Parliamentary
'Lemon' Laws - Inquiry into consumer protections and remedies for buyers of new motor vehicles
Report No. 17, 55th Parliament Legal Affairs and Community Safety Committee November 2015
Legal Affairs and Community Safety Committee
Chair Mr Mark Furner MP, Member for Ferny Grove
Deputy Chair Mrs Tarnya Smith MP, Member for Mount Ommaney
Members Mr Jon Krause MP, Member for Beaudesert
Mr Jim Madden MP, Member for Ipswich West
Mr Tony Perrett MP, Member for Gympie
Mr Mark Ryan MP, Member for Morayfield
Staff Ms Bernice Watson, Research Director
Mrs Kelli Longworth, Principal Research Officer
Mr Gregory Thomson, Principal Research Officer
Ms Lorraine Bowden, Executive Assistant
Technical Scrutiny Ms Renée Easten, Research Director
Secretariat Mr Michael Gorringe, Principal Research Officer
Ms Kellie Moule, Principal Research Officer (part-time)
Ms Tamara Vitale, Executive Assistant
Contact details Legal Affairs and Community Safety Committee Parliament House Telephone +61 7 3553 6641 George Street Fax Brisbane+61 7 3553 Qld 6699 4000 Email [email protected]
Web www.parliament.qld.gov.au/lacsc
Acknowledgements
The committee acknowledges the assistance provided by the Office of Fair Trading, Department of Justice and Attorney-General and the Queensland Parliamentary Library.
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‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Contents
Terms of reference v
Abbreviations vi
Chair’s foreword ix
Findings xi
Recommendations xv
Government members comments xvii
Non-government members comments xvii
1. Introduction 1 1.1 Role of the Committee 1 1.2 Referral of the inquiry 1 1.3 Parliamentary inquiry purpose and process 1 1.4 Inquiry process 2 Private briefing 2 Public submission process 2 Public hearings 2 Further departmental assistance 2 Government response 3 1.5 Scope 3 1.6 Policy context 3 Roles and responsibilities 3 Context 4 Review of the Australian Consumer Law 5
2. Key concepts 7 2.1 What is a ‘new motor vehicle’? 7 2.2 What is a ‘lemon’? 7 2.3 What are ‘lemon’ laws? 8
3. Consumer experiences when buying new motor vehicles 10 3.1 Experiences of Queensland consumers who have purchased ‘lemon’ motor vehicles 10 Consumer campaigns about ‘lemon’ cars 11 3.2 Community expectations of what constitutes a ‘lemon’ motor vehicle 12 3.3 Outcome of ‘lemon’ motor vehicle experiences 13 3.4 Impacts on consumers who have purchased ‘lemon’ motor vehicles 14
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4. Other views on the buying of new motor vehicles 18 4.1 Views on the motor vehicle industry and ‘lemon’ motor vehicles 18 4.2 How prevalent are ‘lemon’ motor vehicles? 19 4.3 Demarcation issues 22 Issues raised in submissions 22 Issues raised at public hearing 22
5. Consumer protections and remedies – Australian Consumer Law (ACL) 24 5.1 Australian Consumer Law (ACL) 24 5.2 Application of ACL 24 5.3 Consumer guarantees under the ACL 24 5.4 Guarantee of acceptable quality 25 5.5 Major and minor defects and failures 26 Minor defects 26 Failure or inability to repair a vehicle within a reasonable time - minor defects 27 Major defects 27 Right to reject/compensation - major defects 28 When a consumer cannot reject the vehicle – major defects 28 5.6 Warranties under the ACL 29 Manufacturer’s warranty 29 Extended warranty 29 5.7 Submitter views on the consumer protections and remedies under the ACL 29 5.8 Redress for defects in new motor vehicles under the ACL 30 Individual negotiation with dealer and manufacturer/importer 30 Queensland’s Office of Fair Trading 31 Public enforcement by the Australian Competition and Consumer Commission 33 Initiated voluntary recall 36 Private action in tribunals and courts 37
6. Consumer protections and remedies – State and Territory legislation 46 6.1 Motor Dealers and Chattel Auctioneers Act 2014 (MDCAA) 46 Statutory warranties for used motor vehicles 46 Exclusions/non-application 46 Cooling-off period 46 Remedies and redress regarding used car warranties 47 Concluding comment 47 6.2 Legislation in other Australian States and Territories 47
7. Adequacy of consumer protections and remedies 48 7.1 ‘Lemon’ motor vehicle complaints and outcomes 48 7.2 Where do ‘lemon’ motor vehicles go? 48
8. Potential improvements to legislative protections and remedies 51 8.1 Suggested improvements 51 Introduction of a ‘lemon’ law 51 Mandated new car purchase agreements 55
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Increased protection for dealerships 55 Introduction of a ‘Lemon’ Register 55 Education 56 Improved dispute resolution 57 Introduction of testing standards 58 QCAT improvements 58 Simplification and enhanced governmental powers 60 Increased efficiency 60 Extended manufacturers warranties 60 Expansion of law to include used-motor vehicles 60 Cooling-off periods 60 Limitation on charge for use of ‘lemon’ 61 Independent assessors/experts 61 8.2 CCAAC recommendations 62 8.3 Committee recommendations 62
9. Consumer protections in overseas jurisdictions 65 9.1 Legislative protections in the United States of America 65 Federal ‘lemon’ law 65 Dispute resolution mechanisms 66 Indiana ‘lemon’ law 66 Concluding comment 66 9.2 Legislative protections in other countries 67
Appendix A List of Submissions 68
Appendix B List of Witnesses 69
Appendix C Summary of experiences of consumers who have purchased ‘lemon’ motor vehicles 70
Appendix D Summary of outcome of experiences of consumers who have purchased ‘lemon’ motor vehicles 72
Appendix E Guarantees and warranties under the ACL and State or Territory legislation and remedies for breaches 74
Appendix F International jurisdictional overview of ‘lemon’ laws 75
Appendix G ‘Lemon’ law criteria in the United States of America 76
Appendix H Information on New York's New Car Lemon Law 77
Appendix I Information on Indiana Lemon Law 78
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‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
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Terms of reference That the Legal Affairs and Community Safety Committee inquire into and report on whether there is a need to improve the consumer protections and remedies for buyers of new motor vehicles with numerous, severe defects that reoccur despite multiple repair attempts or where defects have caused a new motor vehicle to be out of service for a prolonged period of time ('lemons'). That, in undertaking the inquiry, the Committee should consider, but not be limited to: 1. the experiences of consumers in Queensland who have purchased 'lemons' including community expectations of what constitutes a 'lemon' motor vehicle and the impacts, financial and otherwise, on consumers who have purchased 'lemons';
2. the consumer protections and remedies available under existing legislation, such as those contained in the Australian Consumer Law and state-based legislation, including remedies available through Queensland courts and the Queensland Civil and Administrative Tribunal, and their adequacy in assisting consumers who have purchased 'lemons';
3. how legislative protections and remedies might be improved to better protect Queensland consumers who have purchased 'lemons', including improving the ability of consumers to enforce their rights without recourse to courts or tribunals; and
4. any legislative and other protections in other jurisdictions assisting consumers who have purchased 'lemons', including the costs and benefits of existing and proposed protections. That the Committee seek public submissions and consult with key stakeholders, including motor vehicle manufacturers and dealers, as well as consumer protection representatives and report to the Legislative Assembly by 30 November 2015.
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Abbreviations
AADA Australian Automotive Dealer Association Ltd
ACCC Australian Competition and Consumer Commission
ACL Australian Consumer Law
ADR alternative dispute resolution
AD Rules Australian Design Rules
AMEP Australian Motoring Enthusiast Party
Attorney-General The Honourable Yvette D’Ath MP, Attorney-General and Minister for Justice and Minister for Training and Skills
CALC Consumer Action Law Centre
CAMVAP Canadian Motor Vehicle Arbitration Plan
CCAAC Commonwealth Consumer Affairs Advisory Council
CLC Caxton Legal Centre Inc
committee Legal Affairs and Community Safety Committee
DJAG Department of Justice and Attorney-General
EDR external dispute resolution
FCA Australia FCA Australia Pty Ltd (Fiat Chrysler Automobiles)
FCAI Federal Chamber of Automotive Industries
Inquiry ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
LAQ Legal Aid Queensland
MDCAA Motor Dealers and Chattel Auctioneers Act 2014 (Qld)
MTAQ Motor Trades Association - Queensland
MVDT New Zealand’s Specialist Motor Vehicle Disputes Tribunal
OFT Office of Fair Trading (Qld)
QAILS Queensland Association of Independent Legal Services Inc
QCAT Queensland Civil and Administrative Tribunal
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QCAT Act Queensland Civil and Administrative Tribunal Act 2009
QLS Queensland Law Society
RACQ Royal Automobile Club of Queensland Limited
TPA Trade Practices Act 1974 (Cth)
USA United States of America
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Chair’s foreword The committee has undertaken this inquiry over several months, and invited input from consumers of new cars including some who have experienced particular difficulties with those new cars, motor vehicle manufacturers and dealers, consumer advocates, academics, legal bodies and motoring organisations. We have identified key issues raised by those who made submissions, conveyed their recommendations as to what issues exist and how improvements could be made, and considered features of consumer protections offered in other jurisdictions for motor vehicles which are seriously defective. It was clear to the committee that where a consumer has purchased what they perceive is a ‘lemon’, it is of great significance to that individual, with significant health and financial costs. This is conveyed in this report. Recognising that there is a national legal framework regarding consumer protection, with implementation occurring at the state level, the committee has made a number of recommendations for the government’s consideration. I thank my fellow committee members for their measured consideration of these issues, and willingness to go to some lengths to gather evidence to inform our inquiry. I would particularly like to thank officers from the Office of Fair Trading, Department of Justice and Attorney-General, who provided us with significant support in terms of data collection and literature reviews. I also thank the Parliamentary Service, especially the Parliamentary Library and the committee’s secretariat for supporting our inquiry with research, organisational and administrative support.
Mark Furner MP Chair
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Findings
1. The experiences of consumers in Queensland who have purchased 'lemons' including community expectations of what constitutes a 'lemon' motor vehicle and the impacts, financial and otherwise, on consumers who have purchased 'lemons' There was a small number of submissions (25) made to the committee’s inquiry, including 11 from consumers of problematic new motor vehicles and seven from bodies advocating for such consumers. Data made available to the committee indicated that there were 118 responses to the government’s 2015 invitation to consumers to share their ‘lemon’ experiences. Data about complaints made to the Office of Fair Trading (OFT) suggests that while complaints about motor vehicles are consistently one of the top five subjects of all the complaints lodged by consumers with the OFT over the last 4 years, complaints about ‘lemons’ represent less than 1 % of those.1
Similarly, there is limited data at either the Queensland Civil and Administrative Tribunal (QCAT) or Court level which indicates that ‘lemons’ are a widespread issue – though the committee notes the argument that this might suggest that the legal system is not providing an accessible or viable response to aggrieved consumers.
Community expectations as to what constitutes a lemon, and should reasonably be replaced, are not readily gleaned from the low level of submissions to this inquiry. However the evidence presented to the committee suggested that there are different views about what constitutes acceptable quality or ‘fit for purpose’; a reasonable number of, and reasonable time for repairs to be completed or a complaint to be made, before a vehicle is considered a ‘lemon’ and the purchaser entitled to compensation or damages.
While there was insufficient evidence presented to the committee to enable it to draw a conclusion that ‘lemons’ are a prevalent issue, what was very clear is that where a consumer has purchased what they perceive is a lemon, it is of great significance to that individual, with significant health and financial costs. Further, there is a risk that cars perceived to be lemons are offloaded (for example, sold on) and where the defect is a safety issue, this may place unsuspecting future purchasers of those vehicles and other road users at risk.
It is of note that the United States, Canada, New Zealand and other jurisdictions have implemented consumer protection schemes which appear to offer greater clarity for consumers, manufacturers and dealers, and more accessible options for consumer redress where they claim those laws have been breached. There is no reason to suppose that the prevalence of ‘lemon’ vehicles in those jurisdictions is any greater than the prevalence in Australia.
2. The consumer protections and remedies available under existing legislation, such as those contained in the Australian Consumer Law and state-based legislation, including remedies available through Queensland courts and the Queensland Civil and Administrative Tribunal, and their adequacy in assisting consumers who have purchased 'lemons'.
Irrespective of the prevalence of ‘lemons’ in the community, it is clear that a number of significant problems exist with respect to consumer protections and remedies, which could in some instances be fairly readily addressed:
1 JAG, Analysis of OFT data, Material prepared for the Legal Affairs and Community Safety Committee, September 2015, p 4
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There is a lack of clarity within the existing Australian Consumer Law (ACL) as to what constitutes a ‘lemon’ Demarcation issues exist, particularly where a consumer attempts to achieve redress initially with a dealer Adjudicators are not technical experts, and the tribunals and courts have no investigatory function themselves Seeking legal redress is thus costly to consumers financially, or they bear the evidentiary burden. Consumers can be impacted by difficulty in diagnosis, costs of expertise, interpretation of the ACL, technical knowledge of adjudicator and compulsory mediation processes. These matters can affect the timeliness of the redress process. As well as direct costs like the cost of repairs, there are indirect costs associated with a car being off the road, such as the ability to travel to work, which may have implications for ongoing employment Seeking redress is also costly to consumers emotionally and mentally.
3. How legislative protections and remedies might be improved to better protect Queensland consumers who have purchased 'lemons', including improving the ability of consumer to enforce their rights without recourse to courts or tribunals.
Improvements to provide better protection could address the definitional issues in the Australian Consumer Law, providing more specificity around what constitutes acceptable quality or ‘fit for purpose’; what is a reasonable number of, and reasonable time for repairs to be completed; and what is a reasonable timeframe within which a car is considered ‘new’. A further suggestion made by a submitter was to introduce standards for testing new cars, before they are sold.
In addition to the overarching consumer law, improvements could be made to the accessibility of options for redress in cases where the consumer law is breached. There appear to be limited options between an individual approaching a dealer to attempt to negotiate redress directly, and taking action through a tribunal or a court. Other jurisdictions, and indeed a new approach undertaken by FCA in Australia, offer some potential models for filling that gap.
These include improving education for consumers, dealers and manufacturers, establishing dispute resolution bodies such as a specialised motor vehicle Ombudsman, a voluntary (or compulsory) arbitration scheme, and supporting mediators by providing definitional advice.
The government could also consider improvements to the tribunal and court system, where a motor vehicle claim is progressed through those forums. These include appointment of independent assessors to support decision making based on technical evidence; establishing a specialised motor vehicle disputes tribunal with an appropriate financial limit; increasing the QCAT limit of $25,000 (at least in respect of motor vehicle claims); allowing legal representation ‘as of right’; and reversing the onus of proof so that the consumer does not bear the (expensive) onus of establishing that the dealer or manufacturer has breached the law.
4. Legislative and other protections in other jurisdictions assisting consumers who have purchased 'lemons', including the costs and benefits of existing and proposed protections.
Throughout the Inquiry, stakeholders referred the committee to consumer laws and redress models in overseas jurisdictions as offering models which would improve consumer protection. Although consumers are generally able to sue through the courts for breach of warranty under ‘lemon’ laws in the USA, many states require that informal dispute resolution mechanisms are utilised before going xii Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles to court. An impartial third party is required to resolve warranty disputes either through conciliation, mediation or arbitration. Some jurisdictions have state-run arbitration mechanisms available and/or certified guidelines for arbitration. If the vehicle is found to be a lemon through either of these processes, the manufacturer must offer the consumer a replacement vehicle or refund of the purchase price (usually with a provision for a mileage reduction).
These have been considered in the body of the report. However given the lack of evidence as to the prevalence of ‘lemons’ in the community and the costs of implementing various models, the committee does not make recommendations that a specific dispute resolution model be adopted. The committee does however see merit in considering models which reduce prohibitive costs to consumers of seeking redress. One option is to consider ‘fee shifting’ which is a feature of the consumer protection regime in many US states: virtually every state has recognised that in order for the law to be enforceable there must be some provision that allows the consumer to recover their attorneys' fees and costs from the automobile manufacturer. Without this, the cost of seeking legal redress is prohibitive for consumers and that, ultimately, renders the legal options for redress fairly useless.
5. On-selling of ‘lemons’
The committee’s terms of reference provide that the committee may consider matters beyond those specified in the terms of reference. A common theme raised with the committee related to the potential on-selling of defective new cars. If there are serious defects in new cars, and recent recalls and media involving a number of manufacturers suggest that is a very real possibility, then there is an obvious risk of unsafe vehicles being passed on to unsuspecting consumers as the original purchaser attempts to recoup some of their expense, or the dealer (unable to obtain satisfaction from a manufacturer) re-sells a returned car. To this end, some submitters suggested that a ‘lemon’ register be established in order to monitor problem motor vehicles and inform potential buyers prior to any purchase.
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Recommendations
Recommendation 1: 62 The committee recommends the government consider the contents of the committee’s report, particularly the committee’s recommendations, as part of the government’s consideration of issues relating to, and its participation in, the Australian Consumer Law Review 2016.
Recommendation 2: 63 The committee recommends the government bring the committee’s report, particularly the committee’s recommendations, to the attention of Consumer Affairs Australia and New Zealand (CAANZ) and the government bodies, State and Territory regulators and other entitles comprising CAANZ, such that the committee’s report may inform the Australian Consumer Law Review 2016.
Recommendation 3: 63 The committee recommends that the government appropriately amend existing Queensland legislation to ensure effective implementation of the committee’s recommendations included in this report, but do so as part of any national approach to ‘lemon’ laws for new motor vehicles in Australia.
Recommendation 4: 63 The committee recommends that the appropriate mechanism to ensure a national approach to changes in existing ‘lemon’ motor vehicle laws, is to amend the Australian Consumer Law, such that it specifically sets out nationally consistent laws applicable to new ‘lemon’ motor vehicles.
Recommendation 5: 63 The committee recommends the incorporation of clear and practical definitions and provisions into any nationally consistent laws applicable to new ‘lemon’ motor vehicles, including: mandatory time and repair limits, such as imposing limits on the number of times a supplier/manufacturer can attempt to repair a defect in a motor vehicle and the number of days the vehicle can be ‘off the road’, before a buyer must be offered a refund or replacement clarity as to when a supplier/manufacturer must repair, refund or replace a motor vehicle an adequate definition of what constitutes a ‘lemon’ motor vehicle, such as – o adequate definitions of ‘acceptable quality’ and ‘fit for purpose’ o clarity as to the distinction between major and minor defects o clarity as to the distinction between a ‘lemon’ and generic design manufacturing defects (requiring general recall) or serious design safety defects (requiring urgent attention).
Recommendation 6: 63 The committee recommends the government consider appointing independent assessors, with investigative powers and specialised knowledge in relation to motor vehicle disputes, to deal with the issues of how consumers prove that they meet the ‘lemon’ motor vehicle threshold criteria (when established – see recommendation 5), as an alternative to consumers initiating Queensland Civil and Administrative Tribunal (QCAT) and/or court proceedings.
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Recommendation 7: 64 The committee recommends the government change the Queensland Civil and Administrative Tribunal (QCAT) jurisdictional limit of $25,000, for matters involving new motor vehicles with major defects. Government committee members recommend the limit be removed, so no cap applies. Non- government committee members recommend the limit be increased to $40,000.
Recommendation 8: 64 The committee recommends the state and commonwealth governments implement business and consumer awareness programs, with the intention of educating industry and consumers on the intent of the Australian Consumer Law, including the consumer guarantees.
Recommendation 9: 64 The committee recommends the government review cooling-off periods for new motor vehicle purchases, with consideration as to whether such periods should be unable to be waived by the purchaser and whether disadvantaged persons should receive the benefit of a longer period.
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Government members comments
Government members comment 1 The government members of the committee recommend the government bring to the attention of the Australian Consumer Law Review 2016, the government members’ view that national consumers be entitled to a remedy for a deemed major failure of the guarantee of acceptable quality if they satisfy certain threshold criteria, and that the threshold criteria be determined and included in any national approach to ‘lemon’ laws for new motor vehicles. Government members comment 2 The government members of the committee recommend the government bring to the attention of the Australian Consumer Law Review 2016, the government members’ view that consideration be given to the establishment of a national motor vehicle industry-based, consumer dispute resolution scheme, in order to: provide cheap, fair and accessible dispute resolution to resolve disputes between consumers and the motor industry utilise the experience and knowledge of specialist, industry experts who possess knowledge of the relevant issues. Government members comment 3 The government members of the committee recommend the government bring to the attention of the Australian Consumer Law Review 2016, the government members’ view that consideration be given to the establishment of a national Motor Vehicles and Automotive Services Ombudsman to: provide cheap, fair and accessible dispute resolution to resolve disputes between consumers and the motor industry utilise the experience and knowledge of specialist, industry experts who possess knowledge of the relevant issues. Government members comment 4 The government members of the committee recommend that the government consider parties to Queensland Civil and Administrative Tribunal (QCAT) proceedings be allowed legal representation ‘as of right’, at least in relation to consumer protection issues. Government members comment 5 The government members of the committee recommend the government bring to the attention of the Australian Consumer Law Review 2016, the government members’ view that consideration be given to the introduction of a national community ‘lemon’ motor vehicles register, in order to monitor problem motor vehicles and enable potential buyers to inform themselves on the issues relating to their proposed purchase.
