|September 26, 2011|
Previously published on September 2011
Following the commencement of regulation 91 of the Competition and Consumer Regulations on 1 July 2011, the effect of section 103 of the Australian Consumer Law (ACL) has been to impose specific obligations on repairers of consumer goods to give notice to consumers where:
- it is the practice of the repairer to use refurbished parts in the repair of the consumer’s defective goods; or
- the goods being repaired are capable of retaining user-generated data.
The notice requirements apply to a person who accepts, in trade or commerce, goods for the purpose of repairing them. As the ACL’s definition of “trade or commerce” includes any business or professional activity, whether or not carried on for profit, the obligation is binding for motor vehicle repairers in carrying out repairs to consumer motor vehicles, including when those repairs are carried out pursuant to a statutory guarantee or express warranty.
Use of refurbished parts to repair goods
Where it is the practice of the motor vehicle repairer to use refurbished parts in the repair of a motor vehicle, the repairer must notify the consumer that this is the case. The notice must include the exact phrase: “Goods presented for repair may be replaced by refurbished goods of the same type rather than being repaired. Refurbished parts may be used to repair the goods.”1
Repairing goods capable of retaining user-generated data
Where the motor vehicle to be repaired comprises goods that are capable of retaining user-generated data, the motor vehicle repairer must give notice to the consumer that repair of the motor vehicle may result in the loss of that data.2 For the purposes of giving notice, user-generated data means any data stored on goods, including, but not limited to, files stored on a computer hard drive, telephone numbers stored on a mobile phone, songs stored on a portable media player, games saved on a games console and files stored on a USB memory stick.
Consequences of failing to give notice
Failure to give notice in accordance with section 103 is an offence of strict liability,3 which means that even an accidental failure to give notice constitutes a breach of the law. The maximum fine that may be imposed against a body corporate for such an offence is $50,000.4 In addition, the repairer might also be liable to pay a civil pecuniary penalty of up to $50,000, depending on, among other things, the nature and extent of the failure to give notice and whether the person has been found guilty of previously failing to give notice in the past.5
Further, a breach of section 103 might give rise to legal action being taken by either a consumer protection agency or the consumer. Such action might result in the repairer facing a number of consumer remedies including injunctions,6 actions for damages7 and compensation orders for injured persons.8
Finally, the ACL provides grounds for the Australian Competition and Consumer Commission (ACCC) to issue a public warning notice in respect of a repairer’s failure to give notice, which is a written notice to the public detailing the motor vehicle repairer’s failure to give notice, provided specific circumstances apply.
The new consumer guarantees regime
On top of the notice requirements, the ACL establishes a regime of consumer guarantees pursuant to which certain specified rights or other circumstances are guaranteed to exist in relation to consumer transactions. The statutory consumer guarantees cannot be excluded by contract,9 meaning that any attempt by a motor vehicle manufacturer or repairer to contract their way out of them will be void.
This new regime replaces provisions that have implied conditions and warranties into consumer contracts and which were formerly found within Part V, Division 2 of the Trade Practices Act 1974 (Cth) and equivalent state and territory fair trading Acts and related Acts.
The guarantees can be found in sections 52 to 59 of the ACL and, together with a brief comment and/or explanation, are set out below.
The motor vehicle is of an acceptable quality
A motor vehicle will be fit for purpose if it is fit for all of the purposes for which motor vehicles are commonly supplied. In addition, they must be acceptable in appearance and finish and free from defects, and safe and durable, at the time of being supplied to the consumer.
The guarantee does not apply where the consumer is able to inspect the good prior to purchase, and the defect should have been apparent to them, or where they are specifically alerted to a hidden defect prior to the sale. In the case of pre-owned motor vehicles, it is not sufficient to describe the vehicle as a “second” if the particular hidden defect is not pointed out to the consumer.
The motor vehicle will be reasonably fit for any purpose the consumer specified.
To comply with this guarantee, the motor vehicle must be fit for the purpose for which it was designed or ordinarily put, as well as any purpose the consumer has disclosed to the supplier (which is different from the ordinary use) prior to the sale.
The motor vehicle will match the manufacturer or supplier’s description
This guarantee holds the manufacturer or supplier to promises and representations that it has made in connection to the supply of the motor vehicle. It ensures that a description of the motor vehicle (e.g. in an advertisement) will be accurate and that the motor vehicle will match any sample or demonstration model shown to the consumer.
