Freestone Auto Sales Pty Ltd v Musulin

1. [1]

   McCOLL JA: I agree with Simpson J’s reasons and the orders her Honour proposes.

2. [2]

   WARD JA: I agree with Simpson J.

3. [3]

   SIMPSON J: By Summons filed in the Supreme Court on 17 March 2014 the applicant, Freestone Auto Sales Pty Ltd, seeks relief under s 69 of the Supreme Court Act 1970 (NSW) in relation to a decision of the District Court of 18 December 2013. The Summons names Ms Tenielle Musulin as the first respondent, and the District Court of New South Wales as the second respondent. The second respondent has played no part in the proceedings.

4. [4]

   The proceeding in the District Court was an appeal by the first respondent, pursuant to s 67(1) of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) (“the CTTT Act”) (now repealed) from a decision of the Consumer, Trader and Tenancy Tribunal (“the Tribunal”) given on 29 July 2013 in favour of the present applicant. By s 48(2) of the Supreme Court Act, the proceedings are assigned to this Court.

5. [5]

   The orders sought in the Summons are:

6. [6]

   The first respondent (to whom I will refer as Ms Musulin) concedes that the decision of the District Court was affected by error and must be quashed. She also concedes that money paid pursuant to the orders must be refunded. She claims, however, an order that the proceedings be remitted to the District Court for further hearing of her appeal.

7. [7]

   The issues that remain for determination in this Court are:

Facts

1. [8]

   The applicant (to which I will refer as “Freestone”) trades in second hand motor vehicles. For that purpose, it holds a licence as a motor dealer under the Motor Dealers Act 1974 (NSW). Shaun Freestone is the sole director and managing director of Freestone. His wife, Daniela, works in the business with him.

2. [9]

   In December 2011 Ms Musulin purchased from Freestone a 2008 Volkswagen motor vehicle for which she paid $31,500 (plus GST). The Australian Consumer Law (“ACL”) (Sch 2 to the Competition and Consumer Act 2010 (Cth)) applied to the purchase.

3. [10]

   Section 18 of the ACL relevantly provides as follows:

4. [11]

   Section 54 of the ACL relevantly provides as follows:

5. [12]

   Prior to completion of the purchase, Ms Musulin arranged, with the consent of Mr Freestone, for an independent mechanical inspection of the vehicle by the Motor Traders’ Association. That inspection revealed that a new engine had been installed in the vehicle. The report of the inspection otherwise showed that the vehicle was in “a good overall condition showing typical wear and tear for age and mileage” and that:

6. [13]

   Ms Musulin took possession of the vehicle. Shortly thereafter she moved to live in Melbourne. When transferring the registration of the vehicle, she was informed that it was “repaired write off”. The consequence of this, she was informed, was that before transfer of registration could be effected, it would be necessary for the vehicle to be inspected.

7. [14]

   At the beginning of March 2012, Ms Musulin noticed that the vehicle had an oil leak. She took it to a service centre and was told that it appeared that an oil leak had been repaired by filling gaps with silicone. From the middle of May 2012, Ms Musulin experienced further significant problems with the vehicle. The problem was intermittent ignition failure. Despite a number of attempts, Ms Musulin was not able to have the car brought to a satisfactory standard of performance, nor have the ignition problems diagnosed.

8. [15]

   On 31 July 2012 Ms Musulin searched the Personal Property Securities Register (“the PPSR”). (The PPSR is a national register of personal property interests, established by the Personal Property Securities Act 2009 (Cth), which was proclaimed to commence on 30 January 2012, that is, after Ms Musulin’s purchase.) The PPSR contained the following entry:

9. [16]

   Ms Musulin continued to experience difficulties with the vehicle. On 1 October 2012 she lodged an application in the Tribunal. She named Mr Freestone as the respondent. She identified the orders sought as:

10. [17]

    She gave a lengthy explanation of her reasons for seeking the orders, which included:

11. [18]

    On 22 February 2013 a Statement of Claim was filed in the Tribunal on Ms Musulin’s behalf. It named Freestone as the respondent. It claimed orders in the following terms:

12. [19]

    The Statement of Claim pleaded that Freestone’s failure to comply with the statutory guarantee was “a major failure” as defined by s 260 of the ACL, and that , pursuant to s 259(3) of the ACL, she was entitled to reject the vehicle.