Non-government members comments Non-government members comment The non-government members of the committee are mindful of the importance of consumer protection measures, however this should be balanced with the extent of the issue, the importance of a national approach to the issue and not setting up additional regulation and bureaucracy that isn’t necessary.
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1. Introduction
1.1 Role of the Committee The Legal Affairs and Community Safety Committee (the committee) is a portfolio committee of the Legislative Assembly which commenced on 27 March 2015 under the Parliament of Queensland Act 2001 and the Standing Rules and Orders of the Legislative Assembly.2 The committee’s primary areas of responsibility include: Justice and Attorney-General Police Service Fire and Emergency Services Training and Skills. Section 93(1) of the Parliament of Queensland Act 2001 provides that a portfolio committee is responsible for examining each bill and item of subordinate legislation in its portfolio areas to consider: the policy to be given effect by the legislation the application of fundamental legislative principles for subordinate legislation – its lawfulness.
1.2 Referral of the inquiry On 15 July 2015, the Legislative Assembly directed the committee to inquire into consumer protections and remedies for buyers of new motor vehicles (Inquiry). By motion of the Legislative Assembly the Committee is required to report to the Parliament by 30 November 2015.
1.3 Parliamentary inquiry purpose and process The purpose of a Parliamentary committee is to inquire into and report on specific matters referred to it by the Parliament, or under the Parliament of Queensland Act 2001. Members of the committee are generally not experts in the field of inquiry, rather, it is their job to collect evidence from those who are expert and from other stakeholders, analyse and synthesise that evidence and make recommendations back to the Parliament in response to the terms of reference. Evidence is collected in a number of different ways, and these can and do vary depending on the nature of the inquiry and what the committee decides is appropriate. The committee may invite evidence from experts, interested individuals and organisations; conduct literature reviews to gather relevant and current objective information; conduct site visits where this would add valuable information and brings all of this information together into a report and makes recommendations back to the Parliament. As Parliamentarians are representatives of the broader community, they are well placed to reflect the values and priorities of a broad social context. This is in contrast to a review or inquiry undertaken by technical experts.
2 Parliament of Queensland Act 2001, section 88 and Standing Order 194.
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1.4 Inquiry process The steps undertaken by the committee during the Inquiry process are set out below.
Private briefing The committee invited and received a private briefing from the Department of Justice and Attorney- General (DJAG) on 30 July 2015 at Parliament House, Brisbane, to inform its approach to the inquiry.
Public submission process A total of 25 submissions were received from a range of stakeholders, interest groups, organisations and individuals. These included consumers, industry groups, manufacturers/importers/distributors, Fiat Chrysler Automobiles Australia, industry and legal consumer protection bodies, the Queensland Law Society and an academic. A list of submitters is provided at Appendix A.
Public hearings The committee invited oral submissions at the following public hearings to inform the Inquiry: 31 August 2015 at Red Earth Hotel, Mount Isa 3 September 2015 at Rydges Esplanade Hotel, Cairns 28 October 2015 at Parliament House, Brisbane. A list of witnesses is provided at Appendix B.
Further departmental assistance Throughout the Inquiry, DJAG has provided the committee with a number of information briefs. It provided a departmental brief on ‘lemon’ laws, tabled at the committee’s private briefing on 30 June 2015, including information on: relevant legislation in other jurisdictions the Australian Consumer Law (ACL) Australian tribunals and courts the upcoming, 2016 review of the ACL. Additionally, DJAG provided the following departmental briefs on 9 October 2015: an analysis of the 118 submissions received on DJAG’s ‘lemon’ laws website an analysis of complaint data relating to ‘lemon’ motor vehicles received by the Office of Fair Trading (OFT) a review of case law relevant to new motor vehicles with defects a second brief on ‘lemon’ laws, including information on: o the different ways a ‘new’ motor vehicle has been defined in various jurisdictions o how new motor vehicles are assessed to meet the Australian Design Rules (AD Rules) o manufacturer’s warranties o the on-selling of ‘lemon’ motor vehicles in the United States of America. Excluding those of a confidential nature, DJAG provided to the committee copies of the submissions it received on its ‘lemon’ laws website.
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Government response Under s 107 of the Parliament of Queensland Act 2001, the responsible Minister is required to respond to the recommendations made by the committee within three months of the report being tabled in Parliament.
1.5 Scope The terms of reference for the Inquiry are fairly specific, focussing on whether improvement is needed for consumer protections and remedies for buyers of new motor vehicles identified as ‘lemons’. In undertaking the Inquiry, the terms of reference state the committee should consider: the experiences of Queensland consumers who have purchased ‘lemon’ motor vehicles existing legislative consumer protections and remedies, and their adequacy how legislative consumer protections and remedies might be improved, including in enforcing rights without recourse to courts or tribunals legislative and other protections in jurisdictions outside Queensland, including their costs and benefits. Key issues identified by the committee are: What is the test to determine whether a new motor vehicle is a ‘lemon’? What is a ‘new’ motor vehicle? Are existing protections and remedies adequate and, if not, how can they be improved? Should improvements in protections and remedies be of a legislative or other nature, such as through the implementation of a dispute resolution mechanism involving individuals with technical and industry knowledge? What aspects of the laws in other jurisdictions are worthy of introduction into Queensland? Although the terms of reference are limited to new motor vehicles, numerous submitters have identified issues concerning the used car market, particularly concerns regarding the on-selling of new car ‘lemons’ which are unable to be repaired, or are not repaired, before on-selling. This raises significant safety and consumer protection issues that are a direct effect of the issues regarding new cars. In that regard, the committee has devoted a part of this report to considering this important issue. The committee notes that the ACL applies only in a limited way to cars bought from a private seller (rather than from a dealer) and cars bought at an auction. This report does not specifically address issues related to such sales.
1.6 Policy context
Roles and responsibilities The Queensland motor vehicle industry consists of various interacting entities and elements including consumers and government, legal and industry bodies of both a state and national nature; each with separate roles and responsibilities. From a transactional perspective, there are relationships between consumers, dealers, manufacturers and manufacturer’s agents, such as importers and distributors. Sometimes, when attempting to have problems with a new motor vehicle rectified, consumers deal with both the retailer dealer and, later, other dealers; this sometimes extends to independent parties providing reports or technical advice.
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Different entities enter into different contractual relationships. For example, a consumer may purchase a new motor vehicle from a dealer. In such a case, there is a contractual relationship between the two parties. However, the dealer may have a distinct contractual relationship with the manufacturer or manufacturer’s agent, in the form of a franchise agreement. Although the consumer is not a party to the franchise agreement and may be unaware of its content, the terms of the agreement will likely influence how the dealer interacts with both the consumer and the manufacturer and, in some cases, how the manufacturer deals with the consumer. Various consumers who submitted to the Inquiry informed the committee of interactions with a number of government and legal bodies, such as Queensland’s Office of Fair Trading (OFT), the Commonwealth Australian Competition and Consumer Commission (ACCC) and the Queensland Civil and Administrative Tribunal (QCAT). Adding further complexity, the industry is affected by significant international factors, particularly in light of many new motor vehicles having been manufactured overseas and imported into Australia for distribution and retail. The committee notes that international factors will remain a significant factor, given that, in the near future, no company will manufacture motor vehicles in Australia. The committee has considered these issues of complexity and potential overlap throughout the Inquiry, and this is reflected in this report. In particular, sections of this report are dedicated to the above issues and the roles and responsibilities of the various industry entities.
Context Currently, buyers of faulty motor vehicles can seek recourse through the Australian Consumer Law (ACL) and state and territory consumer protection legislation.
Commonwealth Consumer Affairs Advisory Council (CCAAC) In 2009, prior to the introduction of the ACL, the Australian Government requested the Commonwealth Consumer Affairs Advisory Council (CCAAC) consider if a ‘lemon’ law was appropriate for inclusion in the ACL. The final report, Consumer Rights - reforming statutory implied conditions and warranties, was published in October 2009, and found there was little empirical evidence to suggest that 'lemons' were a common feature of the market for motor vehicles or any other market in Australia. The report determined there was no need for a ‘lemon’ law in Australia. Despite these findings, the final report states that Australian governments should monitor the effectiveness of the national statutory consumer guarantees as they apply to motor vehicles, including gathering data about the number and nature of complaints and disputes about statutory consumer guarantees involving new and used motor vehicles. CCAAC reviewed the then statutory implied conditions and warranties under the Trade Practices Act 1974 (Cth) (TPA) and various state and territory fair trading and sale of goods laws. The final report noted that, to a significant extent, submissions received by CCAAC indicated that the implied terms found in the TPA and other legislation adequately encompassed the problem of ‘lemons’. Additionally, the report stated that it appeared that calls for a ‘lemon’ law were not driven by the inadequacy of the implied terms themselves in capturing ‘lemons’, but rather by concerns about the effectiveness of the implied terms regime as a mechanism for redress. Finally, CCAAC formed the view that the implementation of national consumer guarantees would reduce uncertainty for consumers as rights and remedies would both be provided for in the ACL.
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Petition to Queensland Parliament An e-petition, Improving the consumer laws in Queensland for new car buyers, was tabled on 5 May 2015, with 215 signatures.3 In response to the petition the Attorney-General undertook to raise the issue with the Ministerial Council of Consumer Affairs Ministers, which considers proposed amendments to the Australian Consumer Law Australian Governments, and its administration. In response to the petition, the Attorney-General noted that:
Unfortunately, a number of high profile cases in Queensland involving what appear to be lemon vehicles, pre-date the introduction of the ACL. As the ACL is not retrospective, consumers who purchased vehicles before 1 January 2011 could not make full use of the statutory consumer guarantees and remedies it contains.4
The Attorney-General acknowledged the work of Ms Connie Cicchini and Mr Ashton Wood in the House on 4 June 2015. She stated:
One of the questions asked of me is why they cannot just replace the car. That is why I want to put lemon laws on the agenda. No-one wants a new car to cost them their sanity or their savings.5
Queensland government’s ‘Get Involved’ website From June 2015 until the closing date of 25 September 2015, the Department of Justice and Attorney- General (DJAG) invited consumers to inform the government about their experiences with ‘lemon’ motor vehicles they have purchased, via the Queensland government’s ‘Get Involved’ website.6
Review of the Australian Consumer Law The Inter-Governmental Agreement signed by all jurisdictions in 2009 provided for development of consistent consumer protection legislation, a mechanism for any alterations to the ACL, and for review of the enforcement and administration of the ACL.7 The terms of reference for a review of the ACL was agreed at a meeting of Commonwealth, State and Territory Ministers for consumer affairs on 12 June 2015.8 One of the matters to be considered by the review, is whether the ACL should include specific ‘lemon laws’ for new motor vehicles which, in general, imposes limits on the number to times a supplier can attempt to repair a defect in a vehicle before the buyer can ask for a refund or replacement.
3 Petition 2327-14, available at http://www.parliament.qld.gov.au/work-of-assembly/petitions/closed-e- petitions 4 Yvette D’Ath MP, Attorney-General and Minister for Justice, Minister for Training and Skills, correspondence to Clerk re petition 2327-14, 4 June 2015, available at: https://www.parliament.qld.gov.au/apps/Epetitions/responses/2327-14.PDF 5 Yvette D’Ath MP, Record of Proceedings, 4 June 2015, p.1113 6 http://www.qld.gov.au/law/laws-regulated-industries-and-accountability/queensland-laws-and- regulations/fair-trading-services-programs-and-resources/consultation-regulatory-reform/lemon- laws/ 7 Intergovernmental Agreement for the Australian Consumer Law, July 2009, available at http://www.consumerlaw.gov.au/content/the_acl/downloads/acl_iga.pdf 8 Review of the Australian Consumer Law, Terms of Reference, available at http://www.consumerlaw.gov.au/content/Content.aspx?doc=review_of_the_acl/review_of_the_acl_tor.ht m
Legal Affairs and Community Safety Committee 5 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
The formal review is to be conducted by Consumer Affairs Australia and New Zealand (CAANZ). The review, including consumer consultation, will commence in early 2016, and will report to Ministers in early 2017. Ultimately, any amendment to the ACL requires the agreement of the Commonwealth and four other jurisdictions (three of which must be States) in accordance with the Intergovernmental Agreement for the ACL.
6 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
2. Key concepts
2.1 What is a ‘new motor vehicle’? Statutory consumer guarantees contained in the Australian Consumer Law (ACL) apply to goods and services, regardless of age, supplied, in trade or commerce to a consumer. Thus, there is no prescribed definition of ‘new’. The relevant issue for the Inquiry, is, in circumstances where a ‘lemon’ law was introduced, what would be the definition of ‘new motor vehicle’. For example, should a ‘new motor vehicle’ cover passenger, motorcycle, utility, light commercial, heavy and/or commercial vehicles? Should it cover demonstrator vehicles and/or leased vehicles? Should new motor vehicles purchased by businesses be covered by any ‘lemon’ law? According to Department of Justice and Attorney-General (DJAG), defining a ‘new motor vehicle’ in legislation can be complex and the definition of a ‘new motor vehicle’ may need to be determined on a set of criteria:
For example, a demonstrator vehicle is technically a used motor vehicle but may in some cases be relatively ‘new’ in age and kilometres and still covered by the manufacturer’s warranty. In New York, a demonstrator vehicle is specifically mentioned as a motor vehicle that can be covered in their ‘lemon’ laws provided it meets certain criteria.9
In addition, consumer perceptions of what is ‘new’ also vary:
Anecdotal evidence from the Office of Fair Trading suggests that some consumers are not satisfied and are confused when they purchase a new motor vehicle that has a build date or compliance date that are well before the delivery date or registration date. Dealerships also market vehicles based on model years which can add to a complex mix of terms affecting the understanding of ‘new’.10
To provide some guide as to the existing understanding of the meaning of a ‘new motor vehicle’, the committee notes the following comment by Motor Trades Association - Queensland (MTAQ) in its written submission: Technically, the industry always has taken the first registration of the motor vehicle as the defining event of a new motor vehicle. Any subsequent registrations define the car as a used motor vehicle.11
2.2 What is a ‘lemon’? The 2009 Commonwealth Consumer Affairs Advisory Council (CCAAC) report on consumer rights provides commentary on the origins of the term ‘lemon’:
The idea of the ‘lemon’ as an undesirable or unsatisfactory thing has been in common use for at least one hundred years, particularly in the United States. The Oxford English Dictionary quotes The Saturday Evening Post of 20 February 1909 complaining that ‘[t]he wheel goes around; wherever the little indicator at the point of the pin stops, there is your prize — or your lemon’.
9 DJAG, Legislative Issues Information Briefing #2 – Inquiry into consumer protections and remedies for buyers of new motor vehicles, September 2015. 10 DJAG, Legislative Issues Information Briefing #2 – Inquiry into consumer protections and remedies for buyers of new motor vehicles, September 2015. 11 MTAQ, Submission 17, p 3.
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In its colloquial use, a lemon is considered to be something that is completely useless or without value. It is something that will not function as intended and, when bought, returns to its owner more grief than utility.12
It also details the application of the term ‘lemon’ to motor vehicles:
However, when applied particularly to new motor vehicles, the use of the word ‘lemon’ often signifies the buyer’s frustration with the product and the support services of the dealer or manufacturer. The anecdotal evidence presented to CCAAC and previous inquiries into lemon laws suggests that the pejorative ‘lemon’ is often invoked where a vehicle is defective but not irreparable, yet the dealer has repeatedly failed to repair it.13
In CCAAC’s view, the term ‘lemon’ should be understood to mean:
…only those products that simply will not function as intended, for reasons that are beyond the expertise of a reasonable repairer to remedy. A lemon is product which is not only unmerchantable but, further, defies attempts to be made merchantable by repair. Nothing a repairer may reasonably be expected to do can turn a lemon into a well- functioning motor vehicle.
While a repeated failure to repair a particular product may be evidence that the product is a lemon, it may alternatively indicate that the repairer has insufficient incentives to repair the product. A more expansive understanding of the term would blur any distinction that might be made between a genuine lemon and a product that is simply faulty.14
According to the report, popular concern about lemons in the motor vehicle industry first came to prominence in the 1960s and 1970s:
…prompting both George Akerlof’s famous article about the ‘market for lemons’ with an accompanying wave of academic discussion about information asymmetry, and, more practically, a wave of ‘lemon laws’ in the United States by way of response.15
2.3 What are ‘lemon’ laws? ‘Lemon’ laws have been in place in all states in the USA for several decades. The most common form provide consumer remedies for a vehicle where:
…the manufacturer is incapable, within a reasonable period, of correcting any defects that substantially impair the use, value or safety of the vehicle. Rules about how long
12 Commonwealth Consumer Affairs Advisory Council, Consumer Rights – Reforming Statutory Implied Conditions and Warranties, October 2009, p 91. 13 Commonwealth Consumer Affairs Advisory Council, Consumer Rights – Reforming Statutory Implied Conditions and Warranties, October 2009, p 91. 14 Commonwealth Consumer Affairs Advisory Council, Consumer Rights – Reforming Statutory Implied Conditions and Warranties, October 2009, p 92. 15 Commonwealth Consumer Affairs Advisory Council, Consumer Rights – Reforming Statutory Implied Conditions and Warranties, October 2009, p 92, citing Akerlof, G 1970, The market for “lemons”: Quality uncertainty and the market mechanism, The Quarterly Journal of Economics, vol. 84, no. 3 (Aug 1970), pages 488-500.
8 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
constitutes a ‘reasonable period’, and what remedies are available, vary markedly from state to state.16
16 Consumer rights: Reforming statutory implied conditions and warranties, Final report, October 2009
Legal Affairs and Community Safety Committee 9 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
3. Consumer experiences when buying new motor vehicles This section of the report presents the various views expressed by consumers by way of written and oral submission to the committee during the Inquiry.
3.1 Experiences of Queensland consumers who have purchased ‘lemon’ motor vehicles Twelve consumers, including one from Victoria, made written submissions to the Inquiry, outlining their experiences with new motor vehicles they had purchased. These consumers had a range of experiences. General themes of these experiences included: buying a new motor vehicle that suffered from repeated problems, including complete failures problems ranging from those immediately detected to those materialising over time, some of which persisted despite repair attempts numerous visits to the selling dealer’s, and other dealer’s, service departments, including obtaining reports from independent repairers and specialists new motor vehicles spending considerable time off the road for repeated repairs, meaning buyers are unable to enjoy the reliability of, and use of, their purchase works conducted under warranty, with some warranties either expiring or being extended negotiating with both dealers, importers/manufacturers and, sometimes, manufacturer’s overseas head office requesting dealers and or manufacturers for repairs, refunds and/or replacements The table in Appendix C summarises these consumers’ individual experiences in further detail. Mr John Gielis appeared as a witness at the committee’s public hearing in Cairns on 3 September 2015. He recounted difficulties experienced by his late father, Stan, in relation to the purchase of a new Ford Falcon Forte, manufactured in June 2000 and purchased in December of that year. Stan experienced repeated problems with the new motor vehicle; the first being when the rear shock absorber blew on the drive home from the dealership, when the car was first purchased.17 Subsequently, the motor vehicle was returned to the dealership for repairs under warranty on numerous (‘dozens’) occasions over a two year period.18 The problems with the vehicle, which are outlined in the Hansard transcript of the hearing, are succinctly summarised in the following words of Mr Gielis:
They were minor details, but in the end it just blew out of proportion. It was not faulty workmanship; it was components, bad assembly, not enough checking. Those cars might sit in a yard out in the weather for 12 months before they are sold, hence that rust in the rocket panel and the stiffener.19
Stan liaised with the Ford dealership for repairs under warranty – the warranty was for 10,000kms or 3 years.20 However, the manufacturer sent Stan a survey form, which Stan completed (outlining his
17 Hansard transcript, public hearing, 3 September 2015, p 2. 18 Hansard transcript, public hearing, 3 September 2015. 19 Hansard transcript, public hearing, 3 September 2015, p 6. 20 Hansard transcript, public hearing, 3 September 2015.
10 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles repeated difficulties with the vehicle).21 Stan sought a replacement vehicle or compensation, but did not received a response to his feedback/request.22 In its written submission, the Royal Automobile Club of Queensland Limited (RACQ) advised that members regularly convey concerns about defects in vehicles covered by new vehicle warranties, usually relating to situations where:
the source of the problem or issue cannot be correctly identified an ongoing issue has not or cannot be corrected an owner is not convinced an issue is resolved
an issue keeps recurring; the vehicle has a string of different issues.23 In RACQ’s experience, ‘…it isn't uncommon for problem vehicles to spend inordinate amounts of time in workshops, which greatly inconveniences the owner’.24 Characteristics that the owner finds undesirable, but are claimed by the vehicle manufacturer I distributor to be normal or acceptable, is another common source of conflict:
These can range from a noise the owner finds objectionable to concerns or perceptions of a vehicle's safety (for example the operation of the vehicles brakes) that can result in the owner in some way limiting their use of the vehicle.25
According to RACQ and evidenced by the experience of consumers noted above, these often lead to disputes between the consumer and any or all of the following parties: the servicing dealer/s the selling dealer
the agent, importer or manufacturer.26 These matters ‘…become increasingly difficult to resolve as relationships breakdown and positions become entrenched’.27 In her submission, Ms Deidre Evans claimed that a manufacturer/dealer dealt with her complaints inconsistently and attempted to trade her up to a more expensive model.28 She alleged such practices are discriminatory, unfair and unethical.29
Consumer campaigns about ‘lemon’ cars Some consumers have been so incensed by ‘lemon’ motor vehicle experiences, they have instigated consumer campaigns. Three recent high profile consumer campaigns about motor vehicles that appear to be ‘lemons’ have highlighted some difficulties with consumer protection and remedies.
