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Consumer Law Application To Used Vehicle Purchases

Australian Consumer Law and Used Vehicles

The application of Schedule 2 of the Australian Consumer Law (ACL) to the purchase of used vehicles has been the subject of considerable judicial scrutiny, even during the era of the Trade Practices Act 1974 (Cth). The interpretation of “acceptable quality” and “rejection period” has caused some turmoil for consumers who lose legislative protection over used vehicles where the 3-month statutory warranty has expired.

However, a recent decision by the New South Wales Supreme Court provides some welcome clarity to these issues. The proceedings were an appeal from the decision by Magistrate Wahlquist against the motor trader. Adams J in Prestige Auto Traders Australia Pty Ltd v Bonnefin considered the meaning of “acceptable quality” in section 54 of the ACL with respect to used vehicles, and the interpretation of “rejection period” pursuant to section 262(2).

In considering section 54, Her Honour concluded that the repeated mechanical failures of the vehicle, which had been brought to the attention of the Applicant motor trader on numerous occasions, constituted a defect and a major failure under the Consumer Law. Further, with regard to section 262, Adams J concluded that the respondent, in reporting the failures before the expiry of the statutory warranty, had adequately rejected the goods within the required period.

Prestige Auto Traders Pty Ltd v Bonnefin [2017] NSWSC 149

The Facts

On or about 13 October 2014, Mrs Bonnefin purchased a 2007 BMW X5 V8 four-wheel drive vehicle from Prestige Auto Traders for $37,750.00. At the time of purchase, Mrs Bonnefin made it clear to Prestige that the vehicle would primarily be used for its four-wheel drive function, to tow her jet-ski trailer, and to reverse it down boat ramps.

Within one month of the purchase, Mrs Bonnefin and her husband discovered a number of mechanical failures in the vehicle’s operation. On or about 20 November 2014, the coolant in the coolant reservoir was low and was replaced by Mr Bonnefin. A short time later, on or about 16 December 2014, an error message reading “4×4 and DSC have failed” appeared on the dashboard of the vehicle. Between 16 December 2014 and 16 February 2015, Mr and Mrs Bonnefin returned the vehicle to Prestige on 3 separate occasions to conduct repairs relating to the vehicle’s cruise control system, coolant leaks, error message displays, defective caster mounts and other matters. As a result of the ongoing issues, on 24 February 2015, Mr Bonnefin notified Prestige of their rejection of the vehicle via email.

The Parties’ Submissions

Prestige submitted inter alia that the coolant issue, upon the second return of the vehicle in December 2015, was a result of wear and tear and was not covered by warranty. On the third occasion, the coolant issue was no longer covered by statutory warranty, having expired on 14 January 2015. Prestige further submitted that, upon performing diagnostic tests to determine the cause of the error message displayed on the vehicle’s dash, no error codes were detected and hence, no repairs could be conducted. On that point, Mr Parrin, service manager for Prestige, agreed that the problem may have been a voltage or battery issue, which could have been caused by an alternator problem although no tests were conducted on the alternator itself.

Mr and Mrs Bonnefin submitted that the issues surrounding the cruise control, the error message displays, the defective caster mounts and the coolant leak were all significant in nature. Having arisen within the first month after purchase, and continuing despite the Bonnefin’s returning the vehicle to Prestige for repairs on 3 separate occasions, the respondents claimed they were entitled to reject the goods and seek a refund of the purchase price in addition to compensation for related expenses for the vehicle.

Acceptable Quality

In examining sections 54, 259, 260 and 262 of the Consumer Law, her Honour noted that the test contained in section 54(2) requires the court to consider what a reasonable consumer, having paid the purchase price, would regard as being “acceptable quality” if they had known of the vehicle’s defects at the time of purchase. In referring to Medtel v Courtney (2003), her Honour noted that this measurement must be undertaken in light of the information of the goods available at the time of trial. It was further noted that consideration must be had to any disclosed purpose of the vehicle at the time of purchase.

Adams J found that there was no evidence to indicate that the defects ought reasonably to have been revealed at the time of purchase or upon inspection. Her Honour also considered the purchase price to be “significant” for a motor vehicle. Ultimately, Her Honour held that the vehicle was sold with defects in relation to the four-wheel drive and cruise control as well as other defects relating to the dashboard light system. The culmination of the defects meant the vehicle failed the test under 54(2)(a) and (c). Further, the repeated coolant leaks were also regarded as a defect pursuant to section 54(2)(c). The vehicle was therefore not of acceptable quality.

Rejection Period

With regard to section 262(2), Adam J held that, despite the fact that Mr Bonnefin had rejected the goods on a date after which the statutory warranty had expired, repeated complaints had been made to Prestige during the warranty period and as they were not repaired, the rejection period had not expired. The respondents were therefore able to reject the goods. Accordingly, the respondents were awarded $37,750.00 in costs, repair costs in the amount of $446.57 and $1,165.00 for the transfer of registration.

Summary

This case is one of the first examples of a superior court considering the application of the Australian Consumer Law in a civil context. The decision provides welcome clarity to the position of consumers when purchasing used vehicles and provides guidance to suppliers of their duties and obligations continuing after purchase.

By Tracy Albin, GTC Lawyers

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