13. [20]

    In support of her claim, Ms Musulin filed an evidentiary statement, also dated 22 February 2013, together with a statement of her partner, Daniel Conway, and an expert report on the vehicle prepared by Mr James Rogers.

14. [21]

    On 27 March 2013 Mr Freestone filed a Reply to the Statement of Claim. This was treated as an evidentiary statement. He denied misleading or deceptive conduct, denied that the vehicle was not of acceptable quality and made the following positive assertions:

15. [22]

    On 8 April 2013 Ms Musulin sought to file an amended Statement of Claim in the Tribunal. The amendment she sought was to add Mr Shaun Freestone in his personal capacity as second respondent.

16. [23]

    On 10 April 2013 Ms Musulin’s claim came on for hearing in the Tribunal. Both parties were legally represented. The presiding Member declined to permit the proposed amendment to the Statement of Claim.

17. [24]

    No official transcript of the proceedings is available. Audio discs of the proceedings were supplied to solicitors for Ms Musulin. The solicitors arranged for two law students to listen to the recordings and transcribe them. Both transcriptions were provided to this Court, although the affidavits to which they were annexed were never formally read. The transcripts were treated in the hearing as accurately representing what took place.

The evidence before the Tribunal

1. [25]

   In her statement, Ms Musulin gave an account of the dealings she had with Mr Freestone leading up to the purchase of the vehicle. She said that, after a test drive, she asked Mr Freestone if the vehicle had ever been in an accident. He replied that it had not. With his agreement she arranged for the mechanical inspection to which reference has already been made. She asked Mr Freestone about the new engine that the inspection revealed had been installed. He replied:

2. [26]

   Mr Freestone told Ms Musulin that the NWC warranty was “valid for the new, current engine”. Ms Musulin then completed the purchase. On completion of the purchase she was given a “Notice of Sale” which included the following statement:

3. [27]

   The Supplementary Folder filed in this Court contains an index that asserts that, in the Tribunal hearing, Freestone’s legal representative produced a three page document, that included what was referred to as a “Form 4”, which was entitled “Warranty” and stated:

4. [28]

   The third page of that documentation was entitled:

5. [29]

   On the transcript of the proceedings in the Tribunal it is impossible to say with confidence that each of those documents was before the Tribunal. The assertion in the index that they were was not the subject of challenge or dispute. It may therefore be accepted that they were. In any event, no further reference was made to them.

6. [30]

   Ms Musulin then said that after her move to Melbourne, when she had been informed that the vehicle was “a repaired write off”, she telephoned Mr Freestone. The following conversation took place in about March 2012:

7. [31]

   Mr Rogers’ report is dated 21 February 2013. He said that he inspected the vehicle on 4 December 2012, when it had, on several occasions, failed to start. He said that it was clear that the engine had been replaced and that visual inspection also showed evidence of corrosion around the engine computer and some water corrosion on some inner panels under the bonnet. He could not locate signs of water damage on the inside of the vehicle but recommended a more intense inspection at a cost of between $2000 and $3000.

8. [32]

   Freestone relied upon what was contained in Mr Freestone’s Statement in Reply to the Statement of Claim. Mr Freestone gave oral evidence. He was cross-examined about some of Ms Musulin’s assertions. He said that he had bought the vehicle in Victoria, and added:

9. [33]

   He disputed that the car had been written off twice. He said that the explanation for the two entries in the PPSR was that one entry was made when the vehicle was written off and paid out by the insurance company, and the other when the vehicle was inspected (presumably, after repair and the installation of the new engine). He pointed out that the Vic Roads Written Off Vehicles Register Report said that the vehicle had “malicious damage” to the engine (see [15] above).

10. [34]

    He said that, as stated on the Notice of Sale, the car had not been listed on REVS.

11. [35]

    Without having specific recollection, Mr Freestone accepted that he may have had the conversation attested to by Ms Musulin, when (she said) he responded in the negative to her question as to whether the vehicle had been in an accident. He could not recall a conversation about the NCW warranty.