21 Hansard transcript, public hearing, 3 September 2015. 22 Hansard transcript, public hearing, 3 September 2015. 23 RACQ, Submission 15, p 1. 24 RACQ, Submission 15, p 1. 25 RACQ, Submission 15, p 1. 26 RACQ, Submission 15, p 1. 27 RACQ, Submission 15, p 1. 28 Deidre Evans, Submission 2, p 2. 29 Deidre Evans, Submission 2, p 2.
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Lemon Laws 4 Aus Led by Ms Connie Cicchini, Lemon Laws 4 Aus is described on its Facebook page as a Lobby group for the improved protection of consumers by the introduction of Motor Vehicle "Lemon Laws" into Australia. Ms Cicchini lobbies for lemon laws to be introduced after her experience with an Alfa Romeo car purchased in 2009 (before the ACL came into effect). She ran as an independent candidate in Ashgrove at the 2015 Queensland state election to bring attention to problems she and others have faced.30
Destroy My Jeep Mr Ashton Wood of the Sunshine Coast also campaigns for better consumer protection. His campaign originated from problems with his 2010 Jeep.31 Mr Wood is also involved in the Lemon Laws 4 Aus campaign. After protracted attempts to negotiate repairs and obtain redress, Mr Wood publicly destroyed his jeep in October 2014.32 In April 2015, the campaign’s Facebook page reached 3 million views.
Lemon vehicles in Aus Mr Stewart Lette claims to have assisted many others since starting his lobby group page Lemon Vehicles in Aus on Facebook. His group has approximately 200 members and is growing.33 Mr Lette bought his new motor vehicle in 2013 and later discovered its steering was configured for left-hand drive, making it veer heavily to the left and causing excessive tyre wear.
3.2 Community expectations of what constitutes a ‘lemon’ motor vehicle The terms of reference defines ‘lemon’ motor vehicles as:
…new motor vehicles with numerous, severe defects that reoccur despite multiple repair attempts or where defects have caused a new motor vehicle to be out of service for a prolonged period of time.
Ms Cicchini adopted the following variation:
The definition of a ‘lemon’ is a car (often new) that is found to be defective only after its purchase. Any motor vehicle with numerous, severe defects that reoccur after multiple repair attempts is such and the term ‘lemon’ can also extend to any product with flaws too great or severe to serve its purpose.34
Various submitters observed a lack of technical specificity and clarity in existing laws, noting there is no legislative limit on the number of repairs that can be undertaken on a ‘lemon’ motor vehicle, and an absence of guidance on what constitutes a ‘reasonable time’. In outlining his ‘lemon’ experiences, Noel Newton stated: ‘As legislation does not have mandatory “reasonable time” or number of repair attempts the “refund” or “replacement” process was extended until QFT intervened’.35 He concluded: ‘The process costs, including repair times, legal and regulatory support would exceed the cost of the vehicle.’36
30 https://www.facebook.com/lemonlaws4aus 31 https://www.facebook.com/destroymyjeep 32 The popular YouTube video documenting the event is available here: https://www.youtube.com/watch?v=yVM3QX2GPjQ 33 Stewart Lette, Submission 6, p 6. 34 Connie Cicchini, Submission 12, p 1. 35 Noel Newton, Submission 3, p 2. 36 Noel Newton, Submission 3, p 2.
12 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Caxton Legal Centre Inc (CLC) considered that: ‘Reference to the number of major defects and days off the road would help to clarify any definition’.37 CALC favoured a more prescriptive definition of a ‘lemon’ motor vehicle, identical to its proposal to Consumer Affairs Victoria in 2007 as part of a proposal to introduce ‘lemon’ laws in that state:
The definition of a lemon should include presumptions that a vehicle is a lemon in certain circumstances. A new vehicle should be presumed to be a lemon if the vehicle has been repaired at least three times by the manufacturer or importer and the vehicle still has a defect or if the vehicle is out of service for 20 or more days in total due to a defect. A new vehicle should also be presumed to be a lemon if it is repaired once for a defect that is a danger to the personal safety of the driver of the vehicle or other road users 38
Queensland Association of Independent Legal Services Inc (QAILS) adopted a similar view on the appropriate definition of ‘lemon’ motor vehicle.39 Further, CALC argued that ‘lemon’ laws should provide protection to vehicles during the first two years after their sale: ‘This should mean that if a vehicle gets re-sold within that period (perhaps because a consumer is sick of it breaking down), the law still protects a subsequent owner up to two years after the original purchase of the vehicle’.40 CALC considered that this period should not be truncated by mere virtue of the sale of the motor vehicle by the original buyer, and should endure for the full duration of the two year period, even if the car is on-sold.41 Additionally, in CALC’s view, a used car should be presumed to be a ‘lemon’ in the same circumstances, so long as the used car is subject to mandatory warranty protection under the relevant state legislation governing motor car traders. Please refer to section 6 of this report for details on the protections available for the buyers of used motor vehicles under the Motor Dealers and Chattel Auctioneers Act 2014.
3.3 Outcome of ‘lemon’ motor vehicle experiences Section 3.1 of this report outlined the experiences of numerous consumers who made written submissions to the Inquiry. These experiences resulted in a range of outcomes. General themes of these outcomes included: offers of inferior financial sums to trade-in or of inferior replacement vehicles offers to replace the motor vehicle, but only after an extended time some instances where no satisfactory repair and no offer to refund or replace successful and failed QCAT action consumers initiating lobby groups, including on Facebook, and initiating crowd funding campaigns, such as to destroy a defective new motor vehicle consumers suffering financial detriment and expense, expending time and suffering stress
37 CLC, Submission 19, p 3. 38 CALC, Submission 22, p 8; CALC letter to Consumer Affairs Victoria dated 22 November 2007 http://consumeraction.org.au/wp-content/uploads/2012/11/Submission-to-CAV-lemon-law-inquiry-22- November-2007.pdf 39 QAILS, Submission 25, p 1. 40 CALC, Submission 22, p 8. 41 CALC, Submission 22, p 8.
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consumers pursuing matters with OFT and ACCC The table in Appendix D summarises the outcomes of these consumers’ individual experiences in further detail. As mentioned earlier, Mr John Gielis, when recounting the experiences of his late father, Stan, submitted at public hearing that Stan had sought a replacement for, or compensation for, his defective Ford Falcon Forte. Stan did not receive either of these. Rather, about two years after purchase of the Ford, he traded it in for a different car (a demo Toyota Camry), which included the payment of a further $23,000.42 At the committee’s Brisbane public hearing, Mr Wood commented on his ‘lemon’ motor vehicle experience:
I destroyed my Jeep in frustration after three years of lemon vehicle ownership where the manufacturer and dealer wiped their hands of all responsibility and outright refused to replace my faulty vehicle or refund my money. As I stated to them on many occasions, there was nothing wrong with the money I gave them when I purchased my motor vehicle so why should I accept a vehicle that has had so much go wrong?43
3.4 Impacts on consumers who have purchased ‘lemon’ motor vehicles Various submitters commented on the impacts of their ‘lemon’ experiences. Numerous cited emotional and financial stress, including detrimental impact on their well-being and state of mind, and financial loss if their motor vehicle was traded in at a loss. Ms Cicchini stressed the importance of considering the impacts:
…emotional and financial stress has on the consumer and the flow on effects to their families, friends, community, to the health and legal systems when a consumer is not able to achieve a quick and efficient remedy from the supplier.44
Ms Cicchini claimed in some instances the additional stress of trying to get a car fixed, repaired or replaced can greatly impact on a consumer’s well-being and state of mind. Referring to a relevant criminal case, she advised:
This was the case when Jamie Peter Ripley tried to have his new motor vehicle repaired under warranty and the dealership refused. Mr Ripley was so disgruntled that he planted pipe bombs at the Gold Coast dealership. Mr Ripley was then sentenced to three years jail in March 2015…45
Ms Cicchini further noted: ‘When a consumer decides not to burden themselves with unnecessary stress and chooses to instead sell or trade out of an unsafe, unreliable lemon vehicle, in many instances it is the consumer, not the supplier, who will incur a financial loss from this exchange’.46 At the committee’s Brisbane public hearing, Ms Cicchini specifically addressed the financial and other costs associated with her experience:
There were solicitor's fees. There were independent diagnostics. I had numerous reports from the RACQ. I met up with Steve Spalding and a couple of representatives from the
42 Hansard transcript, public hearing, 3 September 2015, p 7. 43 Hansard transcript, public hearing, 28 October 2015, p 7. 44 Connie Cicchini, Submission 12, p 2. 45 Connie Cicchini, Submission 12, p 2. 46 Connie Cicchini, Submission 12, p 2.
14 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
RACQ to discuss my car. There were many independent reports and solicitors fees. I had time off work. There was the QCAT application. There was an appeal process as well, during my QCAT hearing. The adjudicator had made a fundamental error and based his decision on the Australian Consumer Law instead of the Trade Practices Act, because I bought my car in 2009. To lodge that appeal cost me roughly $600. I had to serve the papers, which was about $220, to the dealership. Also there is the stress and the anxiety and the tears and the emotion and the anger and the frustration. You cannot always put a dollar figure on it. Plus a number of years out of my life and then also add the Destroy My Jeep campaign. I have helped fund that and a couple of political campaigns to get the message out there. For me, it is a little bit more than just the cost of meeting with the solicitor to go through QCAT; it is pushing forward the cause as well. It has chewed up a lot of time and a lot of my resources to help get it here today.47
Mr Ashton Wood discussed the impacts he has experienced:
You do not spend $49,000 on a motor vehicle that you do not expect to drive. So there was the time that my car was off the road, the times that it broke down. I travel a lot for my work. So I would be catching shuttle buses and taxis to airports instead of being able to drive my car, which is why I bought it. I paid for solicitors as well to give me advice before I took on the manufacturer.
In terms of personal impact, it is hard to explain for someone who has not gone through it, but it kind of eats up your thoughts. Every time you are about to drive that car you are thinking, ‘Am I going to get there? Should I take this car? Maybe I need to take a different car.’ For our long trips we would not take that car. I have a Holden as well and we would take the Holden. When I destroyed that Jeep it had less than 60,000 kilometres in four years. It just goes to show how little I used it. A normal car gets around 20,000 kilometres a year. It eats up all your thoughts and it really does become consuming. As you can see, it has totally consumed us. It does. It is not something you should have to worry about. When you are going to jump in your car and go somewhere, you should be thinking about where you are going and what you are doing, not, ‘Is this car going to start? Am I going to make it there? Am I going to be on a main road so a tow truck can get to me?’48
Mr Stewart Lette spoke of the impact on both himself and his wife:
You cannot put a dollar figure on it. The impact and the anxiety—she came out of the Navy with mental illness, which is very hard to deal with. I am a full-time carer for my wife and the two kids. Most of the time the vehicle has sat in the driveway. You can tell that from the kilometres that were on it over the two years. The anxiety levels would just go through the roof for her when we went to go anywhere. We would not take it on long trips; we would just not go. We only drove it locally most of the time, except for her appointments here in the city.49
CLC noted that, although some matters will settle once a client institutes proceedings in QCAT or the Magistrates Court, the process of getting to this stage is time consuming, costly and stressful:
47 Hansard transcript, public hearing, 28 October 2015, p 14. 48 Hansard transcript, public hearing, 28 October 2015, p 14. 49 Hansard transcript, public hearing, 28 October 2015, p 15.
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When cases go to trial, it is even worse and legal costs inevitably blow out even further. (There are limits on lawyers appearing in QCAT, but vulnerable clients may need leave for such assistance.)’50
CLC also drew the committee’s attention to the out of pocket expenses incurred in enforcing warranties, including various inconveniences, transport costs and insurance costs if receiving a hire car:
If people are forced to rely on warranties, they are also often left out of pocket with expenses incurred in missing appointments, taking time out to deal with delivering/collecting their car for repairs, and taxi/bus fares to travel to and from repairers/dealerships. If hire cars are offered as part of warranty arrangements, clients also may have to pay insurance fees as part of such arrangements. These are the added sorts of inconveniences which are often ignored in this debate.51
It identified the need to protect certain members of the community, such as elderly retirees, from hidden costs:
For many people, purchasing a car will be one of the largest investments they will make in life, and our clients certainly do not have spare funds to cope with unexpected and significant expenses when car purchases turn out to be problematic. For example, retirees will sometimes invest in a new car, expecting that it will 'see them out' and due to declining health, having a reliable motor vehicle may be paramount for them at this stage in life. They may not have spare funds to deal with the costs of unexpected car defects, and having to deal with the stress of fighting about a consumer dispute has many flow-on consequences for older people. In our experience, the stress of litigation can seriously diminish an older person's health, especially if they already have pre-existing health problems. Arguably, there are treasury and other social cost implications whenever people end up being involved in legal disputes that could have been avoided.52
CLC continued, providing a similar example, where impecunious clients sometimes buy a car on credit simply in order to 'get a job, and it can be financially catastrophic for them if the car turns out to be defective and ends up being off the road: ‘These clients may end up either not being able to get work or not being able to keep the jobs they have secured and then they have spiralling debt problems, which can aggravate problems like relationship breakdown, health difficulties and even homelessness’.53 In the context of the used-car market and to recent changes to Queensland laws applicable to statutory warranties in that market, CLC observed that, because its clients are often quite poor, they tend to be fully committed in terms of their debt levels:
When suddenly faced with a major expense - for example, to repair a vehicle, this can cause our clients considerable hardship - especially if they need a car to get to work. (Many of our clients have no access to reliable public transport.) If a client has only just purchased the vehicle when it breaks down, they are better placed if they can rely on a warranty. (Unfortunately, it has been our experience that clients often have trouble
50 CLC, Submission 19, p 4. 51 CLC, Submission 19, p 4. 52 CLC, Submission 19, p 6. 53 CLC, Submission 19, p 6.
16 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
getting the vehicle repaired quickly under warranty anyway. If a dispute ensues, the client may need to end up paying for a repair themselves and then chasing recovery of the cost via QCAT.54
From its casework and advice experience, LAQ reported a large number of consumers who purchase a car are only able to afford the purchase because they take out a finance contract at the same time.55 LAQ identified the following problems created for consumers in these circumstances:
a) A common mistake that can be made by consumers is that because their car is not working and needs repair they do not have to make the payments on the loan. Under the law they are still required to make the repayments on the loan as the lender and the seller of the car are separate entities.
b) The car may not be covered by a warranty which means the cost of repairing the car is on the consumer. This cost will often leave the consumer with a choice to make between fixing the car and making the repayments on the loan. Hardship variations available under the national Consumer Credit legislation provide some relief to consumers in these circumstances. However they are not designed to provide long term relief where it takes a long time for the car to be repaired.
c) Ombudsman schemes such as the Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO) will not consider complaints solely or predominantly about the condition of the car even where the financier and the seller of the product are linked.56
According to CLC and CALC, consumers experience difficulty in enforcing their consumer rights. As the remedy to which a consumer is entitled depends on whether the failure to comply with the guarantee is ‘minor’ or ‘major’, CALC argued that the uncertainty with the operation of consumer guarantees derives from disputes about minor v major defects and questions about damages.57 This is exacerbated by consumers generally needing to take their claims to tribunals or courts to seek redress and to confusion about the interplay of ACL consumer guarantees and other warranties, including statutory warranties, manufacturer/third party warranties and motor vehicle discretionary risk products (DRPs).58 Eventually, the experiences outlined in this section of the report may lead to consumer exhaustion. CALC stated:
Very often, consumers will rely on statements from dealers or other traders meaning that they won’t even pursue a remedy through a small claims tribunal or court. Not only is there the expense (both cost and time), consumers tend to trust ‘experts’ such as dealers. Often a dealer will offer a part[y] remedy—a repair or a part refund, when what is required is a full remedy. Consumers often accept such a proposal because of the difficulties in using the justice system. In our experience, it is not uncommon for a consumer to have tried to resolve a car problem more than a dozen times with a dealer before seeking legal advice and pursuing a legal remedy.59
54 CLC, Submission 19, p 6. 55 LAQ, Submission 19, p 3. 56 LAQ, Submission 19, p 3. 57 CALC, Submission 22. 58 CALC, Submission 22. 59 CALC, Submission 22, p 5.
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4. Other views on the buying of new motor vehicles Motor vehicle industry bodies and consumer law experts also contributed to the Inquiry.
4.1 Views on the motor vehicle industry and ‘lemon’ motor vehicles FCAI claimed the competitive nature of the new vehicle market ensures that defects in vehicles are minimised and customer’s concerns properly addressed:
Generally, Governments are only required to legislate where there is a need to redress an imbalance or where there is a commercial advantage for one party to act in a way which detrimentally affects another party. Selling new motor vehicles to consumers is not one of those situations. The interests of consumers are aligned with those of the vehicle manufacturers, importers and dealers.60
It submitted that motor vehicle manufacturers spend many millions of dollars (globally many hundreds of millions of dollars) creating and building their brand:
The manufacturers, importers and their dealers are acutely aware that their brand can be damaged by defective or unreliable vehicles and by poor, unresponsive after sales service. The old adage that 'one bad experience leads to ten lost sales' is true.
Consequently, manufacturers spend substantial amounts of money ensuring that their motor vehicles are as reliable as possible. They also spend significant amounts of money on after sales service and on trying to satisfy those few customers who are not happy with their purchase.
It is simply in the commercial interests of the manufacturers, importers and dealers for the customers to be satisfied. The introduction of another layer of legislation will not alter this fact.61
At the committee’s Brisbane public hearing, Mr Tony Weber, Chief Executive of FCAI, wished to stress the following point:
If there is one point I want to leave with the committee today it is that the greater protection for consumers comes from competition in the market. Australia has 67 brands in a 1.1 million market—more than the substantially bigger markets of the US, Canada and the UK. It is probably the most competitive market in the world, especially for its size. In that environment, the reputation of my brands is absolutely critical. The brands compete on price, specification, environmental outcomes, safety, security and reliability. What they want is for the customer to have a positive experience. Ultimately, what they want is to have the customer come in for the next vehicle and to stay within their network in terms of servicing and for the next purchase. It is absolutely critical, and that is the key driver for why my members go so far to actually try to satisfy every customer that ever walks through the door.62
60 FCAI, Submission 14, pp 4-5. 61 FCAI, Submission 14, p 5. 62 Hansard transcript, public hearing, 28 October 2015, p 21.
18 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Mr Bruce McDonald, Chief Executive Officer of Australian Automotive Dealer Association Ltd (AADA), provided further commentary on the Australian retail motor vehicle market:
The Motor Vehicle Standards Act 1989 provides the federal regulatory framework for the entry of new and used vehicles into Australia. In 2014-15 over 1.1 million new vehicles entered the Australian market. These vehicles are required to be compliant with Australian Design Rules, or ADRs, and over 90 per cent are now imported. Consumers have a wide choice, with over 67 brands and approximately 350 models competing for market share. There are over 17.2 million used vehicles in Australia, with the average age of the Australian fleet at 10 years, which is older than in comparable countries like Great Britain, where the average age is 7.3 years, and Japan, where it is 7.5 years.63
Motor Trades Association - Queensland (MTAQ) submitted that the warranty period and the comprehensive nature of the protection being offered to consumers is becoming a contestable selling point:
Warranty periods are being extended as a way of competing in the market for new motor vehicles. Five year warranty periods without distance limits are now common and a number of models offer seven year warranties.64
It noted that contemporary Australian consumer legislation has been based on generic regulation that would be applicable to products generally in the market rather than sector specific legislation: ‘If sector specific legislation was to be considered in respect of the ACL regime, it would tend to indicate that very high level of risks existed in the acquisition of new market vehicles’.65 MTAQ concluded that, anecdotally and traditionally, it is unlikely there are such risks:
The risk associated with the purchase of new motor vehicles has been relatively modest particularly with the increase in technical sophistication and statutory requirements in relation to safety and environmental performance. Also, there may be a tendency for greater after sales servicing to ensure that technical performance meets specifications and consumer expectation. The percentage of vehicles that manufacturers deliver to the market that are not fit for purpose is unlikely to be high because of the reputational risk this constitutes to brand value.66
AADA echoed the prevalent industry view, asserting the intense competition in the Australian motor vehicle retail market has led to a situation where manufacturers, distributors and dealers:
…augment the consumer guarantees under the ACL by offering additional consumer benefits including warranting a vehicle for longer than required by the ACL guarantees, or providing free or capped price servicing. Such offers have obvious public benefits.67
4.2 How prevalent are ‘lemon’ motor vehicles? To provide some appropriate context for the consideration of the prevalence of ‘lemon’ motor vehicles, Australian Bureau of Statistics data show that during the 2014 calendar year, on average there were approximately 93,700 total new motor vehicles sales per month in Australia.68 During the
63 Hansard transcript, public hearing, 28 October 2015, p 22. 64 MTAQ, Submission 17, p 3. 65 MTAQ, Submission 17, p 3. 66 MTAQ, Submission 17, p 3. 67 MTAQ, Submission 17, p 5. 68 9314.0 - Sales of New Motor Vehicles, Australia, Mar 2015
Legal Affairs and Community Safety Committee 19 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles same period, on average there were approximately 18,600 total new motor vehicles sales per month in Queensland, accounting for 20% of all sales in Australia for that year. Passenger vehicles, sports utility vehicles and other vehicles accounted for approximately 48%, 32% and 20% of total new motor vehicle sales, respectively in 2014. In its submission, FCAI claimed the number of vehicles being sold in Queensland that could be categorised as ‘lemons’ is insignificant. It argued that, as a general principle, any legislative change should only be made if, based on empirical evidence, there is a demonstrable need for the change and the proposed change will lead to improved outcomes for all: ‘A few examples of what are alleged to be lemons is not enough, especially when some of those examples might be based on matters other than defects in the vehicle in question’.69 To FCAI’s knowledge, there are no meaningful statistics on the potential number of lemons sold in Queensland. However, it evinced some comparative data, concluding ‘…in a number other jurisdictions some useful analysis has been done which demonstrates that the number of lemons sold in Queensland is likely to be insignificant’. FCAI quoted the following, from page 92 of the Commonwealth Consumer Affairs Advisory Council (CCAAC) October 2009 report on 'Consumer Rights - Reforming Statutory Implied Conditions and Warranties':
Submissions from the motor vehicle industry suggest that the number of new vehicles sold in Australia which might be called lemons has declined significantly since that time [i.e. the 1960s and 1970s]. As the Motor Trades Association of Australia (MTAA) notes,
'Approximately 1,000,000 new motor vehicles are sold in Australia every year. Of those, approximately one third are sold In New South Wales: a jurisdiction that, through the operation of Its Consumer Trader and Tenancy Tribunal (CTTT), Is able to make a determination on a vehicle in terms of its being of 'merchantable quality' or as being 'fit for purpose' ... In the period from 2004/2005 to 2007 /2008, some 410 applications were made to the CTTT with respect to seeking a determination as to the 'merchantable quality / fit for purpose' nature of new motor vehicles sold in NSW ... Of that 410, only three vehicles - or 0.0003 per cent of all vehicles sold in that period - were deemed by the CTTT to not be of merchantable quality.'
