Jakota Pty Ltd v Luatua[2018] QCATA 26

This matter was heard and determined on the papers pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld).

REASONS FOR DECISION

What is this appeal about?

1. [1]
   On 27 January 2016, Keakulina Luatua bought a 2004 Nissan Patrol Wagon from Jakota Pty Ltd t/a JDM Auto Wholesale for $18,790.00. The odometer read 240,053km. Before signing the contract, Ms Luatua’s husband, Ise Luatua took the car for a test drive of for ten minutes and for “no more than about 50 yards away”.^[1]
2. [2]
   The JDM sales manager, John Kirk, told them the car is “good to go”, “there’s no other known issues with the car” and “it’s almost new considering the low kilometres that it’s done”.^[2] Mr Luatua checked the odometer and said his recollection of its reading was “about 160,000 kilometres”.^[3]
3. [3]
   When Mr and Ms Luatua drove the car home, they could not lock the door using the remote and key. They contacted JDM who told them to bring the car in the following Monday. The day after discovering the door problem, the car would not start for an hour. Mr Luatua again contacted JDM. Mr Kirk agreed to fix the door and said “we’ll talk about the other problems”.
4. [4]
   JDM then referred Mr and Ms Luatua to O'Briens Mechanical to fix the door.^[4] JDM ultimately paid for this. However, Mr and Ms Luatua did not take the car back to JDM about the problem with starting the car. One week later, the problems became worse. They heard noise from the engine. Oil kept overfilling.
5. [5]
   Despite these problems, Mr and Ms Luatua continued to drive the car for several months over a distance of some 12,000km,^[5] before taking it to Midas Service Centre on 25 June 2016 for servicing and the engine “revving out of control”.^[6] Midas reported a fault with the fuel injector return pipe seals, allowing diesel to leak into the engine and considered the revving problem to be “very dangerous”.^[7]
6. [6]
   On 15 August 2016, and some seven months after purchase,^[8] Mr and Ms Luatua returned the car to JDM, seeking a refund or exchange or that it fix the problems. The car remained with JDM for over a week. JDM agreed to have a mechanic fix it at a cheaper rate, but at Mr and Ms Luatua’s cost. Mr and Ms Luatua did not agree and insisted that JDM pay.
7. [7]
   JDM then offered to swap the car for a 2003 Mitsubishi Pajero valued at $11,990.00, or a trade-in to the value of $10,000.00.^[9] Again, Mr and Ms Luatua did not agree.
8. [8]
   Two months later – and nine months after purchase – Mr and Ms Luatua took the car to Auster Engine Centre who found the car had excessive engine damage due to faulty injectors. In Auster’s opinion, the issue had been apparent “for some time due to the severity of the engine damage and temporally patched to conceal the true state of the engine”.^[10]
9. [9]
   Auster rendered an invoice for repairs to the value of $11,903.00,^[11] but by the time of the hearing Mr and Ms Luatua had only paid for $4,000.00 of these repairs. They had also paid $750.00 to Midas and $466.00 to RACQ for issues related to the car.
10. [10]
    Because JDM did not reimburse Mr and Ms Luatua to their satisfaction, Ms Luatua filed a claim in the Tribunal’s minor civil disputes jurisdiction. The Tribunal ordered JDM pay to Ms Luatua $8,400.00 being $8,200.00 for reduction in the value of the car and $200.00 for minor repairs by Midas.
11. [11]
    JDM wants to appeal that decision. Because this is an appeal from a minor civil dispute, leave is required.^[12] Leave to appeal will usually be granted where there is a reasonable argument that the decision is attended by error, and an appeal is necessary to correct a substantial injustice to the appellant caused by that error.^[13]
12. [12]
    JDM says that the Tribunal erred in its assessment of the evidence. It says that the Tribunal erred in law and fact in finding that any person acting reasonably on inspection and test driving the car would not have known about the issues. It says the issues were apparent and obvious from the first day of ownership. It says the Tribunal failed to consider that Mr and Ms Luatua drove the vehicle for thousands of kilometres during seven months of ownership, before returning it.
13. [13]
    Findings of fact will usually not be disturbed on appeal if the evidence is capable of supporting the conclusions.^[14] However, the Appeal Tribunal may interfere if the conclusion is ‘contrary to compelling inferences’ in the case.^[15]
14. [14]
    The Tribunal was very careful to identify the relevant provisions of schedule 1 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law). In particular, the Tribunal correctly identified that section 54(1) implies a guarantee of acceptable quality to goods supplied in trade or commerce. The Tribunal then correctly identified that the sale of the car fell within the definition of ‘supply’, and that the definition of ‘goods’ includes second-hand goods.
15. [15]
    As the Tribunal also correctly noted, whether goods are of acceptable quality depends on the nature of the goods, the price, any representations made at the time of sale and any other relevant factor.^[16] The age and distance travelled by the car before purchase are also relevant.^[17]
16. [16]
    The Tribunal referred to these factors and concluded that at the time of purchase the car was not free from defects, not safe, not durable and therefore not of acceptable quality for the purposes of section 54 of the Australian Consumer Law.^[18]
17. [17]