12. [36]

    In written submissions filed on behalf of Ms Musulin in the Tribunal, it was again stated clearly that the case was put on the two bases previously asserted, that is, in reliance on s 18 and s 54 of the ACL. The “misleading or deceptive conduct” asserted under s 18 was said to be Mr Freestone’s silence concerning the vehicle’s written off status. The argument put in support of the claim under s 54 appears to have been simply that the vehicle was not fit for the purpose for which such goods are commonly supplied, and was not free from defects. No reference was made to any warranty, either the warranty under the Motor Dealers Act, or the extended NWC warranty. There was no contractual claim.

The judgment in the Tribunal

1. [37]

   On 29 July 2013, the Tribunal delivered judgment, dismissing Ms Musulin’s application. The Tribunal expressly rejected Ms Musulin’s claims under s 54, and rejected the claim that Mr Freestone had engaged misleading or deceptive conduct. The judgment is short, but contains the following relevant paragraphs:

The District Court proceedings

1. [38]

   Section 67 of the CTTT Act relevantly provided:

2. [39]

   By Amended Summons filed in the District Court on or about 5 December 2013, Ms Musulin appealed to that court against the orders of the Tribunal. The grounds of the appeal were stated as follows:

3. [40]

   In this Court, it was accepted that Grounds 2, 3, 7 and 8 in the Amended Summons do not come within s 67(1) of the CTTT Act. It was, however, contended that Grounds 4, 5 and 6 raised issues “with respect to a matter of law” and are available under s 67(1).

4. [41]

   When the appeal came on for hearing in the District Court, things took an unexpected turn. The judge drew attention to a document which he appeared to have in his papers, but of which both legal representatives claimed to be ignorant, and which had not been the subject of any reference in the Tribunal. This, it seems, was the NWC warranty, extending the contractual warranty or the Motor Dealers Act warranty of 3 months or 5000 kilometres to 24 months or 60,000 kilometres - one of the documents produced at the Tribunal hearing by Freestone’s legal representative.

5. [42]

   Initially, in the District Court, counsel for Ms Musulin expressly disclaimed reliance upon the NWC warranty, and said that he did not have and had never had a copy of it in his brief. The judge then asked counsel whether he relied upon the NWC warranty, to which counsel replied “I do rely on it now”. This about face by counsel for Ms Musulin may be relevant to the ultimate disposition of the proceedings in this Court.

6. [43]

   The judge then proceeded to deal with the appeal on the basis of that document.

The proceedings in this Court

1. [44]

   It was common ground that the District Court thus decided the appeal on a basis that was not raised in the Amended Summons, and had not been raised in the Tribunal. It was for that reason that Ms Musulin realistically conceded that the orders could not stand.

2. [45]

   It will recalled that, initially, Freestone sought, not only that the orders of the District Court be quashed, but also remittal of the matter to either the District Court or to NCAT (the successor of the Tribunal). In its written submissions, however, it abandoned the notion of remittal to either the District Court or the Tribunal, and pressed for orders that the District Court orders be quashed or set aside and, in lieu thereof, that the Court order that Ms Musulin’s appeal to the District Court be dismissed. It also sought an order for reimbursement of the money paid pursuant to the orders, and for Freestone’s costs in the District Court and this Court.

3. [46]

   In written submissions filed on behalf of Ms Musulin it was accepted that the District Court orders must be quashed, but on her behalf orders were sought remitting the matter either to the District Court or to NCAT, with orders that each party bear her or its own costs (and that Ms Musulin be granted a certificate under s 6(1) of the Suitors’ Fund Act 1951 (NSW) in respect of her costs).

4. [47]

   On the hearing, however, it was conceded (appropriately, in my opinion) that remittal to NCAT was inappropriate. Remittal to the District Court, however, was pressed, on the basis that Ms Musulin’s appeal to that jurisdiction had never been properly determined.

5. [48]

   Senior counsel for Ms Musulin submitted (correctly, in my opinion) that Ms Musulin’s legitimate appeal in the District Court has never been properly determined. That is, subject to what follows, a sound basis for remittal. However, relief under s 69 of the Supreme Court Act is discretionary. In this case, having regard to the relatively small amount in issue, the tortured path the proceedings have to date taken, and the disproportionate costs that have been incurred, an order remitting the proceedings for yet further hearing ought not be made unless, on an assessment of Ms Musulin’s prospects of success in the District Court, that course is justified. It would not be an appropriate exercise of discretion to remit the matter to the District Court if there is no realistic prospect of her succeeding on that appeal.