Of course, these figures may not definitively represent the incidence of the supply of lemon vehicles in NSW. Not every consumer sold a lemon will go to the CTTT, and any number of lemon claims may be settled to the consumer's satisfaction before they reach any tribunal.
However, the fact that such a small number of vehicles are ultimately the subject of a finding of unmerchantable quality by a tribunal may indicate both that the number of lemons supplied to consumers is small, and that the law is operating effectively by providing appropriate incentives for retailers and manufacturers to address consumer concerns in relation to faulty motor vehicles.'70
FCAI further quoted from the CCAAC report (page 92): ‘There is little empirical evidence to suggest that 'lemons' are a common feature of the market for motor vehicles or any other market in Australia’.71
69 FCAI, Submission 14, p 2. 70 FCAI, Submission 14, pp 2-3. 71 FCAI, Submission 14, p 4.
20 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
The CCAAC report also provided statistics from both Canada and New Zealand. In Canada, there is a national dispute resolution program for disputes with vehicle manufacturers called the Canadian Motor Vehicle Arbitration Plan (CAMVAP):
In 2013 the CAMVAP statistics revealed that out of 4,692 initial enquiries, 746 applications were sent to eligible consumers, 341 applications were returned and 278 cases were arbitrated, conciliated or a consent award issued. 72
In FCAI’s interpretation of these statistics:
Assuming that the number of returned applications (341) is a reasonable reflection of the number of consumers who felt that their vehicle was defective, this represents approximately 0.02% of the vehicles sold during that time.73
In New Zealand, there is a Specialist Motor Vehicle Disputes Tribunal (MVDT). According, to FCAI:
For the period 1 July 2013 to 30 June 2014, 222 applications were filed with the MVDT and 149 were heard by the MVDT (which includes some carried over from 2012/2013). Assuming the 222 applications all related to alleged defects in motor vehicles, this represents approximately 0.1% of the number of new and ex-overseas vehicles sold in New Zealand in this period.74
FCAI concluded that these Canadian and New Zealand figures are likely to very significantly overstate the potential number of lemons sold in those countries: ‘Merely because a claim was made does not mean it was substantiated and, if it was, It does not mean that the vehicle in question was a lemon’.75 At public hearing, FCAI advised the committee:
When you look at the statistics you see that there is a low level of complaints generated to this inquiry when you consider that we put 1.1 million cars into the market. There have been over two million cars supplied to the Queensland market in the past decade.76
Queensland Law Society (QLS) advised of no rising trend in consumers seeking legal advice regarding poorly performing vehicles, but made the following qualifying statements:
However, it should be noted that this may reflect a lack of consumer knowledge of the legal rights available to them rather than the absence of ongoing problems in relation to motor vehicles. In addition, it is possible that consumers are taking their complaints directly to the Office of Fair Trading or other Government entities involved in consumer protection…
A further contributing factor to the lack of a trend in complaints seen by members of the Society operating in the consumer law space may be that one of the main forums for the
72 FCAI, Submission 14, p 3, citing CAMVAP, 2012 and 2013 Annual Report available at: http://www.camvap.ca/annual-reports/2012-2013-annual-reports/ 73 FCAI, Submission 14, p 3; these statistics are based on new vehicle sales of 1.7 million. 74 FCAI, Submission 14, p 3; approximately 200,000 New Zealand Motor Vehicle Registration Statistics, New Zealand Transport Agency. 75 FCAI, Submission 14, p 3. 76 Hansard transcript, public hearing, 28 October 2015, p 21.
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enforcement of consumer rights is the Queensland Civil and Administrative Tribunal (QCAT), and legal representation in that tribunal is not as of right.77
4.3 Demarcation issues Consumers sometimes experience confusion as to their rights; the responsibilities of dealers and importers/manufacturers; and the demarcation of responsibilities between dealers and importers/manufacturers. Both industry and other bodies, and consumers, expressed views on this issue.
Issues raised in submissions In Mr Stewart Lette’s experience, the dealer repeatedly sought to avoid responsibility, by directing him to the manufacturer.78 Ms Jeanette Stevens found that the manufacturer’s Australian head office refused to assist, directing her to the Japanese head office.79 Ms Diedre Alexandria found that the manufacturer advised the dealer to address the issue.80 In Ms Jewls Neale’s matter, both the dealer and manufacturer were repeatedly involved in addressing issues, however at one stage, she was advised by Chrysler head office that a particular problem should be addressed by the service centre or dealer. CLC identified such issues as one of the most significant and contentious:
…dealers try to deflect blame and responsibility for lemons to the manufacturers; while the manufacturers try to deflect responsibility by insisting consumers simply follow through on their warranty rights and get the dealers to organise repairs.81
MTAQ commented on how demarcation of responsibilities is determined in this context: ‘The behaviour of the ‘new vehicle franchised dealer’ towards the consumer is managed by the terms of the franchise arrangement between the dealer and the manufacturer’.82 MTAQ advised that, ultimately, the manufacturer or the manufacturer’s representative that is the importer or the distributor has to be the ‘responsible entity’ for the remedies under the legislation for new vehicles not fit for purpose:
In other words the franchise new motor vehicle dealer can be called upon to provide remedies but cannot be held responsible for the original manufacturing deficiencies. Irrespective of the contract of sale, the contract is between the dealer and the consumer. The dealer, however, is only acting on behalf of the manufacturer or the importer/distributor.83
Issues raised at public hearing At the committee’s Brisbane public hearing, Mr Ashton Wood indicated that manufacturers have the primary responsibility to liaise with consumers regarding ‘lemon’ motor vehicles:
77 QLS, Submission 13, p 1. 78 Stewart Lette, Submission 6. 79 Jeanette Stevens, Submission 7. 80 Diedre Alexandria, Submission 8. 81 CLC, Submission 19, p 4. 82 MTAQ, Submission 17, p 2. 83 MTAQ, Submission 17, pp 3-4.
22 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
…[the dealers] are just people trying to run a business. They have no control over the quality of a motor vehicle; they just onsell it. That is why most of my focus has been on the importer and manufacturer, not the dealer.84
On the other hand, from her experiences, Ms Connie Cicchini argued that both the manufacturer and dealer have responsibilities:
…because obviously the manufacturer supplies the product and they are ultimately responsible for it, but if a consumer comes up to a dealership and asks for a remedy, they are the one that should be providing that remedy for the consumer. From my experience with the motor vehicle and with the servicing, sometimes the dealerships will bend over backwards to look after the customer and to make sure they are happy, but sometimes there is a point where it will turn around and they will wash their hands and no longer continue to look into the problems with the vehicle, and then make it difficult for the consumer.
The dealership should be putting time into finding out what the problem is and repairing it, because they are the authorised representative. If they cannot repair the vehicle or are having problems for the consumer, they should be fighting for the consumer to get a refund or a replacement from the manufacturer. They are actually covered under the laws as well in that they can get a redress from the manufacturer within the three-year period. What applies for the consumer when we approach the dealership also applies for the dealership with the manufacturer. We should not be duckshoved like happened with me: I will go to the manufacturer; no, go to the dealership; back to the manufacturer; back to the dealership. That game in itself is very frustrating and that is where I think they like to try to wear us down.85
Mr Stewart Lette advised his view that the manufacturer is primarily responsible:
…but, in saying that, they both have obligations under the Australian Consumer Law. That is what they need to be looking at. I do believe that the dealership should be giving a suitable resolution for the customer.86
84 Hansard transcript, public hearing, 28 October 2015, p 12. 85 Hansard transcript, public hearing, 28 October 2015, p 12. 86 Hansard transcript, public hearing, 28 October 2015, p 12.
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5. Consumer protections and remedies – Australian Consumer Law (ACL) Currently, buyers of faulty motor vehicles can seek recourse through the Australian Consumer Law (ACL) and state and territory consumer protection legislation. This section of the report examines existing consumer protections and remedies under the ACL. 5.1 Australian Consumer Law (ACL) The ACL came into effect in January 2011. It provides consistent laws across Australia, and has clearer consumer protections than previous state-based laws. The ACL applies to goods purchased from 1 January 2011, including ‘lemon’ motor vehicles. The ACL is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA). It is applied as a Commonwealth law to the conduct of corporations. Each state and territory applies the ACL as a law of its own jurisdiction covering corporations and individuals in the relevant state or territory. The ACL replaced the previously separate Commonwealth, state and territory legislation (being the Commonwealth Trade Practices Act 1974 and the Fair Trading Acts (or equivalent) of each state and territory). The ACL applies to Queensland under Part 3 of the Fair Trading Act 1989 (Qld) and is referred to as the Australian Consumer Law (Queensland) Act (Qld). The ACL is enforced by state and territory consumer agencies as state and territory law. In Queensland, the relevant consumer agency is the Office of Fair Trading (OFT), which is part of the Department of Justice and Attorney-General (DJAG). The ACL is administered by the Commissioner of Fair Trading.
5.2 Application of ACL The ACL applies to ‘consumers’. A consumer is a person who buys: a product or service (e.g. a car or repairs) costing up to $40,000; or a vehicle or trailer used mainly to transport goods on public roads; or a product or service costing more than $40,000 but is normally used for personal, domestic or household purposes (such as a large car or caravan).87 A person will not be a ‘consumer’ if they buy the motor vehicle to: on-sell it; or use it as part of a business to: make something else or to repair or use on another good or fixture. The ACL applies only in a limited way to motor vehicles bought from a private seller (rather than from a dealer) and motor vehicles bought at an auction. Relevant guarantees apply to leased or hired vehicles, but not those guarantees regarding clear title and undisclosed securities. The undisturbed possession guarantee is only for the term of the hire or lease. Vehicles bought prior to 1 January 2011 are not covered by the ACL but, instead, by the former Trade Practices Act 1974 (Cth) and state and territory legislation in force before 1 January 2011.
5.3 Consumer guarantees under the ACL Sections 51-59 of the ACL provide nine ‘consumer guarantees’ that apply to the sale of new and used motor vehicles: suppliers and manufacturers guarantee that motor vehicles are of acceptable quality
87 ACL, s 4.
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a supplier guarantees that motor vehicles will be reasonably fit for any purpose the consumer or supplier has specified suppliers and manufacturers guarantee that their description of motor vehicles (for example, in a catalogue or television commercial) is accurate a supplier guarantees that motor vehicles will match any sample or demonstration model suppliers and manufacturers guarantee that motor vehicles will satisfy extra promises ('express warranties') made about them a supplier guarantees they have the right to sell the motor vehicle free of any encumbrances (ie with clear title), unless they have informed the consumer before the sale that they had ‘limited title’, however, licensing laws in some states or territories may require a guarantee of clear title a supplier guarantees ‘undisturbed possession’ or that no one will try to repossess or take back motor vehicles, or prevent the consumer using them, except in certain circumstances a supplier guarantees that motor vehicles are free of any hidden securities or charges and will remain so, except in certain circumstances manufacturers or importers guarantee they will take reasonable steps to make spare parts and repair facilities available for a reasonable time after purchase. These guarantees cannot be excluded by contract or other agreement and a consumer may take action if the guarantees are not complied with. The consumer guarantees will apply to new and used motor vehicles: for a reasonable time after purchase of the vehicle (which depends on the vehicle, its price and quality and other factors) regardless of any other warranties from the business or provided by a state or territory statutory warranty even if other types of warranty have run out.
5.4 Guarantee of acceptable quality The test for ‘acceptable quality’ requires further explanation. The test is whether a reasonable consumer, fully aware of the condition of the motor vehicle, and any defects it has, would find it: fit for all the purposes for which cars of that kind are usually supplied acceptable in finish and appearance free from defects safe
durable.88 Pursuant to s 54(3) of the ACL, the test for ‘acceptable quality’ takes into account: the nature of the vehicle (for instance, a new car should last longer than a used car; a high performance vehicle may need more maintenance than other vehicles to maintain its level of performance; or an actual 4WD car may have a higher off-road standard than a ‘soft off- roader’)89
88 See also, ACL, s 54(2). 89 Examples given in Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 4.
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the price of the vehicle so that an expensive model of a certain class of vehicle should be more durable than a cheaper competing model in the same class representations made about the car (eg in a TV commercial or on the dealer’s website or even in the manual for the car) other things told to consumer by the dealer about the car before the sale other relevant matters such as how the consumer has used the vehicle. Under s 54(4)-(7) of the ACL, the guarantee of ‘acceptable quality’ will not apply if: the dealer has drawn the consumer’s attention to the defect in the car before the consumer agrees to buy the car the consumer examines the car prior to purchase and that examination should have revealed that it was not of acceptable quality (note that this requirement does not necessitate that the consumer be able to locate hidden or difficult to find defects); or the consumer uses the car in an ‘abnormal way’ - the term ‘abnormal way’ is not defined but could include using the vehicle in certain inherently abnormal ways such as using a small car to tow a horse float90 or possibly, if the vehicle is used in a manner contrary to the instructions in the operator manual.
5.5 Major and minor defects and failures If the vehicle fails to meet any of the consumer guarantees, the consumer’s rights depend on whether the failure is a ‘major failure’ or a ‘minor failure’.
Minor defects Even if the problem with the vehicle is minor but does not meet any of the above guarantees, the consumer is entitled to a repair within a reasonable time. The ACL refers to failures that are ‘major’ and ‘not major’ but, in this section of the report, the term ‘minor’ is used for failures that are not major. A minor failure would not permit a consumer to reject the car and demand a refund or a replacement or compensation at the initial stage. Under s 259(2) of the ACL, if the failure to comply with the guarantee can be remedied and is not a major failure,91 then: (a) the consumer may require the supplier to remedy the failure within a reasonable time (for example, by repairing the car, or by replacing it with an identical vehicle or by refunding the moneys paid for the car)92; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time—the consumer may:
90 Example given in Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 4. 91 The Commonwealth of Australia, Industry Guide to the Australian Consumer Law, describes such a failure as where a vehicle has a fault that significantly affects its operation but can be fixed within a reasonable time. The examples given are where the windscreen wipers break or a fault in the transmission which can be quickly replaced by the manufacturer (p 6). 92 Competition and Consumer Act 2010 (Cth), s 261 provides for how suppliers may remedy a failure to comply with a guarantee.
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i. otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or ii. subject to s 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection.
Failure or inability to repair a vehicle within a reasonable time - minor defects The situation described by s 259(2)(b) is one that arises where the minor failure has been identified but the problem cannot be fixed or fixed within a reasonable time. In such a case, the consumer can choose to have the repair done somewhere else and recover the costs of the repair from the supplier or the consumer can treat the failure as major and reject the vehicle (see below). Nevertheless, for a minor issue which can be repaired within a reasonable time, the consumer is required to give the supplier the chance to fix it. What amounts to a ‘reasonable time’ for repair depends on all the facts and circumstances, including the nature of the problem and availability of parts. However, a failure that may initially seem minor, but is not repaired within a reasonable time (because, for instance, parts become unavailable) might give the consumer grounds to reject the vehicle.93 Below, are examples of circumstances in which a consumer can and cannot reject a vehicle because it takes too long to fix:
Example 1: A car developed an engine fault that caused the car to seize. The supplier initially assessed the repair as taking a day or two but was unable to repair the vehicle after 11 weeks. This indicates that the fault was not one that could be fixed within a reasonable time and the consumer was entitled to reject the vehicle under the consumer guarantees.
Example 2: A car had an intermittent electrical fault that caused a warning light to activate from time to time. The consumer accepted that the fault was minor and asked the supplier to repair it, but the warning light did not activate while the car was in for repair, so it was not possible to identify the cause of the problem. The consumer returned the vehicle for a second and third attempted repair, and the supplier was eventually able to identify and repair the fault. The consumer was not entitled to reject the vehicle, as the time taken to remedy the fault was reasonable when the nature of the fault was taken into account.94
Major defects Under s 260 of the ACL, a ‘major failure’ to comply with a consumer guarantee is if: (a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure (for instance, would a reasonable consumer buy a new car with so many recurring problems that the car spends more time being repaired than on the road because no mechanics seem to be able to find or fix the problem?); or (b) the goods depart in one or more significant respects: (i) if they were supplied by description—from that description; or (ii) if they were supplied by reference to a sample or demonstration model—from that sample or demonstration model (e.g. the consumer test drives a demonstration model
93 Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 7. 94 Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 7.
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with a diesel engine and buys a new car on that basis, but the car delivered is one with a petrol engine); 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 (e.g. a vehicle with a stated towing capacity of 3,500 kg has a design defect that causes it to overheat when it tows a load of more than just 2,500 kg); or (d) the goods are unfit for a disclosed purpose that the consumer made known to the supplier and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose (e.g. the buyer tells the dealer he wants the sports utility vehicle to tow his boat of particular specifications, but the vehicle turns out not to have enough capacity to tow the boat); or (e) the goods are not of acceptable quality because they are unsafe - what will make the car unsafe depends on the circumstances of each case but examples would include faulty brakes.95
Right to reject/compensation - major defects Under s 259(3) of the ACL, if the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) subject to s 262, notify the supplier that the consumer rejects the goods and of the ground(s) for the rejection; or (b) by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods. Further, the consumer may, by taking legal action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. However, this does not apply, if the failure to comply with the guarantee occurred only because of a cause independent of human control that occurred after the goods left the control of the supplier.96 In summary, a consumer can reject the goods and seek compensation for a reduction in the value of the goods, as well as recover damages.
When a consumer cannot reject the vehicle – major defects Under s 262 of the ACL, a consumer is not entitled to reject the car if:
the rejection period has passed97 the consumer has lost, destroyed or disposed of the vehicle the vehicle was damaged after being delivered to the consumer for reasons unrelated to its state or condition at the time of delivery; or
95 Examples given in Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 5. 96 ACL, s 259(4) & (5). 97 ACL, s 262(2) defines the rejection period as the time beginning when the car is purchased during which it could be reasonable to expect the failure to comply with the guarantee to become apparent (i.e. the problem to surface). It is determined having regard to the type of vehicle, the use to which the vehicle is likely to be put, the length of time it would be reasonable for it to be used and the amount of use to which it is reasonable the vehicle be put before the failure appearing.
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the vehicle, or part of it, has been attached to, or incorporated in, any real or personal property and it cannot be detached or isolated without damaging it.98 As noted previously, a vehicle cannot be rejected on the grounds of not being of acceptable quality, if the consumer has caused the problem through their own actions/abnormal use.99 While the ACL does not define ‘abnormal use’, an example would be using a 4WD to tow a load that exceeds it stated towing capacity.100
5.6 Warranties under the ACL
Manufacturer’s warranty A supplier or manufacturer may provide a ‘manufacturer’s warranty’ regarding a motor vehicle. The warranty might promise that the product (e.g. a vehicle) and services, will be free of defects for a specified time, and that a defect will allow the consumer to seek a repair, replacement or refund. However, the warranty must be transparently written and contain the following mandatory text:
Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.101
Extended warranty An ‘extended warranty’ is one offered at the point of sale to cover a time from the end of the manufacturer’s warranty. It extends the cover of the original warranty and usually comes at an extra cost. However, the extended warranty does not replace, and is additional to, the statutory consumer guarantees.102
5.7 Submitter views on the consumer protections and remedies under the ACL AMEP considered the ACL provides an inadequate definition of what constitutes a problematic vehicle and when the manufacturer/supplier must repair, replace or refund the vehicle.103 Ms Connie Cicchini claimed that the ACL definitions of ‘merchantable quality’ and ‘acceptable quality’ are regularly disputed between the supplier and customer, and it is, therefore, difficult for a consumer to obtain a refund or replacement.104 At public hearing, Mr Stewart Lette commented on definitional issues:
The definitions of a major and minor fault are not very clear. That is where it gets very confusing, because they turn around and say that it is a characteristic of the vehicle. That
98 ACL, s 262. 99 ACL, s 54(6). 100 Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 7. 101 Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 9; see ACL, ss 102-103. 102 If the extended warranty merely mirrors or duplicates the statutory guarantee, there is a danger it might mislead the consumer, particularly if the dealer pressures the consumer into buying the extended warranty or tells the consumer they need to buy the extended warranty, when it does not offer any more benefit than the consumer guarantees under the ACL. See Commonwealth of Australia, Industry Guide to the Australian Consumer Law, p 9. 103 AMEP, Submission 9, p 1. 104 Connie Cicchini, Submission 9, p 1.
