any trouble,’ nor that Peter Hansen knew the Vessel was not in ‘great condition considering its age.’ There is nothing in the evidence to suggest that these were beliefs that could not have been reasonably held by Peter Hansen at the time they were made.
44. [44]
    Accordingly, I find that there is no evidence that Peter Hansen acted outside its authority as Mr Matusik’s agent in its dealings with Mr Frost. The claim against Peter Hansen must fail.

Claim Against Aquasure Marine

45. [45]
    Mr Frost claims that Aquasure Marine is liable to him on two grounds. The first is that Aquasure Marine contravened ss 18 and 29 of the ACL because the Aquasure Report was ‘false’ and the ‘allegations therein were misleading when compared to the true condition of the boat.’^[21] He says that Aquasure Marine misrepresented the condition, quality and age of the Vessel, and Mr Frost suffered loss and damage as a result.^[22]
46. [46]
    The second ground is one based on negligence and/or breach of contract. Mr Frost argues that Aquasure Marine breach its duty of care to Mr Frost, for which he claims ‘damages’ for ‘breach of contract and negligence.’^[23]
47. [47]
    There is also a potential third ground based on the consumer guarantees provided in the ACL. This was not a ground addressed in Mr Frost’s written submissions. I noted the potential application of the ACL in the course of the second hearing, having regard to the Tribunal’s obligation to ensure the parties’ proper understanding and regard of the nature of assertions made in proceedings and the legal implications of those assertions.^[24]

Ground 1: Misleading and deceptive conduct

48. [48]
    Mr Carinus provides services as a marine mechanic and/or inspector of marine engines under the business name Aquasure Marine. He provided the Aquasure Report to Mr Frost in the course of this commercial endeavour. Mr Carinus therefore undertakes those services in trade or commerce as required for ss 18 and 29 of the ACL to apply.
49. [49]
    Mr Frost says that the Aquasure Report was ‘false’ and the ‘allegations therein were misleading when compared to the true condition of the boat as presented in [Mr Ilic’s] findings.’^[25]
50. [50]
    Mr Frost’s contention is that the Aquasure Report was false and misleading because Mr Carinus knew or should have known of the problems that Mr Ilic eventually found with the Vessel, but he did not report them to Mr Frost. Mr Frost says that the problems he ultimately experienced had existed prior to his purchase of the Vessel.
51. [51]
    Intention to mislead or deceive is not a prerequired element of ss 18 and 29.^[26] Mr Frost is therefore not required to prove that Mr Carinus purposely set out to mislead or deceive him into thinking the Vessel was sound by writing an incomplete or incorrect report.
52. [52]
    While it is well established in common law that a party can engage in misleading and deceptive conduct through silence,^[27] a person cannot contravene a prohibition against misleading or deceptive conduct unless the person has actual knowledge of the matter said to be misleading or deceptive.^[28]
53. [53]
    As stated by the New South Wales Court of Appeal in Semrani v Mamoun; Williams v Mamoun:^[29]

The combined effect of the Act and the authorities therefore, is that for … silence to be actionable, [the defendant] must have had actual knowledge of a matter which he intentionally refrained from telling [the plaintiff] in circumstances where there was either a duty to disclose or where [the plaintiff] had a reasonable expectation that such information would be disclosed to him.

54. [54]
    Accordingly, Mr Carinus will have engaged in misleading and deceptive conduct if he actually knew saltwater had entered the engine but intentionally refrained from telling Mr Frost.
55. [55]
    Mr Frost contends that the rust on the exhaust should have alerted Mr Carinus to the fact that saltwater had entered the engine. He says that the Aquasure Report should have included a note stating when the exhaust and risers had last been checked or changed so Mr Frost could have avoided the problems that eventually manifested.
56. [56]
    Mr Frost does not say, nor does his evidence prove, that Mr Carinus actually knew that saltwater had entered the engine and intentionally refrained from noting it in his report. Rather, he says he should have known. There was no evidence that Mr Carinus had actual knowledge of anything other than that there was rust on the exhaust. 
57. [57]
    Accordingly, the Tribunal finds that while Mr Carinus had actual knowledge of rust on the Vessel’s exhaust, there is no evidence that he had actual knowledge that water had entered engine and caused the problems identified in the Ilic Report. The claim against Aquasure Marine under ss 18 and 29 ACL therefore fails.