6. [49]

   Senior counsel for Ms Musulin contended that there remain three undetermined grounds of appeal to the District Court, any of which, if successful, would entitle Ms Musulin to success in the District Court appeal. Counsel for Freestone contends that none of the three grounds has any realistic prospects of success and that remittal would therefore be a (costly) futility.

7. [50]

   The three potential grounds of appeal (reformulated, but essentially drawn from the Amended Summons in the District Court) identified by senior counsel for Ms Musulin are:

8. [51]

   I will deal with each in turn.

9. [52]

   Counsel for Freestone argued that this ground cannot succeed because the Tribunal did not (expressly) make any finding that Mr Freestone told Ms Musulin that the vehicle had not been in an accident. That submission, in my opinion, is untenable. It is true that the Tribunal’s very short reasons for judgment do not expressly contain a factual finding to that effect. However, that Mr Freestone did make that statement to Ms Musulin is clearly stated in Ms Musulin’s written evidence, and, in his oral evidence, Mr Freestone agreed that he “possibly could have said that”. There is nothing in the reasons for judgment to suggest that Ms Musulin’s evidence was not accepted, and there is no apparent reason why it should not have been.

10. [53]

    In my opinion, it should be inferred that the Tribunal accepted that Mr Freestone did tell Ms Musulin that the vehicle had never been in an accident.

11. [54]

    Counsel for Freestone went on to submit that any such finding would be inconsistent and very difficult to reconcile with the express findings that Mr Freestone disclosed to Ms Musulin that he had purchased the vehicle at an insurance auction, and had replaced the engine.

12. [55]

    I disagree. There may be many reasons why a vehicle is sold at an insurance auction and had its engine replaced, other than having been damaged in an accident. One problem is the lack of specificity of the word “accident”. In ordinary usage, in respect of motor vehicles, the word is taken to mean a collision of some sort. That is the real reason that Ms Musulin’s reformulated Ground 1 cannot succeed - there was no evidence that the vehicle had been in an accident. There was some evidence that the vehicle had suffered water damage, but no cause of the damage was assigned. The representation by Mr Freestone has not been shown to have been incorrect, let alone misleading and deceptive. Certainly, it cannot rise to the level of establishing misleading or deceptive conduct.

13. [56]

    An argument was also directed to causation. The argument was that Ms Musulin did not state in evidence that, had she been told that the vehicle had been in an accident, she would not have purchased it. That, again, is true. However, the very fact that Ms Musulin asked the question is capable of giving rise to some inference that, had she been advised that the vehicle had been in accident, she would, at the very least, have considered her position. Moreover, she made such an assertion explicitly in her application to the Tribunal. Proceedings in the Tribunal were conducted with a minimum of formality, and the Tribunal were not bound by rules of evidence: the CTTT Act, s 28(2). In my opinion, there was sufficient evidence of causation. However, given the view expressed above, it is not necessary finally to resolve this question.

14. [57]

    I would reject Ms Musulin’s first proposed ground as not having adequate prospects of success to justify remittal to the District Court.

15. [58]

    The second proposed ground is that Freestone (through Mr Freestone) engaged in misleading or deceptive conduct by failing to disclose that the vehicle had previously been written off.

16. [59]

    Counsel for Freestone first took issue with this ground as not raising a question with respect to a matter of law. In my opinion, the ground is sufficiently broad to raise an issue with respect to a matter of law. The matter of law is the capacity of a failure to disclose a potentially relevant circumstance to amount to misleading or deceptive conduct. That Mr Freestone had purchased the vehicle at an insurance auction is sufficient to warrant the inference that he knew enough of the history of the vehicle to render it appropriate that he disclose that history. The Tribunal accepted that Mr Freestone had told Ms Musulin that he had purchased the vehicle at an insurance auction. This is not an explicit disclosure that the vehicle had previously been written off, although, to the initiated, it may signify or convey such information. It would not necessarily signify or convey that fact to the uninitiated. However, I am not persuaded that there was any obligation on Freestone to disclose that the vehicle had been written off. That is particularly so in the light of Ms Musulin’s having had an independent inspection of the vehicle.

17. [60]

    There is no evidence of any act of misleading or deceptive conduct on the part of the Freestone nor of any omission that amounts to misleading or deceptive conduct.