    I must respectfully disagree with the Tribunal’s finding that having regard to these factors, the car was not of acceptable quality. Ms Luatua bought a car that was 12 years old, with an odometer reading of 240,053km for $18,790.00 all inclusive. In coming to this conclusion, I have been guided by the statutory warranties applied to the sale of vehicles under the Motor Dealers and Chattels Auctioneers Act 2014 (Qld).
18. [18]
    Under that Act, a statutory warranty is not available if the car is more than ten years old or has an odometer reading of more than 160,000km.^[19] This car had both. Although this does not operate to exclude the warranty of acceptable quality under section 54 of the Australian Consumer Law, it does give an indication of what a reasonable consumer should expect when purchasing older cars with significant mileage.
19. [19]
    I have noted that despite its considerable age and mileage, Mr Luatua did not have the car independently inspected or even take it for a proper test drive. Instead, he took the car for a “test drive” for only ten minutes and about 50 yards. These are not the actions of a reasonable consumer and are relevant factors in deciding whether the car would have been acceptable to “a reasonable consumer fully acquainted with the state and condition of the goods” (my emphasis).^[20]   
20. [20]
    I am also not satisfied that the representations made at the time of sale were sufficient to displace these other factors. Mr Luatua checked the odometer and knew that it had not done low kilometres, but instead had substantial mileage. He also knew that it was not new, but rather was more than 10 years old. Armed with this information together with the price, it is unlikely that a reasonable consumer would expect the car to have no “known issues”.
21. [21]
    Moreover, I do not agree with the Tribunal’s finding that the Midas and Auster reports are evidence of the condition of the car at the time of purchase. The Midas report is dated one year after purchase, following an inspection some five months after purchase. By the time Midas inspected the car, it had been driven for another 12,000km. Similarly, the Auster report is dated some nine months after purchase and after even more mileage. Much time and distance had passed.
22. [22]
    Because these reports could not be relied upon as evidence of the condition of the car at the time of sale, they could not be relied on to make a finding that a reasonable consumer, fully acquainted with the nature and extent of the failure, would not have acquired the goods.^[21] The reports, do, however support a finding that the car was in a condition consistent with its age and mileage and by the time Midas and Aster inspected the car, it was showing further signs of age.^[22]   
23. [23]
    Because there is insufficient evidence of the condition of the car at the time of purchase, I cannot be satisfied that JDM’s representations about “no known issues” or the car being “good to go” are sufficient for a cause of action for misrepresentation either under the Australian Consumer Law^[23] or in equity. I also do not consider that it would be reasonable to rely upon JDM’s representation about the car being “almost new considering the low kilometres it’s done”, in circumstances where Mr Luatua had checked the mileage and knew the age and price of the car - the representation had no effect.^[24]
24. [24]
    Because I am not satisfied of evidence sufficient to support a finding of a breach of a consumer guarantee, the appeal must be allowed. It is therefore not necessary to consider whether the failure of the car was a major defect.^[25]
25. [25]
    For completeness, however, I would add that even if the car did have a major failure, a consumer is not automatically entitled to return the goods and claim a refund if the rejection period has ended.^[26] The rejection period is the period in which it would be reasonable to expect the relevant failure to comply with the guarantee to become apparent, having regard to the type of goods, the use to which they are put, the length of time for which it is reasonable to use them, and the amount of use.^[27]
26. [26]
    Mr Luatua said he could not start the car the day after purchase. He said he saw that the oil was above its guiding marks. He said the problems became worse “upon months of using it”.^[28] Yet he continued to drive it. He did not take it back to JDM until seven months after purchase and JDM offering to “talk about the other problems”.^[29] Any applicable rejection period ended when Mr Luatua first noticed the car was defective.^[30] His ongoing driving of the car without taking it back is inconsistent with a rejection of the car.
27. [27]
    Similarly, when a consumer notifies a supplier that goods are rejected, the consumer may terminate a related finance contract.^[31] Ms Luatua financed the car but did not attempt to terminate the finance contract. This is also not consistent with rejection. To that extent, the Tribunal was correct in assessing damages for loss or damage rather than ordering a refund. However, because I have found no breach of a consumer guarantee, no damages are payable.
28. [28]
    JDM would suffer a substantial injustice if it were required to pay damages in where there is no breach of a consumer guarantee or other cause of action. Leave to appeal is granted. The appeal is allowed. The decision of 24 January 2017 is set aside. The application is dismissed.

What are the appropriate Orders?

[29] The appropriate Orders are:

1. Leave to appeal granted;
2. Appeal allowed;
3. The Orders made on 24 January 2017 are set aside; and
4. The application is dismissed.