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gets used a lot in the industry. What is a characteristic of a vehicle? Is it a manufacturer defect that they cannot fix, if you know what I mean?105
On the other hand, the FCAI suggested the ACL:
…now provides significant and proven protection for consumers. The current ACL provides rights and protections in excess of those provided by many of the specific lemon laws quite often quoted in overseas jurisdictions. There are over 1.1 million new vehicles introduced into the market every year, with over 230,000 of these coming into the Queensland market.
The FCAI strongly recommends that the Queensland parliament acknowledge the benefits to the consumer and to the industry of a nationally consistent approach to regulation, including in the area of consumer law, and acknowledge the ACL as the legislative framework. The provisions of the ACL go to the areas of being fit for purpose, acceptability in appearance and finish, freedom from defects, safety and durability.106
The MTAQ argued that any enhancements to the existing legislative framework need to be carefully considered:
…the committee must consider the current dynamic in which new motor vehicles are retailed. The evolution of the Australian automotive market means that any state regulation is likely to be quite difficult—this is due to the vehicle market becoming a national market for buyers, created through websites—and for Queensland new vehicle dealers a state based law would create difficulties. It would be MTA Queensland’s preference for a nationally consistent approach to lemon laws, and it is our strong view that such legislation should only be contemplated if it were introduced nationally.107
5.8 Redress for defects in new motor vehicles under the ACL The committee has considered the process generally taken by a consumer to address problems with a new motor vehicle.
Individual negotiation with dealer and manufacturer/importer Usually, where a buyer encounters problems with a new motor vehicle they have purchased, the natural course would be for the buyer to personally approach the dealer and convey their concerns about the vehicle. If discussions or repair work fail to resolve the problem, the buyer would ordinarily approach the manufacturer/importer and convey their concerns. Professor Corones summarised this stage of the process as follows:
Car manufacturers will generally attempt to repair a defect in a new motor vehicle if it is within the warranty period. They may even make multiple attempts at repair. They may be prepared to replace the vehicle if these attempts are unsuccessful, but they will resist providing a refund.108
It is only in circumstances where the buyer is unable to achieve a satisfactory outcome after having attempted negotiation, that a buyer would take further steps to seek redress.
105 Hansard transcript, public hearing, 28 October 2015, p 10. 106 Hansard transcript, public hearing, 28 October 2015, p 21. 107 Hansard transcript, public hearing, 28 October 2015, p 22. 108 Hansard transcript, public hearing, 28 October 2015, p 1.
30 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Professor Corones sets out the three bases upon which consumers can obtain relief for economic loss arising from defects in new vehicles: public enforcement by the ACCC initiated voluntary recall – where the manufacturer admits liability and generally repairs or replaces the part subject to the recall for free private action – where the manufacturer or dealer denies liability and the consumer initiates tribunal or court proceedings seeking a statutory remedy under the ACL - the nature of the remedy depends on whether the failure to comply with the consumer guarantee was major or not.109 This report will incorporate these bases of redress into the below examination, which will consider the process an ordinary consumer might follow in circumstances where it has not received satisfaction from the dealer or manufacturer/importer.
Queensland’s Office of Fair Trading If consumers are unable to resolve a problem with the dealer or manufacturer/importer, the Office of Fair Trading (OFT), Queensland Department of Justice and Attorney-General, can provide advice and, sometimes, other forms of assistance.
The role of the OFT This section summarises the role of the OFT in dealing with consumer complaints. The information is either extracted directly from the OFT website or is a rewording of information on the website.110 On its website, the OFT state that its role is to: promote consumer rights give information to consumers and businesses help consumers to resolve disputes in the marketplace. It is unable to act on every complaint, but advises that the more information a consumer gives it, the more quickly and accurately it can assess the complaint. As a result of a complaint, the OFT might: investigate the complaint conciliate the issue between the consumer and the business return the complaint for self-resolution. During conciliation, which is an informal way to resolve a complaint, the OFT advises it will act as an intermediary between the consumer and the business, at no cost. If conciliation fails, the OFT might suggest the consumer take the complaint to a tribunal or court, or seek his or her own legal advice. The OFT is unable to force a business to give a consumer what he or she wants or to make judgments or orders on any matter. Further, it lacks the authority to investigate some types of disputes, in which case it can pass on a consumer’s complaint to the relevant agencies. According to the OFT, when it receives a complaint from a complainant who lives in Queensland or about a business operating from Queensland, it will assess the complaint to determine:
109 Professor Stephen Corones, Submission 4, p 2. 110 Office of Fair Trading website, accessed on 5 November, 2016: https://www.qld.gov.au/law/your- rights/consumer-rights-complaints-and-scams/make-a-consumer-complaint/how-we-can-help/
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which issues are in dispute options that may help to resolve it whether someone has broken a law that the OFT have the power to act on if another organisation could better handle the dispute. There is scope for state regulators (such as the OFT) to bring a representative action on behalf of consumers to enforce the Consumer Guarantees. Section 277 of the ACL provides that the regulator may commence an action on behalf of one or more persons who are entitled to take action against suppliers or manufacturers who fail to honour Consumer Guarantees:
However, the regulator may only take such action if it has obtained the written consent of the person, or each of the persons, on whose behalf the application is made. The regulator must conduct its own investigation into the nature of the defect, whether the failure to comply with the guarantee is major or not, and the remedy that is appropriate in the circumstances, or it can, as part of its settlement proceedings assign the investigation to an independent arbiter.111
Submitter experiences with the OFT Various submitters informed the committee of their dealings with the OFT as part of their ‘lemon’ motor vehicle experiences. As part of his experience, Ashton Wood made a complaint to the OFT. He informed the committee that a file was opened and that he was later advised by the OFT that neither dealer nor manufacturer would provide redress.112 The OFT’s investigation of Noel Newton’s complaint apparently included the OFT querying delays with the manufacturer, but it concluded there was insufficient evidence to prove legislative breach.113 Despite this outcome, Mr Newton submitted that the OFT’s pursuit of his claims assisted in his achieving an ‘out of court’ settlement.114 Other submitters who made complaints to the OFT include Stewart Lette (who made a complaint when the dealer refused to negotiate) and Pamela Pearce and Benjamin Besanko (who made a complaint and subsequently wrote to the dealer seeking a refund).115 Connie Cicchini suggested contacting the OFT as an affordable option, in order to request that the OFT attempt to mediate with the supplier, failing which a consumer can lodge QCAT claim.116 At the committee’s Brisbane public hearing, Mr Lette commented further on the OFT’s role:
I think with stronger processes—I think there can be a lot more done with the Office of Fair Trading. They are the first port of call for anyone. By the time people have gone through that experience where they cannot do anything, they turn around and think, ‘If they cannot do anything for us, what is QCAT going to do?,’ and they just give up because it is so much of a struggle. By the time you get to that point you have experienced more than 12 months’ worth of hell from the manufacturer and the dealership. Then they are told that they do not deal on a case-by-case basis, they do not deal with individual cases
111 Professor Stephen Corones, Submission 4, p 7. 112 Ashton Wood, Submission 1. 113 Noel Newton, Submission 3. 114 Noel Newton, Submission 3. 115 Stewart Letter, Submission 6; Pamela Pearce and Benjamin Besanko, Submission 11. 116 Connie Cicchini, Submission 12.
32 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
and there have to be a number of cases before they start to look at it, pass it on to the ACCC or whatever. I have a list here today which I got off the internet. There are something like 1,600 motor vehicle cases—complaints—that have been lodged with Fair Trading this year alone.117
OFT data on motor vehicle complaint dispute outcomes OFT data does not indicate why complaints about ‘lemon’ vehicles appear to result in poorer outcomes for consumers than matters overall.118 Anecdotal information from OFT officers about why this might be, highlights the demarcation and definitional issues identified throughout this report: the dealer or manufacturer maintain the consumer has contributed to the vehicles issues and so they will not assist; the dealer advises that the manufacturer will not accept the issue is a manufacturing fault and that in this situation they cannot assist the consumer; the dealer advises the manufacturer will not accept the issue is a manufacturing fault and will not assist but that in this situation the dealer will partially assist the consumer themselves as a gesture of goodwill, including for example, by repairing a vehicle free of charge, servicing a vehicle free of charge, providing parts at cost price. OFT officers report this occurs more frequently in smaller regional towns where dealers are concerned to maintain a good business reputation within the community; and the consumer does not accept that the redress provided is sufficient. For example, the trader may repair the vehicle but the consumer insists they should receive other, or additional, redress. OFT officers report this occurs more frequently with vehicles than with most other items complained about and that it is their sense that this is a result of the significant financial investment which vehicles represent to the consumers.119
Public enforcement by the Australian Competition and Consumer Commission In addition to assistance offered by the OFT, a consumer may obtain redress from a motor vehicle manufacturer or dealer through public enforcement by the ACCC. The ACCC is empowered to conduct investigations into alleged breaches of the specific and general protections in the ACL, including the general protection for misleading conduct in section 18 of the ACL. A motor vehicle manufacturer or dealer may also contravene one of the specific protections in the ACL such as making a false or misleading representation that the motor vehicle was of a particular standard, quality, value, style or model; making a false or misleading representation concerning the availability of facilities for the repair of the motor vehicle or of spare parts for the motor vehicle; or making a false or misleading representation concerning the existence, exclusion or effect of one of the consumer guarantees under Division 1 of Part 3-2 of the ACL.120 Professor Corones provided a recent example where the ACCC settled an investigation into Fiat Chrysler Australia in relation to motor vehicle faults and how their complaints were handled by Chrysler and its dealers:
117 Hansard transcript, public hearing, 28 October 2015, p 15. 118 DJAG Information Brief, Analysis of Office of Fair Trading data to assist the Committee in its consideration of ‘lemon’ laws, September 2015, p 5. 119 DJAG Information Brief, Analysis of Office of Fair Trading data to assist the Committee in its consideration of ‘lemon’ laws, September 2015, p 5-6. 120 Professor Stephen Corones, Submission 4, p 7.
Legal Affairs and Community Safety Committee 33 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
The complaints related to various issues including delays in sourcing spare parts and failing to deal adequately with customer complaints. The investigation was resolved by means of an undertaking under ACL, s 218 to appoint of an independent arbiter to investigate and determine disputes. Under the Chrysler Consumer Redress plan, Chrysler agreed that it would appoint an independent person (sic) review the consumer complaints to determine whether the outcome was in accordance with ACL consumer rights. Chrysler agreed that where a review is conducted and it is determined that the outcome was not in accordance with ACL consumer rights, it would provide or procure that a dealer provide a remedy on Chrysler’s behalf as recommended by the independent reviewer. The ACCC has approved Ford’s former in-house legal counsel, Mr Peter George, to be the independent arbiter in disputes between Chrysler and its customers.121
As part of the Inquiry, the committee wrote to FCA, seeking details on its undertaking to the ACCC. In response, the FCA advised on actions it has taken to: address aftersales customer care issues; improve its dealers’ standards; grow dealer representation; and comply with the ACCC undertaking, including how it is implementing its Consumer Redress Program and its ACL Compliance Program, including Complaints Handling System. In relation to its commitment to establish a Consumer Redress Program the FCA advised:
Under the Consumer Redress Program, FCA will contact customers who made a complaint about their vehicle to FCA between 1 January 2013 and 31 December 2014, and who were refused a particular remedy by FCA (subject to limited exceptions), to advise them that they will be entitled to have their complaint reviewed. Those customers will be offered a review of their complaint by an independent reviewer. If a customer accepts the review offer, FCA will aim to complete the review within a month of receiving a customer's acceptance of the review offer.
FCA cannot conduct all of the reviews simultaneously and accordingly they will be conducted over a period of time. The period of time will largely depend on the number of customers who take up the review offer.
If the independent reviewer decides that FCA did not resolve the customer's complaint in accordance with the customer's rights under the applicable consumer laws, being the implied warranties in the Trade Practices Act 1974 or the consumer guarantees and the Australian Consumer Law (whichever applies to the particular customer), the customer will be provided with a remedy or remedies as decided by the independent reviewer, consistent with those rights. Remedies recommended by the independent reviewer will be provided by FCA either directly or by FCA procuring a dealership to provide the remedy or remedies.122
In relation to FCA’s commitment to review its handling of previous complaints, it advised:
The review of previous complaints under the Consumer Redress Program will be carried out by the independent reviewer with the assistance of FCA personnel. The review will be based on information FCA has concerning the customer's vehicle and any additional information the customer provides when accepting the review offer. All decisions under
121 Professor Stephen Corones, Submission 4, p 7. 122 FCA, Submission 20, p 4.
34 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
the Consumer Redress Program concerning whether a customer is entitled to any remedy or remedies will be made by the independent reviewer.123
In relation to FCA’s commitment to establish an Australian Consumer Law compliance program, it advised:
FCA has for many years provided relevant FCA personnel with training to ensure that FCA complies with its obligations under consumer laws, particularly insofar as they relate to the provision of aftersales customer service, such as dealing with customer queries and complaints.
FCA has undertaken to the ACCC to establish an Australian Consumer Law Compliance Program which will involve upgrading, documenting and formalising FCA's existing compliance measures. This Program will include the provision of staff training and dealer training each year.
FCA has also undertaken to the ACCC to review and upgrade its existing processes for handling consumer complaints and establish a formal complaints handling system by 10 March 2016.124
Submitter experiences with the ACCC Various consumers informed the committee they had contacted the ACCC as part of their attempts to find a resolution to their ‘lemon’ motor vehicle experience. In his written submission, Ashton Wood commented that the ACCC do not investigate individual cases, but that after he co-ordinated a complaint campaign, ACCC commenced an investigation:
I personally met with the ACCC to see what they could do, but was told that they do not investigate individual cases ... so, not being one to give up ... I brought hundreds of unhappy FCA customers to their webpage to fill in the Consumer Complaint Form, and now the ACCC have confirmed that they are investigating FCA and we are waiting on the outcome of their investigation.125
Stewart Lette and Noel Newton lodged complaints with ACCC. The latter was advised he was entitled to a replacement motor vehicle and should follow up with the OFT.126 Connie Cicchini noted the recent ACCC investigations into FCA Australia and its dealerships, and into the Volkswagen Group.127
Victorian submitter, Jewls Neale, provided a copy of an ACCC complaint and reply.128 The ACCC reply directs the complainant to the Department of Infrastructure and Regional Development (DIRD), as DIRD monitor compliance with the Australian Design Rules, which are national standards for vehicle safety, anti-theft and emissions.129
123 FCA, Submission 20, p 4. 124 FCA, Submission 20, p 4. 125 Ashton Wood, Submission 1, p 5. 126 Noel Newton, Submission 3. 127 Connie Cicchini, Submission 12. 128 Jewls Neale, Submission 10. 129 Jewls Neale, Submission 10.
Legal Affairs and Community Safety Committee 35 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Initiated voluntary recall Vehicle recalls occur where there is the possibility of a safety concern with one or more of the parts used in vehicles that are part of the recalled model range:
A motor vehicle manufacturer that initiates a voluntary recall must, within two days of taking the action provide the… ACCC… with a written notice that complies with ACL, s 128(7). The notice requires the manufacturer to provide the ACCC with information about the consumer goods that are the subject of the recall, and the nature of the defect. The notice will then be published on the ACCC website. Details of the number of voluntary recalls in relation to motor vehicle defects by manufacturer are available on the ACCC’s web site.130
Professor Corones reported that the total number of motor vehicle related recalls in each year since the ACL took effect is: 2015 – 109 2014 – 125 2013 – 108 2012 – 78
2011 – 88.131 In his written submission he referred the committee to: the FCAI code of practice, which sets out the conditions under which an investigation into a possible recall must occur (essentially triggered when an FCAI Member believes a ‘Safety Defect’ exists or may exist) the role of the Commonwealth’s Department of Infrastructure and Transport, which administers the relevant federal legislation132 regulating the manufacture, importation and supply of road vehicles in Australia the ACCC’s ‘Consumer Product Safety Recall Guidelines’, which sets out the requirements for conducting a recall.133 According to Professor Corones, in order to avoid a compulsory recall notice pursuant to section 122 of the ACL, suppliers generally engage with the ACCC and seek input from it as to their recall plan:
Generally, where a voluntary recall is conducted, manufacturers will repair or replace the part the subject of the recall. If the remedy offered by the manufacturer or its Australian representative is inadequate the consumer in relation to motor vehicles purchased after 1 January 2011, consumers may seek to enforce their rights under the consumer guarantees regime.134
Little other evidence was presented to the committee during the Inquiry relating to initiated voluntary recall. It was outside the experience of submitters to the Inquiry.
130 Professor Stephen Corones, Submission 4, p 2. 131 Professor Stephen Corones, Submission 4, p 2. 132 Motor Vehicles Standards Act 1989 (Cth) and Motor Vehicles Standards Regulations 1989 (Cth). 133 Professor Stephen Corones, Submission 4, pp 2-4. 134 Professor Stephen Corones, Submission 4, p 4.
36 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Private action in tribunals and courts Where a negotiated outcome cannot be achieved under the ACL, the onus is on the consumer to seek a remedy.
Queensland Civil and Administrative Tribunal (QCAT) In Queensland, this requires taking civil action through QCAT or the relevant court. As provided under the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act), QCAT has inherent jurisdiction to hear 'minor civil disputes' matters of a value not more than $25,000. QCAT decisions are appealable. Orders of QCAT are generally enforced in the Magistrates Court or, in the case of some non-monetary orders, the Supreme Court. Beyond the $25,000 limit, consumers must initiate proceedings through the Magistrates or Districts courts which, respectively, have current limits of $150,000 and $750,000. 135
Tribunals in other Australian states Nationally, the jurisdiction of tribunals and small claims is not limited to just consumer affairs issues. The current monetary limits for consumer claims varies across jurisdictions, with some jurisdictions not providing access to a tribunal for consumer claims: Victorian Civil and Administrative Tribunal (VCAT) - no monetary limit on the cost or value of the goods or services in dispute, or on the amount of payment or compensation that can be claimed New South Wales Civil and Administrative Tribunal (NCAT) - claims up to the value of $40,000 Magistrates Court of Western Australia - claims up to $75,000 (up to $10,000 is a minor claim with a general claim being up to $75,000) Magistrates Court of Tasmania - minor civil claims up to $5,000 South Australia Magistrates Court - claims up to $100,000 (up to $25,000 is a minor civil claim with a general claim being up to $100,000) higher amounts are dealt with by the Supreme and District Courts Australian Capital Territory Civil and Administrative Tribunal (ACAT) - civil claims of up to $10,000 Northern Territory Magistrates Court (small claims jurisdiction) - actions for amounts under $10,000.136
Consumer experiences with QCAT Whilst stating that no specific information is publically available as to the exact number of motor vehicle disputes brought before QCAT, Professor Corones observed that only four QCAT decisions concerning new motor vehicles have been reported:
It is not possible to draw any firm conclusions about the effectiveness of QCAT as a dispute resolution mechanism for cases involving lemons; however, the small number of reported cases strongly suggests that it not effective.137
135 As the ACL is also a Commonwealth law the consumer can seek a remedy through the Federal Circuit Court of Australia, which has jurisdiction with respect to claims up to $750,000. 136 DJAG Information Briefing, July 2015, p 9. 137 Professor Stephen Corones, Submission 4, p 8.
Legal Affairs and Community Safety Committee 37 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
He identified the following five issues facing consumers bringing proceedings in QCAT: lack of clarity under the existing law evidentiary issues consumer risk as to a cost award period of time taken for a decision to be rendered
low monetary limits.138 Lack of clarity under the existing law With respect to a lack of clarity under the existing law, Professor Corones observed that: the onus is on the consumer to prove the motor vehicle was not of ‘acceptable quality’ and had a defect when supplied, that is, a ‘latent defect’ if the defect is not major the supplier is entitled to remedy the defect, but there is no guidance as to what constitutes a ‘reasonable period’ for allowing the supplier to remedy the defect a supplier or manufacturer who does not want to give a refund for a major failure (i.e. a failure that can’t be remedied) is likely to dispute a claim by the consumer where there is a major failure, the consumer may nevertheless lose the right to a refund if the rejection period has passed – the provisions regarding loss of a consumer’s right to reject the vehicle and ascertaining the rejection period are complex.139 Evidentiary issues Professor Corones noted that tribunals and courts are not investigative bodies.140 They determine rights based on facts and evidence, and consumers must satisfy the evidentiary burden. In relation to motor vehicle disputes State civil and administrative tribunals, including QCAT, operate on the basis that the applicant bears the onus of proof according to the civil standard, the ‘balance of probabilities’:
If the applicant fails to adduce sufficient evidence to allow the tribunal to conclude that there has been a major failure to comply a statutory guarantee, the tribunal has no choice but to dismiss the application. Both parties are likely to give sworn evidence that is contradictory. The applicant may present evidence as the general nature of the problem and be accepted by the tribunal to be an honest witness. However, honesty is not enough. In order to obtain a refund the applicant must present expert opinion evidence that will persuade the tribunal that there is an inherent defect in the vehicle that was present at the time of supply; that it was the cause of the damage suffered; and that the defect constitutes a major failure to comply with a consumer guarantee. 141
The high cost of obtaining inspections and expert mechanical reports may deter some applicants. Professor Corones noted that motor vehicles are difficult and expensive to diagnose.142 Accordingly, a consumer may be reluctant to pay for expert reports, especially where the purchase price of a vehicle is relatively low. RACQ commented that ‘…while QCAT is a low cost forum for hearing such matters,
138 Professor Stephen Corones, Submission 4, p 8. 139 Professor Stephen Corones, Submission 4, pp 8-9. 140 Professor Stephen Corones, Submission 4, p 9. 141 Professor Stephen Corones, Submission 4, pp 9-10. 142 Professor Stephen Corones, Submission 4, p 10.