Ground 2: Negligence/breach of contract

58. [58]
    Mr Frost’s written submissions claim that Aquasure Marine failed to properly exercise its duties as an expert, and as a result Mr Frost ‘claims damages for breach of contract and negligence.’^[30]
59. [59]
    This Tribunal’s jurisdiction to deal with matters and the orders it can make are limited by Chapter 2 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’). As a creature of statute, QCAT can only deal with matters it is expressly empowered to deal with by the QCAT Act itself or by an enabling act.^[31] QCAT has no jurisdiction to deal with applications for unliquidated damages arising from breach of contract or negligence.^[32]
60. [60]
    Accordingly, QCAT has no jurisdiction to adjudicate this ground.

Ground 3: Consumer guarantees relating to the supply of services

61. [61]
    This application was filed as a Minor Civil Dispute—Consumer Dispute, for which jurisdiction is conferred by the ACL. Despite this, Mr Frost’s submissions did not address the consumer guarantee provisions in ACL. This is surprising considering the guarantees as to services in Part 3-2 have obvious potential application to Mr Frost’s claim against Aquasure Marine.
62. [62]
    Whether or not the Tribunal should consider a legal argument that an applicant has not specifically raised requires careful consideration of its obligations. The Tribunal must conduct hearings consistently with its objects, which includes the obligation to deal with matters in a way that is accessible, fair, just, economical, informal and quick.^[33] While bound to observe the rules of natural justice, the Tribunal is not bound by the rules of evidence, may act as informally as permitted by the QCAT Act or an enabling act, and must ensure, so far as is practicable, that all relevant material is disclosed to enable the Tribunal to decide the proceeding with all relevant facts.^[34] It is a delicate balance, as the Tribunal’s predominant obligation is to act impartially.
63. [63]
    The parties to this matter were unrepresented at the hearing. This is the case with the majority of minor civil dispute hearings, for which leave is granted for legal representation in limited situations.^[35] It is often the case, therefore, that parties are not aware of every law that might assist or impede their application or defence as the evidence unfolds in the course of the hearing. The Tribunal is under an obligation to ensure proper understanding and regard for its practices and procedures, and for the legal implications of assertions made in a proceeding.^[36] While that does not extend to assisting a party to prosecute its claim, it has been held that the obligation to ensure proper understanding and regard suggests that parties to proceedings will receive, and have an entitlement to expect, assistance with the legal implications of the issues of their case.^[37]
64. [64]
    Accordingly, at the hearing I mentioned that Mr Frost’s claim against Aquasure Marine and Mr Carinus might be better framed as a failure to exercise due care and skill under s 60 of the ACL.^[38] 
65. [65]
    Section 60 provides:

60 Guarantee as to due care and skill

If a person provides, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. 

66. [66]
    Mr Frost is a ‘consumer’ under the ACL.^[39] It has already been found in these proceedings that Mr Carinus provided his services in trade or commerce. Section 60 therefore imposed an obligation on Mr Carinus to use due care and skill when conducting the pre-purchase inspection on the Vessel.
67. [67]
    Adapting Mr Frost’s submissions to correspond with s 60, he contends that Mr Carinus breached the guarantee as to due care and skill because the Aquasure Report failed to:

    1. (a)
       alert Mr Frost to the fact that the presence of rust on the exhaust manifolds and risers might indicate a more significant issue, and a qualified inspector should have attempted to locate the cause of the rust;^[40]
    2. (b)
       note the presence of sealant within the exhaust gasket;^[41] 
    3. (c)
       note rust on the base of the spark plugs, which should have prompted a competent inspector to conduct further investigations which would have revealed that water was leaking into the engine;^[42] and
    4. (d)
       mention or warn of the poor condition of the fuel in the engine,^[43] nor did it make recommendations about the sampling of oil or fuel beyond some post-purchase ‘tips’.^[44]
68. [68]
    Section 61 of the ACL provides a further guarantee that services will be fit for the purpose for which they are obtained. That section provides (as relevant):

61 Guarantee as to fitness for a particular purpose etc.

1. (1)
   If:

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

2. (b)
   the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer;

There is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose.

