When the wheels stop turning: motor vehicle failures and your consumer rights
We have all heard the horror stories: someone buys a shiny new car, only for it to be towed away weeks or months later, leaving the owner feeling betrayed and bewildered. What steps can you take if your dream car turns out to be a lemon? In this article, we provide a high-level overview of consumer rights under the Australian Consumer Law (ACL) when dealing with motor vehicle failures.
Are you protected under the Australian Consumer Law?
A person acquires a motor vehicle as a ‘consumer’ and receives the protections under the ACL if the vehicle is “acquired for use principally in the transport of goods on public roads”.
What is a consumer guarantee?
Under the ACL, when a consumer purchases a motor vehicle it comes with automatic consumer guarantees. Suppliers (i.e. dealers) and manufacturers of motor vehicles are bound by these consumer guarantees. Although some exemptions exist under the ACL, suppliers and manufacturers cannot rely upon contract terms or other agreements that seek to interfere with a purchaser’s consumer guarantees.
Consumer guarantees include:
Guarantee as to acceptable quality
A motor vehicle must be:
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fit for all the purposes for which vehicles of that kind are commonly supplied
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acceptable in appearance and finish
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free from defects
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safe
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durable.
A motor vehicle is of acceptable quality if a reasonable consumer, fully acquainted with the state and condition of the motor vehicle (including any hidden defects) would regard the vehicle as acceptable. A consumer may pursue action against either or both the supplier and the manufacturer for failure to comply with this guarantee.
Guarantee as to fitness for a particular purpose
In addition to the requirement that a motor vehicle be reasonably fit for its normal or common use, it must also be reasonably fit for any purpose made known by the consumer to the supplier. A consumer may pursue action against either or both the supplier and the manufacturer for failure to comply with this guarantee.
Guarantee as to spare parts
For most vehicles, there is a consumer guarantee that the manufacturer will take reasonable action to ensure that parts for repair of the vehicle are reasonably available for a reasonable period of time after the vehicle was supplied. A consumer may pursue action against the manufacturer for failure to comply with this guarantee.
What is a major failure?
If the vehicle has suffered from a ‘major failure’ a consumer is entitled to reject the vehicle and claim damages (see Rejection and Remedies below).
A failure is considered to be a major failure if the vehicle:
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would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure
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departs from its description/sample/demonstration model
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is substantially unfit for a purpose for which it was purchased (or for a purpose that was disclosed to the supplier during negotiations) and cannot, easily and within a reasonable time, be remedied to make it fit for such purposes, or
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is unsafe.
In Safi v Heartland Motors Pty Ltd t/as Chrysler [2016] NSWCATAP 80, the Tribunal found that a major failure may be caused by one defect or a series of defects which, when taken as a whole, constitute a major failure. The test of whether the failure amounts to a major failure is whether the goods “would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of those failures.”
The Tribunal found that a defect is not a major failure if it can be fixed under warranty with little inconvenience or concern about the potential for ongoing problems. A consumer can expect to experience some teething problems, even in a new vehicle.
Whether a defect would amount to a major failure would depend on the nature and extent of the failure. In this case, the failure of the vehicle’s transmission, a fundamental part of the motor vehicle, was considered a major failure.
Similarly, in Avci v Inchurch Automotive Pty Ltd t/a Parramatta Motor Group [2019] NSWCATCD 39, the Tribunal found that the failure of an engine amounted to a major failure and warranted a full refund. Also of note in this case was the dealer’s failure to replace the vehicle’s engine within a reasonable period of time (i.e. almost 3 months).
In Bertinat v Sam Estephan t/as Car & Commercial Sales [2020] NSWCATCD 26, the Tribunal found that a leak in the vehicle’s engine which rendered it un-roadworthy and unsafe to drive amounted to a major failure. Conversely, in Campbell Stuart Smith v Family Auto Group Pty Ltd t/as Western Auto Group [2014] NSWCATCD 244, defects in the applicant’s vehicle, which included engine oil leaks, rust and some missing and loose bolts, was not considered a major failure because there was no evidence that the vehicle could not be repaired easily and within a reasonable period of time.
Rejection and remedies
As referred to above, if a vehicle’s defects amount to a major failure, a consumer is entitled to reject the vehicle and demand a replacement vehicle or refund of the purchase price.
Even if the failure is not a major failure and is capable of remedy, the consumer can require the supplier to remedy the failure within a reasonable time. If the supplier fails to do so, the consumer can have the motor vehicle repaired elsewhere and claim those costs from the supplier, or can notify the supplier that they reject the vehicle and of the grounds for rejection.
Rejection of the motor vehicle must take place during the ‘rejection period’, which is defined as the period of time from the supply of the vehicle in which the defect should have reasonably become apparent.
After rejecting the vehicle, in addition to demanding a refund or replacement, a consumer can also claim damages for any loss suffered as a result of the supplier or manufacturer's failure to comply with the consumer guarantees.
Examples of damages that are commonly claimed include: hire-car costs, towing costs, insurance and registration costs and legal costs. When making a claim for damages, a consumer must demonstrate that it was reasonably foreseeable that they would suffer that loss or damage as a result of the breach of the consumer guarantees.
Taking Action
Proceedings against a supplier or manufacturer under the ACL may be commenced in NSW Civil and Administrative Tribunal, or in the Local or District Court. The appropriate jurisdiction will depend upon whether the consumer is an individual or a company, the purchase price of the vehicle and the total amount of damages being sought.
In addition to rights under the ACL, purchasers of motor vehicles may have other available remedies based upon their specific circumstances.
This article is general in nature and does not constitute legal advice. If you think you have purchased a lemon and need help enforcing your consumer guarantee rights, please contact Jennifer Shaw or Adam Cutri of our Dispute Resolution & Advisory Team for advice on your specific circumstances.
Authors: Jennifer Shaw, Adam Cutri and Irene Higgins