38 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles obtaining independent expert evidence to support such claims can be difficult and prohibitively costly’.143 CALC advised:
In some cases, the expert even has to be available for cross examination. This comes at a significant cost, and together with application fees for the tribunals… In Queensland, the application fee for similar disputes is $305. This represents a real barrier to justice. Many people choose to simply give up. Those that proceed may achieve a conciliated outcome or determination, but not receive a full remedy.144
Although involving a second-hand car, CLC provided useful anecdotal evidence relating to a client it recently assisted, who purchased a motor vehicle which proved to be defective and dangerous from the outset:
Initiating QCAT action was necessary because of the uncooperative conduct of the dealership concerned. We calculate that the pro bono assistance we received from a barrister who assisted our client amounted to approximately $20,000.00 in fees. We were also able to obtain the kind assistance of an expert motor mechanic who agreed to assist in proceedings at no cost. Individual members of the public often cannot obtain this sort of assistance themselves and without expert evidence their cases may not succeed, even if they have merit.145
In addition to specific references to expert costs, various submitters made general statements, arguing that the costs of pursuing a QCAT claim are prohibitive for many consumers.146 At public hearing, Ms Connie Cicchini stated:
I totally did not understand QCAT and the processes so I engaged a solicitor to help me. Between technical reports and solicitors fees, it cost me thousands of dollars to do that. My solicitor’s advice was not to go through the court system because it would be tied up there for ages, the dealership would have more money than I would to battle it through and the cost would be astronomical. Even going through QCAT to provide those documents, it was a very costly exercise for me. I pursued it because I was determined that they were not going to get away scot-free, so I dug my heels in.147
Please also see section 3 of this report for an examination of the impacts on consumers who have purchased ‘lemon’ motor vehicles. It includes commentary on the impact of QCAT. Even if the applicant obtains an expert’s report, Professor Corones pointed out there is no guarantee that the expert’s report will be admissible:
In order to qualify as an expert the person must have ‘specialised knowledge’ by reason of ‘training, study or experience’. If the expert’s report is admissible, it may not be accepted by the tribunal.148
143 RACQ, Submission 15, p 2. 144 CALC, Submission 22, p 4. 145 CLC, Submission 19, p 4. 146 CLC, Submission 19 & others. 147 Hansard transcript, public hearing, 28 October 2015, p 11. 148 Professor Stephen Corones, Submission 4, p 10.
Legal Affairs and Community Safety Committee 39 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Further, RACQ claimed vehicle manufacturers and distributors, in general, have an advantage as they have access to their own subject matter experts: ‘In contrast, the costs to the consumer of securing expert testimony may well exceed the value of the vehicle in dispute, in circumstances where there can be no guarantee of the outcome’.149 Similarly, QLS claimed that a party appearing regularly in a tribunal will, over time, acquire specific knowledge of the procedures and the law applicable:
This confers an unfair advantage on the regularly appearing party. In the context of this Inquiry this would mean that it is likely that car retailers will hold an unfair advantage over self-represented consumers seeking to enforce their rights in relation to poorly performing motor vehicles.
This element of the problem can be compounded if retailers employ people with specific knowledge of these matters, to act on behalf of the retailer in action taken by a consumer. These employees may even possess legal qualifications, but in any event will possess significantly more experience and knowledge of the concepts involved than a consumer appearing before the tribunal for the first and only time.150
Innately connected to the issue of satisfying the burden of proof, is the issue of whether QCAT adjudicators are appropriately qualified to make and implement the necessary determinations. Whilst acknowledging that the ACL has improved the avenues of recourse available to vehicle owners to resolve defective motor vehicle issues, RACQ claimed:
A problem with this tribunal is that in many cases the adjudicator does not have the technical expertise required to enable them to make a technically informed decision with respect to such disputes. Simply, adjudicators are well versed in the law but do not necessarily know about motor vehicles, technical issues associated with vehicle repairs, or have knowledge of the motor vehicle industry in general.
This can result in a win for the party that puts up the best performance on the day, rather than the one that has the strongest case.151
Consumer risk as to a cost award Although parties typically bear their own costs in QCAT, another difficulty faced by consumers in court and tribunal proceedings is the risk that they may be exposed to an adverse award of costs if their application is dismissed. This risk is greater in superior courts and is discussed further, later in this report. Despite the above, Professor Corones noted section 105 of the QCAT Act provides: ‘The rules may authorise the tribunal to award costs in other circumstances, including, for example, the payment of costs in a proceeding if an offer to settle the dispute the subject of the proceeding has been made but not accepted’.152 Period of time taken for a decision to be rendered A further difficulty faced by consumers in tribunal and court proceedings is the period of time taken for a decision to be rendered:
149 RACQ, Submission 15, p 2. 150 QLS, Submission 13, p 2. 151 RACQ, Submission 15, p 2. 152 Professor Stephen Corones, Submission 4, p 12.
40 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Tribunals are intended to provide a process by which small claims can be dealt with quickly and efficiently in a short time frame. However, most tribunals attempt to resolve consumer dispute through mediation prior to the matter going to hearing. The period of time taken for a decision to be rendered varies. Some decisions take several months, however the period of time in others is significantly longer. The occurrence of a compulsory conference may extend the time taken for the conclusion of a dispute. Under the current Tribunal procedure a consumer is only likely to obtain adequate compensation after a lengthy and arduous process.153
Low monetary limits QCAT has jurisdiction over matters that are minor civil disputes. Correspondingly, it possesses jurisdiction to hear claims up to and including a maximum limit of $25,000. A large percentage of cars cannot be purchased for less than $25,000:
As a result, the limit on amounts to be awarded may force consumers to seek remedies in courts of law, thereby exposing consumers to higher costs of filing claims and the requirement to seek legal representation to ensure that their claim will proceed successfully.154
Ashton Wood’s QCAT claim was dismissed due to the value of his claim exceeding the jurisdictional limit.155 Connie Cicchini reduced the quantum of her claim by approximately $15,000, so as not to exceed the QCAT limit.156 The benefit of Ms Cicchini’s approach was she was able to avoid court action in a superior court. However, the detrimental aspect was to render complete redress an impossibility, even if securing a successful outcome to her claim. At public hearing, Mr Wood commented further on the jurisdictional limit and inquiries he receives from consumers throughout Australia:
…the majority of people coming to me have vehicles over $25,000 so they come to me and say, ‘What do we do?’ I ask them how much their car was and as soon as they say, ‘It’s over $25,000,’ I ask them what state they are in. If they are in New South Wales, they can get cases up to $40,000 through NCAT. Victoria is unlimited in VCAT… if they are in Queensland and their vehicle is over $25,000, I tell them that the only thing I can do is tell them to keep on the dealer, keep the pressure on them. I can give them contacts in the press to help them get some visibility of their battle.157
Various submitters argued that, in light of the average cost of a motor vehicle, the $25,000 jurisdictional limit should be removed or increased, as consumers currently possess no means of recourse, other than through the Magistrates Court.158
Specifically, FCAI suggested increasing the QCAT limit to $40,000 to align with other states.159 Professor Corones argued:
The New Zealand Motor Vehicle Disputes Tribunal has jurisdiction to determine claims where one party to the dispute is a motor vehicle trader, and the sum of the claim does
153 Professor Stephen Corones, Submission 4, p 12. 154 Professor Stephen Corones, Submission 4, p 14. 155 Ashton Wood, Submission 1. 156 Connie Cicchini, Submission 12. 157 Hansard transcript, public hearing, 28 October 2015, p 11. 158 Submissions 6, 12 & 15. 159 FCAI, Submission 14.
Legal Affairs and Community Safety Committee 41 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
not exceed $100,000. This limit is more appropriate in the context of motor vehicles than the current limits on tribunals in Australia.160
Please refer to section 8 of this report for further commentary on possible changes to the existing law.
Other issues raised in submissions about QCAT QCAT powers and legal representation QLS stated that QCAT has all the necessary powers to create declarations and give equitable relief in relation to claims regarding vehicles which perform poorly or are not fit for purpose.161 However, it identified the difficulty faced by consumers in these issues, and possibly the members of QCAT who hear these matters, ‘…is that the legal concepts involved, and remedies available, are exceedingly complex and unlikely to be easily applied by unrepresented litigants’.162 QLS noted the powers which might be exercised by a member of QCAT in applications of this nature could include: granting a declaration providing equitable relief varying/voiding contracts
issuing corrective advertising orders.163 It categorised these as powers a magistrate does not ordinarily have, and cautioned that they must be applied judiciously:
Given that magistrates can, especially in remote regions, function as members of QCAT, having the assistance of legal representatives for the parties involved is essential. It is highly unlikely that an unrepresented litigant will have the knowledge and time to ensure that all relevant issues are fully ventilated in the material raised before the tribunal, or that submissions in relation to the appropriate relief will be of assistance to the tribunal member.164
QLS concluded the most effective way to empower consumers is to provide for legal representation as of right in QCAT, at least in relation to consumer protection issues:
Allowing consumers access to legal representation is the only realistic way to address the inherent imbalance in experience, knowledge of the motor vehicle industry and commercial weight which exists between motor vehicle retailers and their customers.
Having access to legal representation would also mean that consumers would not bring spurious or unwinnable claims which might consume tribunal resources unnecessarily.165
Contrary to the QLS view that QCAT possesses the necessary powers to create declarations and give equitable relief, LAQ submitted that the problem faced by a consumer commencing proceedings in QCAT is that QCAT has no power to grant injunctive relief or make a declaration under sections 234 and 243 of the ACL:
160 Professor Stephen Corones, Submission 4, p 14. 161 QLS, Submission 13, p 2. 162 QLS, Submission 13, p 2. 163 QLS, Submission 13, p 2. 164 QLS, Submission 13, p 2. 165 QLS, Submission 13, p 2.
42 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Its powers are limited by s13(2) of the Queensland Civil and Administrative Tribunal Act 2009 and section 138B of the Competition and Consumer Act 2010. This means that the most vulnerable consumers do not have access to the full range of remedies provided for under the ACL.166
In LAQ’s experience the three problems most frequently experienced by vulnerable consumers are:
(a) Access to these remedies only occurs after they have suffered a substantial harm that is difficult to recover from. For example, the car is off the road for a number of months causing the client problems with difficulty in making it to work. This problem may be addressed by a definition of lemon laws that allows a determination that a car is a lemon a lot earlier in the process.
(b) Accessing a Court remedy carries with it the risk of costs and most consumers only feel comfortable accessing the court with the assistance of a lawyer. Many vulnerable consumers cannot afford a lawyer and availability of free legal advice and representation from organisations like LAQ does not meet all of the need in this area. Moreover, where the only issue relates to the condition of the vehicle, legal aid for representation is not available.
(c) Even in accessing the QCAT jurisdiction, which is set up to encourage access without needing the assistance of a lawyer, many vulnerable consumers still feel uncomfortable accessing QCAT without at least talking to a lawyer about what to do. While services like LAQ, Community Legal Centres and the QPILCH self- representation service go some way towards meeting demand, these services do not have the scope or capacity to meet all of the need in the wider community. In addition, many new car contracts would exceed the jurisdictional limit of QCAT.167
Additional submissions were made in relation to expanding the declaratory powers of QCAT. Section 23 of the ACL provides that a term of a consumer contract is void if: the term is unfair the contract is a standard form contract. CLC noted that most contracts for new cars are standard form contract and that the unfair terms provisions of the ACL could assist consumers in their disputes with car dealers:
Section 250 of the ACL gives the court the power to make a declaration that a term of a contract is unfair.
In Queensland, section 51 of the Fair Trading Act (Qld} 1989 provides that an application for a declaration that a term of a contract is unfair must be heard in the District Court.168
Given the risks associated with litigation, CLC claimed consumers are reluctant to bring applications under section 250 of the ACL, and recommended that consideration be given to giving QCAT jurisdiction to make such declarations, such as the express powers enjoyed by VCAT.169
166 LAQ, Submission 16, p 4. 167 LAQ, Submission 16, p 4. 168 CLC, Submission 19, p 5. 169 CLC, Submission 19, p 5.
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Court proceedings Throughout submissions, there was some overlap between comments on QCAT and to courts of law. As the majority of commentary on private action centred on QCAT, areas of overlap have sometimes been addressed under sections of this report dedicated to QCAT. Specific comments on courts of law have been incorporated in this section. Other than QCAT, LAQ noted that a consumer may elect to institute proceedings in relation to ‘lemon’ motor vehicles in the Magistrates Court for disputes up to $150,000.170 Various submitters informed the committee of their experiences with courts of law. In relation to his ‘lemon’ motor vehicle experience, Noel Newton sought advice and concluded ‘…it would be expensive to pursue my complaint through the courts, may delay the replacement process and there was evidence of breaches of legislation.’171 Stewart Lette’s matter was listed to be heard at Sandgate Magistrates Court for mediation, but the matter was resolved before the mediation proceeded.172 This was said to predominantly be a result of a change in owners of the dealership.173 Connie Cicchini stated she did not possess the financial capacity to institute court proceedings, and stressed the importance of affordable justice for consumers.174 CLC observed that court proceedings can be time consuming, stressful and costly, ‘…especially for self- represented litigants’.175 As noted above, another difficulty faced by consumers in court and tribunal proceedings is the risk that they may be exposed to an adverse award of costs if their application is dismissed. Professor Corones observed that, in superior courts, the usual rule is that ‘costs follow the event’ and an unsuccessful party is generally required to pay the costs of the opponent. 176 He referred to a paper which argued the manufacturer possesses the upper-hand in circumstances where the consumer is seeking a refund rather than a replacement vehicle:
Assume the manufacturer offers to provide a replacement vehicle and the offer is rejected by the consumer. If the consumer’s claim is successful the consumer would be ordered to return of the vehicle and obtain a refund of the purchase price under s 259 of the ACL. In such circumstances, each party would usually bear their own costs. However, if the consumer’s claim is unsuccessful the consumer may be exposed to a costs order to cover the manufacturer’s costs.177
In public hearing, Professor Corones submitted:
…when faced with an intransigent car manufacturer a consumer has little prospect of success in the courts. Consumers face near insurmountable problems of proof in relation to motor vehicle disputes under the current law causing much consumer detriment.
170 LAQ, Submission 16, p 4; a further option for consumers is to institute proceedings in the Federal Circuit Court for disputes up to $700,000. 171 Noel Newton, Submission 3, p 2. 172 Stewart Lette, Submission 6, p 5. 173 Stewart Lette, Submission 6, p 5. 174 Connie Cicchini, Submission 12. 175 CLC, Submission 19, p 4. 176 Professor Stephen Corones, Submission 4, p 11. 177 Professor Stephen Corones, Submission 4, pp 11-12; citing L Griggs, A Freilich and N Messel, Consumer guarantees - lessons to be learnt from afar (2015) 23 Australian Journal of Competition and Consumer Law 36, 41.
44 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Technical problems in motor vehicles are difficult and expensive to diagnose. Consumers are reluctant to incur these costs. The cheapest solution for the consumer is to trade in the vehicle on another and to pass the problem on to somebody else. That is scarcely an ideal solution.178
An alternative to an individual consumer initiating court proceedings, is for numerous consumers to band together and commence a class action. At the time of writing this report, class action litigation in Australia is proceeding over Volkswagen's fraudulent emissions claims. Such proceedings could perhaps be relevant if many consumers suffered the same problem and had not received satisfactory redress.
178 Hansard transcript, public hearing, 28 October 2015, p 2.
Legal Affairs and Community Safety Committee 45 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
6. Consumer protections and remedies – State and Territory legislation As discussed earlier, the ACL replaced the previously separate Commonwealth, state and territory legislation (being the Commonwealth Trade Practices Act 1974 and the Fair Trading Acts (or equivalent) of each state and territory). The ACL applies to Queensland under Part 3 of the Fair Trading Act 1989 (Qld) and is referred to as the Australian Consumer Law (Queensland) Act (Qld). Queensland law applies, however, to the sale of used motor vehicles. The relevant legislation is the Motor Dealers and Chattel Auctioneers Act 2014 (MDCAA).
6.1 Motor Dealers and Chattel Auctioneers Act 2014 (MDCAA) Schedule 1 of the MDCAA provides for statutory warranties, which apply only to used vehicles.
Statutory warranties for used motor vehicles A dealer selling a used car warrants that it is free of defects at the time of taking possession and that it will repair any defects appearing during the warranty period, at no cost to the buyer. A statutory warranty covers the used vehicle, provided it has been driven less than 160 000 km and the date of manufacture is less than 10 years before the sale. The warranty expires after 3 months or after being driven 5,000 km (whichever occurs first). Some used vehicles are not covered by the statutory warranty, such as: motorcycles and caravans commercial vehicles vehicles being sold on consignment for a private seller vehicles that cannot be registered because of their design vehicles that are on the ‘written-off’ register. The statutory warranty will cover most defects in the vehicle or a part. The buyer who wants to have the vehicle repaired under the warranty must give written notice to the dealer before the end of the warranty period and deliver it to the dealer or nominee for the repair. The repair must be carried out within 14 days unless there is a reasonable excuse.
Exclusions/non-application The statutory warranty will not apply to defects in: tyres or tyre tubes, batteries, fitted airbags or radiator hoses lights (other than a warning light or a turn indicator light used as a hazard light) installed radio, tape recorder or CD player aerial, spark plug, wiper rubber, distributor point, oil or oil filer, heater hose, fuel or air filter paintwork or upholstery.
Cooling-off period There is no cooling-off period for new motor vehicles, but there is a cooling-off period for used motor vehicles. The cooling-off period for used motor vehicles is 1 day and does not apply to certain sales (such as auctions and sales on consignment, except in certain circumstances).
46 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Various contractual disclosure requirements apply regarding the cooling-off period and give rise to various rights to the buyer to end the contract, if the contract does not comply. The buyer is entitled to end the contract before the end of the cooling-off period, by giving the dealer a notice of termination.179
Remedies and redress regarding used car warranties If, under the statutory warranty provisions of the MDCAA, the dealer: does not accept the defect is covered: or fails to repair within the 14 days; or does not repair the vehicle properly; the buyer can apply to QCAT for an order under s 13 of the MDCAA. Such an order might be to extend the warranty period or order that the dealer pay the reasonable costs of having the repair undertaken elsewhere. QCAT can also make orders under the Queensland Consumer and Administrative Tribunal Act 2009 (Qld).
Concluding comment See section 7.2 of this report for a discussion on the adequacy of existing consumer protections and remedies, which also addresses used motor vehicles. For the sake of completeness, the committee notes the nine consumer guarantees under the ACL apply to both new and used motor vehicles. These guarantees are discussed in the context of new motor vehicles in section 5 of this report.
6.2 Legislation in other Australian States and Territories See Appendix E for a summary of: the guarantees and warranties provided under State and Territory legislation, including those in the ACL and in Queensland legislation for ease of comparison the remedies available for breaches of these warranties and guarantees.
179 MDCAA, ss 100-105.
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7. Adequacy of consumer protections and remedies A potential indicator of the adequacy of consumer protections and remedies is to consider how many consumers of ‘lemon’ motor vehicles achieve a successful resolution to their problems and to determine what happens to problem motor vehicles in circumstances where a successful resolution is not achieved.