2. (2)
   If:

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

2. (b)
   the consumer makes known, expressly or by implication, to:

1. (i)
   the supplier; or

2. (ii)
   a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made;

the result that the consumer wishes the service to achieve;

there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.

3. (3)
   This section does not apply if the circumstances show that the consumer did not rely on, of that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier.

69. [69]
    Adapting Mr Frost’s submissions to s 61(1), he contends that Mr Carinus breached the guarantee of fitness for purpose because Mr Frost made known to Mr Carinus (expressly or by implication) that the purpose of the pre-purchase inspection was to give Mr Frost assurance that the Vessel was free of defects, faults, damage or other problems before he committed to purchase it. Mr Frost’s claim is that Mr Carinus’s services were not reasonably fit for purpose because, as he later discovered, the inspection was not comprehensive and/or careful enough to give the assurance Mr Frost reasonably expected.
70. [70]
    Similarly, applying s 61(2), Mr Frost contends that he told Mr Carinus the result he wished to achieve, namely a report that would detail any defects, faults, damage or problems existing in the Vessel, but that, in failing to detail the numerous defects, faults, damage and problems that Mr Frost found soon after purchase, or pointing out the that the rusty exhaust should have been a sign of those problems, the Aquasure Report was not of a nature or quality to achieve that result. 
71. [71]
    Mr Carinus says that the pre-purchase inspection was a combination of observations made on a visual inspection and a report by a diagnostic machine connected to the engine (which he referred to as an ‘engine computer monitoring programme’). He provided the Tribunal with a copy of the diagnostic report conducted on the Vessel on 22 July 2015.^[45] It noted zero faults. Mr Ilic gave evidence that despite a diagnostic machine noting zero faults, a visual inspection of the exhaust manifolds and risers would have alerted a competent marine inspector that saltwater had possibly entered the engine, and to inspect further.
72. [72]
    Mr Carinus also said Peter Hansen provided him with photographs of the Vessel’s engine compartment.^[46] It is unclear when these were taken, but it can be reasonably inferred from their inclusion in Mr Carinus’s written submissions that he relied on these photos to determine that the engine was in sound condition.
73. [73]
    Both Mr Carinus and Mr Ilic gave evidence that there are no minimum standards or regulated checklists for marine pre-purchase inspections. Mr Frost gave evidence that he did not see a work order, terms of trade or any other description of the extent and limitations of Mr Carinus’s pre-purchase inspection.
74. [74]
    Nevertheless, I find that it was reasonable for Mr Frost to rely on Mr Carinus’s skill and judgment to note the potential for at least some of the problems that arose with the Vessel soon after purchase. I accept the evidence of Mr Ilic that a reasonable marine mechanic would have alerted Mr Frost to the potential consequences of rust on exhaust manifolds and risers, rather than to recommend that the rust be simply ‘brushed off’. While Mr Frost has not shown that Mr Carinus could have known the full extent of the damage to the engine, it was incumbent upon Mr Carinus to exercise due care and skill in undertaking his inspection and not to rely (unreasonably, in my view) on the outcome of a diagnostic test when the visual inspection would have been a more reliable method of identifying potential problems.
75. [75]
    Accordingly, I find that Mr Carinus has breached the consumer guarantees as to due care and skill and fitness for purpose. In so finding, I do not suggest that Mr Carinus was under an obligation to dismantle the engine. Rather, that he should have at the very least noted the potential for further internal issues given the presence of external rust to give Mr Frost an opportunity to decide if he should investigate further. Mr Frost was not given that opportunity, so purchased the Vessel unaware of the potential for the problems he would later experience.  

Remedy

76. [76]
    Section 267 of the ACL provides that a consumer may take action against a supplier if an applicable consumer guarantee has not been complied with. By s 64, a term of a contract is void to the extent it attempts to exclude, restrict or modify consumer guarantees.  
77. [77]
    If the failure to comply with a guarantee:

    1. (a)
       cannot be remedied; or
    2. (b)
       is a ‘major failure’,

the aggrieved consumer may recover compensation for the reduction in value of the price paid for the services. Clearly, only one of these needs to be satisfied for the consumer to be entitled to claim compensation.  

