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Buying a defective used car – your rights under the Australian Consumer Law

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By Phoebe Langridge, Lawyer, MST Lawyers

In a recent decision in the Victorian Civil and Administrative Tribunal (“VCAT”), the Deputy President of VCAT awarded the Applicant, Mrs Pojzak, $17,495.29 in compensation for breach of guarantee under the Australian Consumer Law (“ACL”). 

The case arose when Mrs Pojzak purchased a used car from Congeo Nominees Pty Ltd (“Congeo”).  Shortly after the purchase Mrs Pojzak discovered that the car had a “major defect” which was caused when, prior to the sale, the original car’s engine had been replaced by a second hand engine which had been incorrectly fitted.

The Deputy President of VCAT, in applying section 54 of the ACL, determined that the car was not of “acceptable quality” and “substantially unfit for its purpose” constituting a breach of guarantee under the ACL. 

The Deputy President noted “that [just because] the car was a used car with a fairly high odometer reading, sold for an unremarkable price, does not mean that it need not be free from major defects, safe and durable”.

What constitutes Acceptable Quality?

Section 54(1) of the ACL sets out that a where a person supplies goods to a consumer in trade or commerce, other than by way of auction, there is a guarantee that the goods be of acceptable quality.  Under section 54(2) and (3) goods will be of acceptable quality if they are:

Section 54(2)

(a)  fit for all the purposes for which goods of that kind are commonly supplied; and

(b)  acceptable in appearance and finish; and

(c)  free from defects; and

(d)  safe; and

(e)  durable;

as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3).

Section 54(3) 

The matters for the purposes of subsection (2) are:

(a)  the nature of the goods; and

(b)  the price of the goods (if relevant); and

(c)  any statements made about the goods on any packaging or label on the goods; and

(d)  any representation made about the goods by the supplier or manufacturer of the goods; and

(e)  any other relevant circumstances relating to the supply of the goods.

Definition of Major Failure

Under the ACL a failure to comply with a guarantee that applies to a supply of goods will be a “major failure” if:

(a)  the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b)  the goods depart in one or more significant respects from the description given or from a sample or demonstration model (where applicable); or

(c)  the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(d)  the goods are unfit for a disclosed purpose that was made known to:
       (i)   the supplier of the goods; or
       (ii)  a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made;

(e)  and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(f)  the goods are not of acceptable quality because they are unsafe.

Taking Action

This case serves as a salient reminder that, just because goods might be used or old, if the goods are not of an acceptable quality, the supplier may be liable to the purchaser.

In this case VCAT ordered Congeo to pay to Mrs Pojzak:

(a)  a refund of the purchase price of $12,000.00;

(b)  damages in the nature of interest of $2,140.29;

(c)  damages of $2,035.00; and

(d)  costs of $1,320.00.

A consumer may take action under the ACL in instances where there has been a breach of the consumer guarantee which cannot be remedied or is a considered to be a major failure by:

(a)  notifying the supplier that the they reject the goods and the grounds for the rejection and seeking a remedy directly; or

(b)  by taking action against the supplier in VCAT for damages for any loss or damage suffered by them because of the failure to comply with the guarantee.

For further information on your rights under the ACL, please contact our Dispute Resolution and Litigation team on ​+61 03 8540 0200 or email the author of this article, Phoebe Langridge.