7.1 ‘Lemon’ motor vehicle complaints and outcomes There are no available detailed statistics on the numbers of ‘lemon’ motor vehicle complaints in Queensland and the outcomes of those complaints. However, please refer to Appendix D to see a summary of the outcomes achieved by those consumers who made written submissions to the Inquiry in relation to their ‘lemon’ law experience. At the committee’s Brisbane public hearing, Professor Corones illustrated the extent of the difficulty applicants encounter in satisfying the onus of proof in legal proceedings and the impact this has had on the outcome of cases:
Since the Australian Consumer Law took effect on 1 January 2011, consumers have failed to satisfy the onus of proof in the majority of cases involving motor vehicles. In Queensland there have only been four reported cases involving defective motor vehicles, three of which were dismissed for failure to satisfy the onus of proof. In New South Wales there have been about 20 reported cases involving defective motor vehicles, 14 of which have been dismissed for failure to satisfy the onus of proof.180
In response to committee questioning as to whether four reported cases indicated a widespread problem, Professor Corones elaborated:
It is very difficult to gain access to the relevant statistics from the regulators. They will not provide you with details of the number of complaints that have been made in relation to motor vehicles. It is very difficult to get access to QCAT records. You do not know the number of disputes that have been mediated or settled through some sort of conciliation process, which is mandatory in relation to QCAT proceedings. I would have thought that those numbers do not provide a reliable guide as to the seriousness of the problem. If you look at comparable jurisdictions—if you look at New Zealand, if you look at Canada—there are roughly 200 to 300 cases a year that are being arbitrated in those jurisdictions. I think that is a more reliable guide as to the seriousness of the problem here.181
7.2 Where do ‘lemon’ motor vehicles go? Various submitters have raised concerns about the fate of ‘lemon’ motor vehicles. A failure to satisfactorily resolve an issue that has arisen with defects in a new motor vehicle may result in such a motor vehicle entering the second-hand market. In the committee’s view, such concerns are valid and are inextricably connected to the issues at the heart of the terms of reference. Instances of this reflect on the adequacy of consumer protections and remedies. For example, some claim that ‘lemon’ motor vehicles are on-sold due to a buyer’s failure or inability to enforce existing consumer rights. Mr Ashton Wood posed the question of what might happen to a consumer’s ‘lemon’ motor vehicle, if, for example, it is traded in with the manufacturer for a replacement vehicle.182 RACQ noted that,
180 Hansard transcript, public hearing, 28 October 2015, p 2. 181 Hansard transcript, public hearing, 28 October 2015, p 3. 182 Ashton Wood, Submission 1.
48 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles even with a trade-in, the owner commonly incurs some level of financial loss and the problem is simply moved to a new owner.183 Various submitters asserted that stronger consumer laws would address the current situation where vehicles are introduced to the second-hand market, due to new vehicle owners being unable to achieve a resolution.184 These submitters considered that current laws resulted in unsafe vehicles being on the road, where second-hand buyers do not know of a motor vehicle’s problems. At the committee’s Brisbane public hearing, Mr Wood commented on the fate of ‘lemon’ motor vehicles once they are returned to the dealership:
I had someone approach me just two days ago. I do not know why but she bought the same model of Jeep that I had and she is experiencing many of the same issues that I had. She bought it second-hand and she is absolutely regretting buying it. So they are definitely getting returned back to the pool. Obviously, the dealers cannot afford to take them back as a trade-in and pull them apart or leave them out the back. They have to make their money on them. They need to sell them somehow, whether it be through auctions, wholesale or whatever they are going to do with them. There is no doubt that they are ending back on the roads.185
In its submission, LAQ discussed the second-hand motor vehicle market and issues faced by disadvantaged consumers, including issues with finance contracts.186 In relation to newly purchased second-hand cars which do not perform as advertised and require extensive and expensive repairs, LAQ stated that the problem is exacerbated for a large number of vulnerable consumers who are less financially well off and can only afford cars that are more than 10 years old and have odometer readings greater than 160,000kms:
The problem for our clients is that cars with these characteristics are not subject to any statutory warranty. The current second hand car warranty only applies to second hand cars under 10 years and with odometer readings of less than 160,000kms. That warranty is for a period of 3 months or the first 5000kms travelled, whichever occurs first. As a consequence, when an older second hand car breaks down, LAQ’s clients do not have an easily accessible mechanism for covering the costs of repair to the car.
The effect on vulnerable consumers in this position in Queensland can be great as the car is often relied to travel to work in places where public transport is not readily accessible and/or to provide support to family members unable to drive due to a disability or the elderly. It should also be acknowledged that the impact on a less wealthy consumer of purchasing a defective second hand vehicle is just as significant as the impact on a more affluent consumer who has purchased a new car with defects that require extensive repair.187
LAQ advised:
…prior to legislative changes made in 2014, the current limited second hand car warranty applied to all second hand cars purchased from dealers, and this was relatively
183 RACQ, Submission 15. 184 Stewart Lette, Submission 6; Australian Motoring Enthusiast Party, Submission 9; Connie Cicchini, Submission 12; RACQ, Submission 15; CLC, Submission 19. 185 Hansard transcript, public hearing, 28 October 2015, p 10. 186 LAQ, Submission 16, pp 2-3. 187 LAQ, Submission 16, p 2.
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widely-known in the community. So consumers believed they had some warranty protection when they purchased a vehicle from a dealer, even if it was limited. Many consumers are unaware of the change in the law limiting the warranty to newer second hand cars.188
Accordingly, LAQ recommended ‘…the current statutory warranty for second hand cars be extended to cars which are more than 10 years old and which have travelled more than 160,000kms’.189 At public hearing, Ms Connie Cicchini commented on existing statutory warranties for the buyers of second-hand motor vehicles:
I believe that one month would not be adequate. I know that the statutory guarantees were three months but I would actually like to see that pushed out to between six months and 12 months, because some of the problems do not manifest themselves straightaway. For example, I have transmission issues with my vehicle and that has manifested a number of times during the three-year warranty period. That was still faulting again before I took it back into another dealership and that is being done on a higher level than Australia at the moment. So I would like to see that statutory warranty period go to somewhere between six months and 12 months because of the types of defects that happen. They do not always manifest themselves so early.190
188 LAQ, Submission 16, p 3. 189 LAQ, Submission 16, p 3. 190 Hansard transcript, public hearing, 28 October 2015, p 11.
50 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
8. Potential improvements to legislative protections and remedies
8.1 Suggested improvements
Introduction of a ‘lemon’ law Various submitters argued for the introduction of a ‘Lemon’ Law, whether by way of stand-alone legislation or by way of a change to the ACL to include such a law. Numerous felt that this would increase the likelihood that manufacturers, importers and dealers would be held responsible for the sale of ‘lemon’ motor vehicles. CALC asserted that: ‘Momentum is arguably building for the introduction of lemon laws, particularly in the lead up to the review of the Australian Consumer Law in 2016’.191 Similarly, CLC endorsed the introduction of ‘lemon’ laws and ‘…any consolidation of State and Commonwealth legislation that improves consumer protection and enables members of the community to more easily access, understand and invoke consumer protections when they have purchased motor vehicles that prove to be defective’.192 Alternatively, FCAI argued ‘…there is no reason whatsoever for the Queensland Government to introduce laws to deal with lemons’.193 MTAQ observed that contemporary Australian consumer legislation has been based on generic regulation that would be applicable to products generally in the market rather than sector specific legislation: ‘If sector specific legislation was to be considered in respect of the ACL regime, it would tend to indicate that very high level of risks existed in the acquisition of new market vehicles’.194 Anecdotally, and traditionally, MTAQ concluded it is unlikely this level of risk exists:
The risk associated with the purchase of new motor vehicles has been relatively modest particularly with the increase in technical sophistication and statutory requirements in relation to safety and environmental performance. Also, there may be a tendency for greater after sales servicing to ensure that technical performance meets specifications and consumer expectation. The percentage of vehicles that manufacturers deliver to the market that are not fit for purpose is unlikely to be high because of the reputational risk this constitutes to brand value.195
At public hearing, the FCAI commented on the potential impact of any recommendations to change the existing law:
If you start to bring in different legislation in different jurisdictions, the problem is that the businesses involved in that will have to respond to that legislation. There is always an administrative burden with any regulation and that is likely to increase the cost of supplying the vehicle to the market and maintaining the vehicle in the market. You then have a discrepancy between markets in terms of price. As the other two panel members have spoken about, in an internet based environment people can easily move across
191 CALC, Submission 22, p 10. 192 CLC, Submission 19, p 2. 193 FCAI, Submission 14, p 1. 194 MTAQ, Submission 17, p 3. 195 MTAQ, Submission 17, p 3.
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state boundaries and make a purchase. I think that is an issue for the Queensland automotive industry.196
Adequate definitions Australian Motoring Enthusiast Party (AMEP) and Connie Cicchini supported the inclusion of adequate definitions to enhance clarity. In AMEP’s view, ‘…it would appear there is inadequate definition around what defines a problematic vehicle and when the vehicle manufacturer or supplier must repair, replace or refund a consumer’s vehicle’.197 Connie Cicchini supported introducing ‘lemon’ laws which clearly define the term ‘acceptable quality’, enhance the ACL’s Consumer Guarantees and provide mandatory time and repair limits.198 She suggesting the following wording: The acquired new vehicle will be deemed to be of acceptable quality if the motor vehicle has not been presented by the Consumer to the Supplier within the first twenty-four (24) months from date of purchase for the following: a) Two (2) events for safety related non-scheduled repair issues, or b) A total of four (4) accumulated events for non-scheduled repair issues, or c) Has spent a total of twenty (20) accrued days for repair199 If ‘lemon’ laws were to be introduced, MTAQ asserted a chronological definition would be necessary as to how long would a car remained ‘new’:
This should include a responsibility on the consumer to advise of any deficiencies in the new motor vehicle as soon as possible - and certainly advise before the deficiencies became chronic. Any legislation or regulation would need to clearly define the obligations and the ultimate responsibility for any remedies under the legislation.200
It argued that new laws would ideally distinguish between ‘…specific individual vehicle failures not fit for purpose (‘lemons’), generic design manufacturing defects which require general recalls or serious design safety defects which require immediate/urgent attention’.201
Mandatory time and repair limits Including Connie Cicchini’s proposed definition of ‘acceptable quality’, there was support amongst submitters for the inclusion of specifically recommended mandatory time and repair limits in any ‘Lemon Law. Noel Newton suggested potential time and repair limits of 14 days or 4 attempts.202 As mentioned in section 3.2, CALC argued that a ‘new vehicle’ should be presumed to be a lemon if:
…the vehicle has been repaired at least three times by the manufacturer or importer and the vehicle still has a defect or if the vehicle is out of service for 20 or more days in total
196 Hansard transcript, public hearing, 28 October 2015, p 23. 197 AMEP, Submission 9, p 1. 198 Connie Cicchini, Submission 12, p 2. 199 Connie Cicchini, Submission 12, p 2. 200 MTAQ, Submission 17, p 3. 201 MTAQ, Submission 17, p 4. 202 Noel Newton, Submission 3, p 2.
52 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
due to a defect. A new vehicle should also be presumed to be a lemon if it is repaired once for a defect that is a danger to the personal safety of the driver of the vehicle or other road users.203
Also mentioned earlier in greater detail, CALC believed that ‘lemon’ laws should provide protection to vehicles during the first two years after their sale. Professor Corones stated that uncertainties under the current consumer guarantees regime should be clarified:
What is required a set criteria or an objective standard by which the faults in a motor vehicle can be determined to be a “major” failure, e.g., a deemed major failure if fault cannot be repaired after three attempts. A reasonable period to allow the dealer to attempt to remedy the defect in the motor vehicle should be specified, such as three months.204
Enhanced Consumer Guarantees Connie Cicchini suggested that the ACL could be amended to include stronger Consumer Guarantees.205 She provided a copy of proposed clauses as an annexure to her written submission.206 The clauses are intended to be annexed to a contract or purchase agreement for the acquisition of a new motor vehicle (see below). However, Ms Cicchini suggested the clauses could also be inserted into the ACL.207
Clarity There was support amongst submitters for improvement of the existing law to enhance clarity as to when the manufacturer/supplier must repair, replace or refund a new motor vehicle. In CLC’s opinion, one of the most significant and contentious issues seems to be that dealers try to deflect blame and responsibility for lemons to the manufacturers, while the manufacturers try to deflect responsibility by insisting customers simply follow through on their warranty rights and get the dealers to organise repairs:
Ashton Wood's much publicised dispute regarding his Jeep illustrates the problems people encounter, and we have certainly advised clients who have experienced difficulties obtaining redress when they approach dealers about their car problems.
Lemon laws need to clearly state who is required to pay the refund on a vehicle once it has been deemed a lemon. This needs to be something that, practically, can be enforced in Australia, given that car manufacturing companies are located in other jurisdictions.208
Reversal of onus of proof CALC recommended that ‘lemon’ laws reverse the onus of proof where it is alleged there has been a major problem, or the vehicle is a 'lemon' (as defined by CALC):
203 CALC, Submission 204 Professor Stephen Corones, Submission 4, p 18. 205 Connie Cicchini, Submission 12, pp 2 & 7. 206 Connie Cicchini, Submission 12, pp 2 & 7. 207 Connie Cicchini, Submission 12, pp 2 & 7. 208 CLC, Submission 19, p 4.
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This means the obligation is on the trader to demonstrate that there has been no breach of the consumer guarantees. If the vehicle is a lemon or there has been a major problem, consumers should have the choice of a refund or a replacement vehicle.209
It provided an alternative, noting it had previously suggested a reverse onus on all goods for a period after purchase (say 3 or 6 months), as in Singapore:
This would mean that within this period the trader would be required to prove that they did not breach the consumer guarantees… The consumer guarantees would continue to apply beyond that period, but the consumer would be required to prove their case as per usual. In our view this would encourage both parties to reach a resolution early after purchase where a defect has been identified, rather than prolonging the process which sometimes happens now. Applying the rule to all goods, whether new or second hand, would enable a continued ‘general law across the economy’ approach.210
On a national basis Various submitters contended that any concerns relating to defective vehicles, including ‘lemons’, should properly be dealt with on a national basis. Such views generally appeared to be shared by both stakeholders who supported and opposed the introduction of ‘lemon’ laws. That is, that those opposing such laws supported national laws, as opposed to Queensland specific laws, in circumstances where new laws were to be introduced. In opposing the introduction of ‘lemon’ laws, FCAI stated:
…any residual concerns relating to defective vehicles, including lemon, should properly be dealt with on a national basis and, if necessary can be examined as part of the review of the Australian Consumer Law (ACL) to be conducted by the Commonwealth Government in 2016.211
AADA warned that:
Enactment of Queensland industry specific laws such as those under consideration could lead to unintended consequences and place Queensland motor vehicle dealers at a competitive disadvantage relative to dealers in other States and Territories. Such a law would fail to recognise the national consumer market in which distributors and dealers operate.212
Other comments According to RACQ, any legislation needs to also provide an incentive for dealers and manufacturers to resolve problems in a timely manner so that involvement of QCAT becomes a matter of last resort:
This could be achieved by introducing the possibility that the vehicle may have to be replaced, or its owner appropriately compensated if it can't be satisfactorily repaired in a certain time frame, or when the same or different problems keep appearing. The criteria for such trigger points is well documented in the various pieces of US legislation
209 CALC, Submission 22, p 9. 210 CALC, Submission 22, p 9. 211 FCAI, Submission 14, p 2. 212 AADA, Submission 18, p 3.
54 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
that deal with what there are called Lemon Laws. We believe these should be considered when drafting any local legislation.
It should also provide cover for all vehicles, regardless of whether they are intended for private or business use and for all owners while the vehicle is covered by a new vehicle warranty.
A positive for dealers and manufacturers would be that such legislation could provide a means of managing the myriad of minor points of conflict that regularly occur between customers and dealers. That is, it should have the ability to be able to determine if a fault is of a major or minor nature and how it is to be resolved, or if it is in fact an acceptable 'characteristic' of the vehicle type that requires no further action.213
Mandated new car purchase agreements Connie Cicchini suggested that new car purchase agreements and contracts could be mandated to include additional comfort for the consumer.214 As mentioned above, Ms Cicchini attached proposed clauses to her written submission. The clauses take the form of a proposed Defined Acceptable Quality and Enhanced Consumer Guarantee Clauses Annexure, which Ms Cicchini stated ‘…could be made available by government so as to provide additional protection for the consumer when purchasing a new motor vehicle in Australia’.215
Increased protection for dealerships Connie Cicchini sought increased protection for dealerships, by including the same definition of ‘acceptable quality’ and enhancing guarantees, to apply to manufacturers and distributors supplying new vehicles.216
Introduction of a ‘Lemon’ Register Several submitters supported the introduction of a community ‘Lemon’ Register to monitor the outcomes of problem vehicles, so potential buyers will be informed.217 Connie Cicchini recommended the implementation of such a register ‘…so that when a problematic new car has been replaced or refunded that this information is available to all potential buyers’.218 At the committee’s Brisbane public hearing, she elaborated:
In the States they have a lemon vehicle register. What happens over there in some of the jurisdictions is that the vehicle is recorded on the register and it also gets an extended manufacturer’s warranty with the vehicle.219
213 RACQ, Submission 15, p 3. 214 Connie Cicchini, Submission 12, pp 2 & 7. 215 Connie Cicchini, Submission 12, pp 2 & 7. 216 Connie Cicchini, Submission 12, p 3. 217 Noel Newton, Submission 3; Connie Cicchini, Submission 12; RACQ, Submission 15. 218 Connie Cicchini, Submission 12, p 3. 219 Hansard transcript, public hearing, 28 October 2015, p 11.
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Mr Ashton Wood added:
It protects the consumer so then they know they are going to be buying a car that may have had issues in the past and it is their risk. They will get it obviously a lot cheaper, but the extended warranty means that hopefully they have some support behind them.220
Where a vehicle is replaced by its manufacturerIdistributor, RACQ stated there would clearly be a need to flag its status to alert future buyers to its history.
We also believe that in such cases the manufacturer/distributor must be compelled by legislation to repair the defect/s and warrant the repairs before the vehicle can be resold. We would also expect that such actions would not remove or limit a consumer's rights to have any future issues pertaining to the vehicle considered by the tribunal.
An appropriate method of flagging these vehicles may be the existing Personal Property Security Register which, while primarily intended to record financial interests, also records aspects such as written off and stolen status. The addition of an appropriate flag for such vehicles is likely to be fairly straightforward given that this register is already being used to identify similar pertinent matters.221
CALC asserted that manufacturers or importers that buy-back ‘lemon’ vehicles should be required to notify all potential purchasers that the vehicle is a lemon if they re-sell it: ‘Consumer regulators will have to be sufficiently resourced to ensure that lemons are not being re-sold in breach of the lemon laws’.222
Education Numerous submitters suggested increased industry and consumer education on the intent of the ACL. FCAI suspected that some of the frustrations expressed by some motor vehicle purchasers are due to them not being aware of the extent of their existing rights:
Accordingly, rather than providing another layer of unnecessary legislation, a better response might be to better educate consumers so that they are fully aware of their existing rights. The publication "Motor Vehicle Sales and Repairs - Industry Guide to the Australian Consumer Law'' was jointly produced by the ACCC and the state and territory consumer affairs organisations and provides a good reference point for consumers.223
MTAQ commented:
The lack of understanding of consumer rights by the public is a major issue. If the State makes the decision to introduce ‘lemon’ laws as part of a harmonised framework across the Commonwealth or in a standalone provision, it is essential that it be accompanied with a consumer education program that informs new motor vehicle purchasers of their rights under both Commonwealth and State legislation.
220 Hansard transcript, public hearing, 28 October 2015, p 11. 221 RACQ, Submission 15, p 4. 222 CALC, Submission 22, p 9. 223 FCAI, Submission 14, p 6. FCAI is also of the view that some of the frustration could be due to the purchases in question having been made prior to the ACL coming into effect. As such, the complaints are not reflective of existing consumer rights. Motor Vehicle Sales and Repairs - Industry Guide to the Australian Consumer Law is available at: http://www.consumerlaw.gov.au/content/acl_resources/downloads/industry guides/motor vehicle sales.pdf
56 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Legislation without education would not let the full benefits to consumers be realised. The extension of the education to new motor vehicle dealers should be considered.224
CLC expressed a similar view:
Because consumer law, at least in our experience, is complex and is not generally well understood by members of the public, any change to the law needs to involve an extensive community education campaign.225
Consumers, Mr Newton and Ms Cicchini, also recommended educating industry and consumers.
Improved dispute resolution Ms Cicchini proposed the introduction of a motor industry-based consumer dispute resolution scheme or a Motor Vehicles and Automotive Services Ombudsman to resolve disputes between consumers and the motor industry.226 CALC strongly recommend improving dispute resolution services in the motor vehicle industry. In particular, it supported the introduction of a compulsory industry-based external dispute resolution (EDR) scheme, as an excellent way of improving the resolution of consumer disputes:
Canada’s voluntary dispute arbitration service, CAMVAP, is an excellent example of how similar services can improve consumer outcomes. Industry-based EDR schemes also exist in many other industries in Australia, including energy, water, telecommunications and financial services. Generally, such schemes are supported by consumers and industry alike, as they provide cheap, fair and accessible dispute resolution. We note that the Productivity Commission recently praised the role of these schemes in resolving consumer complaints in its Access to Justice report.