78. [78]
    It is a ‘major failure’ if (among other things):

    1. (a)
       the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
    2. (b)
       the services are substantially unfit for a purpose for which services of the same kind are commonly supplied and they cannot, within a reasonable time, be remedied to make them fit for such a purpose.^[47]
79. [79]
    Aquasure Marine’s inspection and report cannot be remedied. The pre-inspection and report cannot be redone. The Vessel was significantly repaired within a few months after purchase and has since been sold. On this basis alone Mr Frost would be entitled to compensation for anything paid to Aquasure Marine for the pre-purchase inspection. Mr Carinus says his invoice had never been paid,^[48] so an order for compensation is unnecessary.
80. [80]
    I also find that the failure to exercise due care and skill and the failure to conduct an inspection and provide a report that were fit for purpose were major failures because I accept that:

    1. (a)
       Mr Frost would not have engaged Aquasure Marine had he known that Mr Carinus would not identify the potential risks associated with the rusted exhaust; and
    2. (b)
       The pre-purchase inspection and Aquasure Report were substantially unfit for the purpose for which they were supplied.
81. [81]
    Accordingly, Mr Frost is entitled to be reimbursed anything paid to Aquasure Marine for the pre-purchase inspection as compensation pursuant to s 267(3)(b) of the ACL. Again, Mr Frost has not paid the invoice it is unnecessary to award compensation. 
82. [82]
    By s 267(4), a consumer may also recover damages for any loss or damage suffered by the consumer because of the failure to comply with a guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of the failure.^[49]  
83. [83]
    What is ‘reasonably foreseeable’ is determined by reference to established legal principle:^[50]

[W]hen we speak of a risk of injury as being "foreseeable" we are not making any statement as to the probability or improbability of its occurrence, save that we are implicitly asserting that the risk is not one that is far-fetched or fanciful. Although it is true to say that in many cases the greater the degree of probability of the occurrence of the risk the more readily it will be perceived to be a risk, it certainly does not follow that a risk which is unlikely to occur is not foreseeable.

[T]he tribunal of fact must first ask itself whether a reasonable man in the defendant's position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff. If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk.

84. [84]
    What a reasonable person would do by way of response requires consideration of:

    1. (a)
       The magnitude of the risk and the degree of the probability of its occurrence; against
    2. (b)
       The expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the respondent may have.^[51]
85. [85]
    The testimony of Mr Ilic showed that the probability of the mechanical problems Mr Frost experienced was not far-fetched or fanciful. It was a real risk given the visible rust on the exhaust. The magnitude of the risk was undoubtedly high.
86. [86]
    It would have cost Aquasure Marine virtually nothing and taken little time to include a warning in the report noting that rust on the exhaust could mean that saltwater had entered the engine and recommending further internal inspection. In my view this was necessary despite the diagnostic machine finding no faults. There was no apparent inconvenience to Mr Carinus nor any conflict in taking this alleviating action.
87. [87]
    In any assessment of damages the claimant must prove what his or her position would have been but for the conduct of the other party.^[52] The cost of repairing the Vessel to make it seaworthy and able to be used is clearly loss or damage suffered by Mr Frost because of a failure to comply with a guarantee and reasonably foreseeable as likely to arise from such a failure.
88. [88]
    Mr Frost says he has expended $31,384.77 to fix the Vessel. However, invoices submitted to the Tribunal total only $18,899.11. They are:

89. [89]
    Mr Frost seeks an additional $5,500.00 for legal costs and $315.70 for his filing fee. The QCAT filing fee is a recoverable cost in a minor civil dispute,^[53] but legal costs are not.^[54]

Orders

90. [90]
    I order as follows:

    1. (a)
       The third respondent’s name is amended to SBM Business Holdings Pty Ltd ACN 110 668 963 t/as Aquasure Marine;
    2. (b)
       The application against the first and second respondents is dismissed;
    3. (c)
       The third respondent must pay $19,214.81 within 45 days of this order, comprising:

       1. $18,899.11 compensation; and
       2. $315.70 filing fee.