18. [61]

    The proposed third ground is that the Tribunal incorrectly took into account that Freestone was not aware of the vehicle’s intermittent ignition issues. This is the ground numbered 6 in the Amended Summons filed in the District Court.

19. [62]

    Counsel for Freestone responded to this ground by contending that it could not succeed because the evidence called on behalf of Ms Musulin failed to establish that the vehicle had any defect at the time of its purchase, and, again, that the ground does not raise an issue “with respect to a matter of law” within s 67(1) of the CTTT Act.

20. [63]

    The latter, in my opinion, is hardly an answer to a ground which asserts error in taking into account an irrelevant consideration. Such a ground clearly raises an issue “with respect to a matter of law”. That aspect of Freestone’s response must be rejected. Moreover, the submission that the evidence failed to disclose a defect in the vehicle at the time of purchase somewhat overstates the position. The evidence was that the vehicle had suffered some engine damage, resulting in replacement of the engine. Notwithstanding a satisfactory mechanical report, within a few months of purchase, the vehicle developed problems, the cause of which could not be diagnosed. An inference is arguably available that the ignition problems were present, although latent, at the time of sale. However, on the state of the evidence in the Tribunal, it would be difficult, if not impossible, to sustain a finding of fact to that effect. There was nothing in s 67 to suggest that Ms Musulin would be permitted to expand the evidentiary basis of her case in the event of remittal.

21. [64]

    In any event, it seems to me that the ground is based on a false premise. There is no explicit finding in the Tribunal judgment that Freestone was not aware of any defects in relation to the intermittent starting issue. The nearest that the judgment comes to such a finding is in [19] where the Tribunal said:

22. [65]

    Accordingly, this ground also could not succeed in the District Court.

Conclusion

1. [66]

   The consequence of these conclusions is that remittal to the District Court would achieve nothing. The appeal to that court would necessarily be dismissed. In those circumstances, the appropriate course for this Court is to order that the Amended Summons to the District Court be dismissed. Although s 69 does not expressly provide for such an order, there is precedent in this Court for taking such a course: see Allwood v Peter Vivian Benjafield t/as Benjafield & Associates Lawyers [2014] NSWCA 355; and see Wende v Horwath (NSW) Pty Ltd [2014] NSWCA 170; 86 NSWLR 674, at [95]-[101].

Costs

1. [67]

   Freestone seeks an order for costs in respect of both the District Court proceedings and the proceedings in this Court. In my opinion, such an order is irresistible. It was Ms Musulin who was the moving party in the District Court and, although she had some success in that court, it has now been conceded on her behalf that that success was on an erroneous basis. The conclusions I have reached above demonstrate that she ought to have failed in the District Court.

2. [68]

   It is, up to a point, true, as was contended on her behalf, that the District Court proceedings “were affected by miscarriages in the legal process”. However, Ms Musulin must bear some of the responsibility for the miscarriages. Rather than correcting the District Court judge, who clearly signalled that he was about to act upon an erroneous basis, counsel for Ms Musulin adopted the erroneous basis on which the judge proposed to, and subsequently did, act. Ms Musulin must pay the costs of Freestone in the District Court.

3. [69]

   The concession as to the fate of the application to this Court was made at a relatively late stage, and, in any event, it was sought, on her behalf, to salvage something of the proceedings. Ms Musulin has been unsuccessful in this Court. To the extent that some time was saved by her “capitulation”, to adopt the word used by counsel for Freestone, that occurred at a point after costs had been incurred.

4. [70]

   In my opinion, Ms Musulin must pay the costs of Freestone incurred in the proceedings in this Court also.

5. [71]

   The orders I propose are:

   1. (1)

      The order of the District Court on 18 December 2013 is quashed;

   2. (2)

      The first respondent’s appeal from the Consumer, Trader and Tenancy Tribunal to the District Court is dismissed;

   3. (3)

      The first respondent is to pay the applicant’s costs of and incidental to the proceedings in the District Court;

   4. (4)

      The first respondent is to reimburse the applicant in the sum of $5132 paid in compliance with the orders of the District Court of 18 December 2013;

   5. (5)

      The first respondent is to pay the applicant’s costs of and incidental to the proceedings in this Court and have a certificate under the Suitors’ Fund Act 1951 (NSW), if otherwise qualified.