Repair facilities and spare parts will be available
When goods are supplied to a consumer, there is an implied guarantee that spare parts and repair facilities will be reasonably available for a reasonable time after the supply to the consumer. Given that the provision does not make specific allowance for refurbished parts, it can be assumed that motor vehicle repairers must ensure the availability of new parts in order to satisfy the guarantee.
In certain exceptional circumstances, the guarantee will not apply. Namely, where the manufacturer took reasonable steps to ensure that the consumer would be given notice that either the facilities or the parts for the repair of the motor vehicle would not be available after a specified period, the repairer is not bound to honour the guarantee. To be effective, the notice must be given in writing to the consumer at or before the time they agreed to purchase the motor vehicle.10
Supplier and manufacturer warranties will be complied with
Second, there is a guarantee created by section 59 that when goods are covered by an express warranty given by the supplier or manufacturer, the warranty will be complied with. The effect of this guarantee is to give the consumer access to the full suite of remedies that are available for a breach of the implied statutory consumer guarantees in circumstances where the motor vehicle dealer has breached a manufacturer or supplier’s express warranty.
The consumer will enjoy clear title to and undisturbed possession of the motor vehicle
The primary issue this guarantee addresses is the right of the consumer to clear and unencumbered title to the motor vehicle purchased, and ensuring that no party will attempt to take back or limit their rights to use the motor vehicle.
However, this guarantee does not apply where the supplier made known to the consumer that it only had limited title to the motor vehicle, or would be supplying the motor vehicle subject to certain encumbrances (as applicable). Similarly, the guarantee does not operate where a motor vehicle has been supplied under a hire purchase arrangement and then subsequently repossessed because the consumer has not met its obligations under that arrangement.
Consequences of failing to comply with a consumer guarantee
The nature of the remedy available to the consumer will depend on the extent of the failure to comply with the guarantee. If the failure to comply with the guarantee is a major failure and cannot be remedied, the consumer may, in certain circumstances, be entitled to give notice to the supplier that they are “rejecting” the motor vehicle and subsequently recover compensation for any reduction in the value of the motor vehicle below the purchase price.11 The ACL sets out a number of circumstances in which a major failure will be seen to have occurred. The circumstances include where:12
- the consumer would not have acquired the motor vehicle had they known of the extent of the failure;
- the motor vehicle is different in one or more significant respects from the description by reference to which it was supplied or, if the motor vehicle was supplied by reference to a sample or demonstration model, from that sample or model.
- the motor vehicle is substantially unfit for its usual purpose or for the specific purpose of the consumer that was made known to the supplier prior to the purchase of the motor vehicle, and the motor vehicle cannot easily and within a reasonable time frame be made fit for such a purpose; or
- the motor vehicle is unsafe.
In all other situations, being those where the failure to comply with the guarantee is a not a major failure and is capable of being remedied, the consumer can simply require the person who supplied the motor vehicle to comply with the guarantee.13 This can be achieved by the supplier replacing the motor vehicle with an identical model, or by refunding any money paid by the consumer for the motor vehicle.14 If the supplier does not comply with the requirement to make good the guarantee satisfactorily or within a reasonable time, the consumer may otherwise have the guarantee complied with, at cost to the supplier.15
Motor vehicle repairers need to comply with the ACL’s notice requirements when making repairs to consumer motor vehicles, regardless of whether the repairs are carried out for profit or pursuant to a statutory consumer guarantee or express warranty given by the manufacturer or supplier. There are serious legal and financial consequences for those who do not comply.
In addition, the ACL establishes the consumer guarantees regime that implies a raft of guarantees into all consumer contracts. The guarantees cannot be excluded; however there is limited scope for the manufacturer, supplier or repairer of a motor vehicle to curtail the effectiveness of some of the guarantees by taking advantage of some of the specific exceptions set out in the ACL.
1 Regulation 91(2), Competition and Consumer Regulations
2 Regulation 91(1)(a), Competition and Consumer Regulations
3 Section 193(2), Australian Consumer Law
4 Section 193(1), Australian Consumer Law
5 Section 224, Australian Consumer Law
6 Pt 5-2, Div 2, Australian Consumer Law
7 Pt 5-2, Div 3, Australian Consumer Law
8 Pt 5-2, Div 4, Australian Consumer Law
9 Section 64, Australian Consumer Law
10 Section 58(2), Australian Consumer Law
11 Section 259(3), Australian Consumer Law
12 Section 260, Australian Consumer Law
13 Section 259(2), Australian Consumer Law
14 Section 261, Australian Consumer Law.
15 Section 259(2), Australian Consumer Law.