A particular benefit of specialist external dispute resolution schemes is that they can develop expertise around the subject of the dispute; in this case, motor vehicles. Our experience is that while some VCAT members have expertise that assists in identifying whether, for example, defects are ‘major’ or ‘minor’, others rely on outside expertise such as expert reports from the parties. As outlined above, the costs and effort in producing expert reports can be a barrier to access to justice.227
On the other hand, CALC believed that imposing a requirement that consumers participate in alternative dispute resolution (ADR) as a mandatory condition precedent before filing an application in a tribunal to exercise rights under lemon laws, would be inefficient and contrary to the interests of consumers:
Mandatory ADR would increase the difficulty and delay consumers face in bringing an action. This delay and difficulty would likely cause attrition of claims, leading to many valid consumer claims not being satisfactorily resolved. Rather than place obstacles in
224 MTAQ, Submission 17, p 5. 225 CLC, Submission 19, p 7. 226 Connie Cicchini, Submission 12, p 3. 227 CALC, Submission 22, p 10, citing Productivity Commission, Access to Justice Final Report – Chapter 9 Ombudsmen and other complaint mechanisms, 3 December 2014, available at: http://www.pc.gov.au/inquiries/completed/access-justice/report
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front of consumers making complaints about lemon vehicles, the law should ensure there is a seamless dispute resolution process.228
The Productivity Commission, in its Review of Australia’s Consumer Policy Framework, strongly supported the use of ADR schemes since they ‘…generally offer relatively economical, accessible, fast arrangements for dealing with individual complaints that could not be cost effectively tackled using any other method’.229 Professor Corones observed that industry-funded ADR schemes do not simply mediate or conciliate disputes; they investigate the facts of a particular dispute:
In becoming a member of a scheme, the industry party agrees to be bound by scheme decisions and is thus, to some extent, surrendering its legal rights to solve its consumer contractual problems in court. Although consumers have not so agreed and are therefore free to reject the scheme determination and take their issue up with the courts, for a variety of reasons, very few do so. Like the industry member, their rights have been effectively determined.230
Introduction of testing standards After buying a new motor vehicle which was later discovered to have a steering setup for left hand drive, Mr Stewart Lette argued there is a real need for testing standards: ‘It is a real safety issue… diminishing the handling capacity of the vehicle’.231
QCAT improvements
$25,000 jurisdictional limit Mr Stewart Lette also argued that the QCAT jurisdictional limit of $25,000 ‘…needs to be removed or a higher limit needs to apply when average cost of a vehicle is much higher which therefore gives many no means of recourse without going to Magistrates Court’.232 Similarly, but going even further, Ms Connie Cicchini suggested that justice would be easily accessible and affordable for consumers ‘…by removing the $25,000 limit set at QCAT and all other monetary limits that may be set in any other Australian States and Territories for civil disputes matters.’233 RACQ considered the QCAT limit to be insufficient to cover the costs of some major repairs and would certainly limit the tribunal's ability to order replacement of a vehicle: ‘Failure to address this point would mean that claims for higher values would need to be dealt with by a higher court, which we believe to be undesirable’.234 CLC added further support to increasing the limit:
We believe that QCAT's jurisdiction to deal with these types of consumer complaints needs to be increased to a more realistic amount. These disputes should be able to be
228 CALC, Submission 22, p 10. 229 Professor Stephen Corones, Submission 4, p 19, citing Productivity Commission, Review of Australia’s Consumer Policy Framework. 230 Professor Stephen Corones, Submission 4, pp 19-20, citing P O’Shea, The Lion’s question applied to industry- based consumer dispute resolution schemes (2006) 8(5) ADR Bulletin 1, 4. 231 Stewart Lette, Submission 6, p 5. 232 Stewart Lette, Submission 6, p 5. 233 Connie Cicchini, Submission 12, p 3. 234 RACQ, Submission 15, p 4.
58 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
dealt with without undue technicality, and keeping these matters within QCAT's jurisdiction is important.235
At the committee’s Brisbane public hearing, Mr Shane Budden of the QLS, commented on the current jurisdictional threshold:
It has probably come across in many of the submissions that $25,000 appears to be a low figure for QCAT. That might have been okay when you could get a car for $15,000. These days, $25,000 does not buy you much of a car. Most of the popular sedans that families tend to buy or the SUVs are in the $40,000 to $60,000 range or greater.236
Industry also supported an amendment to the jurisdictional limit. Mr Tony Weber, Chief Executive of FCAI, provided further comment on his organisation’s suggestion that the QCAT jurisdictional limit be increased to $40,000:
I do not think there is any great science in the figure of $40,000. We just think that expanding it beyond the $25,000 threshold at the moment provides greater opportunity for people to utilise that facility. 237
Providing context to the issue, Mr Weber noted that ‘…the average price of a car purchased in Australia last year was $38,000’.238
Legal representation ‘as of right’ At the public hearing, Mr Budden of the QLS, argued for the importance of legal representation, at QCAT or in court, in a context of complex, technical disputes:
…we consider these sorts of areas of the law very, very complex. It is not something that a layperson is going to get their head around very quickly and, in fact, it is not something necessarily that a magistrate or a tribunal member will be particularly familiar with. In these sorts of matters, magistrates and tribunal members rely heavily on the parties to put the material before them and that includes the right area of the law and the right level of evidence. That happens when you have legal representatives involved… It is imperative, in our view, that, even if you amend the law in the way that Professor Corones suggests or in a way that many other people have suggested in their submissions, without access to legal representation you will not overcome the problems you have here.239
Expansion of powers LAQ recommended that:
…the jurisdiction of QCAT be expanded to provide for the tribunal to grant injunctive and declaratory relief as provided for under the ACL as a remedy for complaints about lemon cars purchased for personal use.240
235 CLC, Submission 19, p 5. 236 Hansard transcript, public hearing, 28 October 2015, pp 5-6. 237 Hansard transcript, public hearing, 28 October 2015, p 23. 238 Hansard transcript, public hearing, 28 October 2015, p 23. 239 Hansard transcript, public hearing, 28 October 2015, p 3. 240 LAQ, Submission 16, p 4.
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As mentioned earlier, given the risks associated with litigation, CLC claimed consumers are reluctant to bring applications under section 250 of the ACL, and recommended that consideration be given to giving QCAT jurisdiction to make such declarations, such as the express powers enjoyed by VCAT.241
Simplification and enhanced governmental powers Mr Stewart Lette sought simplification of the process to deal with ‘lemon’ motor vehicles, and more powers to be given to the relevant government departments, so as to decrease time and money spent in courts.242 AMEP placed importance on having the right laws in place and that proper resource is available for consumers of new vehicle: ‘It is also important that it is an easy process for the consumer to find a resolution’.243
Increased efficiency Ms Connie Cicchini desired increased efficiency of mediation, which she claimed could be obtained by government providing a dispute resolution form listing how and when consumer guarantees or ‘acceptable quality’ have not been met: ‘This would not only assist the consumer, it would also benefit dealerships and any parties involved in the mediation process when making claims for redress’.244 Ms Cicchini attached a proposed form as part of her written submission to the committee.
Extended manufacturers warranties Ms Cicchini also proposed that manufacturers and distributors could provide extended manufacturers warranties for any vehicle deemed to be a ‘lemon’ and for any vehicles that have been recalled.245
Expansion of law to include used-motor vehicles As mentioned earlier, LAQ recommended that ‘…the current statutory warranty for second hand cars be extended to cars which are more than 10 years old and which have travelled more than 160,000kms’.246
Cooling-off periods CLC argued that the laws relating to cooling-off periods need to be reviewed:
The current very short cooling off period applicable to second-hand cars should be extended and a cooling-off period should apply to new car purchases. Furthermore, we do not believe that cooling-off periods in relation to motor vehicles should ever be allowed to be waived.247
Further, CLC claimed that, for disadvantaged clients who are more vulnerable to making poorly considered on-the-spot decisions, longer and more extensive cooling off periods would be of great value:
241 CLC, Submission 19, p 5; section 250 of the ACL gives the court the power to make a declaration that a term of a contract is unfair. In Queensland, section 51 of the Fair Trading Act (Qld} 1989 provides that an application for a declaration that a term of a contract is unfair must be heard in the District Court. 242 Stewart Lette, Submission 6. 243 AMEP, Submission 9, p 1. 244 Connie Cicchini, Submission 12, p 3. 245 Connie Cicchini, Submission 12, p 3. 246 LAQ, Submission 16, p 3. 247 CLC, Submission 19, p 5.
60 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
From our perspective, it is very important for clients to be able to rely on a cooling-off period if they have made hasty, ill-considered decisions about purchasing property they cannot actually afford. (This could be particularly important if a client is experiencing emotional trauma or has a mental health condition that heightens a tendency towards impulsive behaviours.)248
Limitation on charge for use of ‘lemon’ CALC did not support the imposition of an obligation on consumers to pay a ‘reasonable amount’ for use of a lemon for those periods the consumer has been able to drive it, however if a ‘reasonable amount’ charge is implemented, consumers should:
…at the very least, only be required to pay for the period between purchase and the first occurrence of the vehicle being off-road due to defect and service… if a ‘reasonable amount’ charge is implemented, the amount the consumer is obligated to pay should be an amount that is capable of objective calculation and not ill-defined.
There can be complication when calculating a charge for use of a vehicle… any amount should be based on a mathematical formula (e.g. based on the purchase price of the vehicle and the amount of time it has been used by the consumer).249
Independent assessors/experts Professor Corones claimed: ‘The cost of securing proof that a consumer has been sold a lemon may prevent a purchaser of a lemon from securing justice’.250 He noted that he Victorian Lemon Law Inquiry considered the appointment of independent assessors to deal with the issues of how consumers prove that they have met the threshold criteria set out in the Victorian Lemon Law Report.251 Further, he cited a similar CCAAC recommendation to the Minister for Competition and Consumer Affairs that: ‘State and Territory governments should give active consideration to the appointment of specialist adjudicators and assessors to deal with disputes involving motor vehicles and statutory consumer guarantees’.252 In a context where QCAT and courts are unsatisfactory, as they possess no investigative powers and specialised knowledge in relation to vehicle disputes, Professor Corones concluded that ‘…assessors would be able to provide impartial advice where the consumer and the manufacturer provide conflicting evidence as to the threshold criteria issues’.253 Also critical of existing processes, specifically the application of the ACL by QCAT, RACQ believed the aim of any new legislation should be to place all parties on equal footing with respect to access to legal, financial and technical resources that could otherwise be an impediment to consumers having issues fairly resolved:
We believe a specialist group that has relevant technical and industry experience is needed to assist the adjudicator in making informed assessments of such cases.
248 CLC, Submission 19, p 5. 249 CALC, Submission 22, p 9. 250 Professor Stephen Corones, submission 4, p 18. 251 Professor Stephen Corones, submission 4, p 18. 252 Professor Stephen Corones, submission 4, p 18, citing CCAAC. 253 Professor Stephen Corones, submission 4, p 18.
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This would largely alleviate the imbalance of power/knowledge between the consumer and the vehicle manufacturer and would in many cases eliminate the need to engage an independent and suitably qualified person to support the consumer, as the specialist group could in effect become the independent party to the proceedings. Our view is that this would not and should not remove the ability of either party to obtain expert technical assistance if they wished. In some cases such support may still be essential in providing a detailed explanation of the issues involved.
Importantly, it would be necessary to provide members of the specialist group with appropriate legal protection to ensure they can conduct their roles without fear of litigation from an aggrieved party.
The make-up of the proposed specialist group and its funding arrangements would need detailed consideration.254
8.2 CCAAC recommendations As mentioned earlier, although CCAAC found that (at the time) it did not consider the case for the introduction of a separate 'lemon law' for motor vehicles to have been made, the final report stated that Australian governments should monitor the effectiveness of the national statutory consumer guarantees as they apply to motor vehicles, including gathering data about the number and nature of complaints and disputes about statutory consumer guarantees involving new and used motor vehicles. As well as ensuring adequate information is given to consumers, CCAAC also recommended that State and Territory governments should give active consideration to the appointment of specialist adjudicators and assessors to deal with disputes involving motor vehicles and statutory consumer guarantees. CCAAC reported that ideally state and territory governments should develop a consistent approach for tribunals and small claims processes for uniform claim limits, uniform remedies and uniform filing fees and administration processes. One recommendation made by CCAAC more generally, was that consumers should have access to low- cost dispute resolution mechanisms, such as tribunals or small claims processes, to facilitate timely resolution of claims. CCAAC noted that there are number of different state and territory tribunal systems operating each with different monetary limits, procedures and filing fees.255
8.3 Committee recommendations Recommendation 1:
The committee recommends the government consider the contents of the committee’s report, particularly the committee’s recommendations, as part of the government’s consideration of issues relating to, and its participation in, the Australian Consumer Law Review 2016.
254 RACQ, Submission 15, p 3. 255 CCAAC, Consumer Rights – reforming statutory implied conditions and warranties, October, 2009, p 72.
62 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Recommendation 2:
The committee recommends the government bring the committee’s report, particularly the committee’s recommendations, to the attention of Consumer Affairs Australia and New Zealand (CAANZ) and the government bodies, State and Territory regulators and other entitles comprising CAANZ, such that the committee’s report may inform the Australian Consumer Law Review 2016.
Recommendation 3:
The committee recommends that the government appropriately amend existing Queensland legislation to ensure effective implementation of the committee’s recommendations included in this report, but do so as part of any national approach to ‘lemon’ laws for new motor vehicles in Australia.
Recommendation 4:
The committee recommends that the appropriate mechanism to ensure a national approach to changes in existing ‘lemon’ motor vehicle laws, is to amend the Australian Consumer Law, such that it specifically sets out nationally consistent laws applicable to new ‘lemon’ motor vehicles.
Recommendation 5:
The committee recommends the incorporation of clear and practical definitions and provisions into any nationally consistent laws applicable to new ‘lemon’ motor vehicles, including: mandatory time and repair limits, such as imposing limits on the number of times a supplier/manufacturer can attempt to repair a defect in a motor vehicle and the number of days the vehicle can be ‘off the road’, before a buyer must be offered a refund or replacement
clarity as to when a supplier/manufacturer must repair, refund or replace a motor vehicle an adequate definition of what constitutes a ‘lemon’ motor vehicle, such as – o adequate definitions of ‘acceptable quality’ and ‘fit for purpose’ o clarity as to the distinction between major and minor defects o clarity as to the distinction between a ‘lemon’ and generic design manufacturing defects (requiring general recall) or serious design safety defects (requiring urgent attention).
Recommendation 6:
The committee recommends the government consider appointing independent assessors, with investigative powers and specialised knowledge in relation to motor vehicle disputes, to deal with the issues of how consumers prove that they meet the ‘lemon’ motor vehicle threshold criteria (when established – see recommendation 5), as an alternative to consumers initiating Queensland Civil and Administrative Tribunal (QCAT) and/or court proceedings.
Legal Affairs and Community Safety Committee 63 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Recommendation 7:
The committee recommends the government change the Queensland Civil and Administrative Tribunal (QCAT) jurisdictional limit of $25,000, for matters involving new motor vehicles with major defects. Government committee members recommend the limit be removed, so no cap applies. Non- government committee members recommend the limit be increased to $40,000.
Recommendation 8:
The committee recommends the state and commonwealth governments implement business and consumer awareness programs, with the intention of educating industry and consumers on the intent of the Australian Consumer Law, including the consumer guarantees.
Recommendation 9:
The committee recommends the government review cooling-off periods for new motor vehicle purchases, with consideration as to whether such periods should be unable to be waived by the purchaser and whether disadvantaged persons should receive the benefit of a longer period.
64 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
9. Consumer protections in overseas jurisdictions Throughout the Inquiry, stakeholders have referred the committee to existing laws in overseas jurisdictions as a potential guide as to how ‘lemon’ laws might be implemented in Queensland or in Australia generally. This section of the report examines the laws in various jurisdictions.
9.1 Legislative protections in the United States of America The 'lemon' laws in the United States of America (USA) generally focus on a breach of a manufacturer's warranty for new vehicles which makes the manufacturer legally responsible for repairs to the consumer's vehicle.
Federal ‘lemon’ law The following information, sourced from the ‘Lemon Law America’ website, 256 but reproduced in an abridged and amended form, provides some background on the Magnuson-Moss Warranty Act, which is often referred to as the USA’s federal ‘lemon’ law:
In 1975, Congress enacted the Magnuson-Moss Warranty Act, which provides that if a warrantor of a consumer product fails to comply with the obligations of its warranty, i.e. repair defects in materials or workmanship, after being afforded a reasonable opportunity to do so, that the consumer may bring suit not only for damages, but also for attorneys' fees, and costs. This was important, because it allows law firms to represent consumers without charging them for their time and expenses. This 'fee- shifting' provision levels the playing field so that an individual consumer may hire an attorney who is experienced in handling 'lemon' laws and 'breach of warranty' claims to take on some of the world's largest corporations. Moreover, this provision allows consumer attorneys to do the work that state agencies are often too burdened or unable to handle.
Congress knew that without this attorneys' fee provision that most consumers would not be able to afford to hire an attorney to get rid of their 'lemon' car, truck, boat, motorcycle, refrigerator, and other consumer products. In lobbying for the inclusion of this "fee-shifting" provision, Senator Warren Magnuson noted:
Because enforcement of the warranty through the courts is prohibitively expensive, there exists no currently available remedy for consumers to enforce warranty obligations. If warrantors who did not perform as promised suffered direct economic detriment, they would have strong incentives to perform. Therefore, there is a need to insure warrantor performance by monetarily penalizing the warrantor for non- performance and awarding the penalty to the consumer as compensation for his loss. One way to effectively meet this need is by providing for reasonable attorneys' fees and court costs to successful consumer litigants, thus, making consumer resort to the court feasible. Senate Report - No. 93-151, 93rd Congress, First Session, at pp. 7-8 (1973).
Following the enactment of the Magnuson-Moss Warranty Act into law in 1975, states throughout the USA drafted their own 'lemon’ laws with similar 'fee-shifting' provisions. While every state lemon law is different, virtually every state has recognised that in order
256 Cohen, Scott M., ‘Federal and State Lemon Laws Require the Automobile Manufacturer to Pay Your Attorneys' Fees and Costs’, Lemon Law America website: http://www.lemonlawamerica.com/blog/2014/01/15/federal-and-state-Iemon-laws-require-automobile- manufacturer-pay-your-attomeys-fees
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for the law to be enforceable there must be some provision that allows the consumer to recover their attorneys' fees and costs from the automobile manufacturer.
As noted by the court, in the case of State Farm Fire and Casualty v. Miller Electric Co., fee-shifting provisions were '…intended to encourage consumers to pursue their legal remedies by providing them with access to legal assistance’.257 The court recognised that ‘…without such assistance, consumers would frequently be unable to vindicate their warranty rights accorded by law.’258
Appendix F provides an international jurisdictional overview of ‘lemon’ laws, including the laws applicable in the USA. Specifically, Appendix G includes a detailed description of lemon law criteria in the USA, outlining the different threshold levels in various states.
Dispute resolution mechanisms Although, consumers are generally able to sue for breach of warranty under ‘lemon’ laws in the USA, many states require that informal dispute resolution mechanisms are utilised before going to court. An impartial third party is required to resolve warranty disputes either through conciliation, mediation or arbitration. Some jurisdictions have state-run arbitration mechanisms available and/or certified guidelines for arbitration. If the vehicle is found to be a lemon through either of these processes, the manufacturer must offer the consumer a replacement vehicle or refund of the purchase price (usually with a provision for a mileage reduction). Further detail regarding New York's ‘lemon’ laws is contained in Appendix H, which excerpts that state’s guide for consumers, including a summary of its arbitration program’s operational procedures.
Indiana ‘lemon’ law In order to provide an example of a state-based ‘lemon’ law, Appendix I outlines the standards of the Indiana Lemon Law and further details the concept of 'non-conformity'. Remedies differ depending upon the severity of the situation and range from a new motor vehicle, or full buyback, or a partial refund or extended warranty along with continued ownership of the car.
Concluding comment The federal Magnuson-Moss Warranty and state Lemon Laws possibly enable consumers to seek redress in cases they may otherwise be reluctant to pursue.259 The 'fee-shifting' provisions of these laws make them more pursuable under the US court system, which generally requires parties to bear their own 'court action' costs. In so doing, the laws make manufacturers more accountable when their products do not operate as they should. The 'fee-shifting' approach seems to mimic the existing 'costs follow the event' practice of most jurisdictions in Australia, as well as the United Kingdom and Canada.
257 State Farm Fire and Casualty v. Miller Electric Co., 596 N.E.2d 169,171 (Ill. App. 1992). 258 State Farm Fire and Casualty v. Miller Electric Co., 596 N.E.2d 169,171 (Ill. App. 1992). 259 The provision states that: ’If a consumer finally prevails in any action brought under paragraph (1) of this subsection, he may be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of cost and expenses (including attorneys' fees based on actual time expended) determined by the court to have been reasonably incurred by the plaintiff for or in connection with the commencement and prosecution of such action, unless the court in its discretion shall determine that such an award of attorneys' fees would be inappropriate.’
66 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
9.2 Legislative protections in other countries As mentioned earlier, Appendix F provides an international jurisdictional overview of ‘lemon’ laws. It provides an outline of 'lemon' laws, or equivalent laws, that provide consumer protections when purchasing a new motor vehicle in a number of other jurisdictions, including: Canada - Canada does not have 'lemon' laws - the Canadian Motor Vehicle Arbitration Plan (CAMVAP) is a national resolution dispute program for new cars and vehicles made in the previous four years (that have travelled less than 160,000 kilometres) - most manufacturers are covered by CAMVAP New Zealand - like Australia, New Zealand has legislation relating to generic consumer protections260 - if a dispute cannot be resolved through these means, consumers may make a claim to the motor vehicle disputes tribunal (MVDT) Singapore - defective goods, including vehicles, are covered under national legislation - the legislation applies to second-hand goods China - in 2013, China implemented 'lemon' laws known as the 3 Guarantees or San-Bao - it includes guarantees on repairs, changes and returns Germany - Germany has a 'lemon' law - the Burgeliches gesetz buch (para 434ss) - German dealerships must honour a one-year warranty for all used cars they sell European Union (EU) - European Union Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999 covers certain aspects of the sale of consumer goods and associated guarantees - it provides a minimum level of consumer protection which deals with lack of conformity with a contract of sale.
260 http://www.lawcom.gov.uk/wp-content/uploads/2015/04/apd_website.pdf
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Appendix A List of Submissions
Sub # Submitter
001 Ashton Wood 002 Deidre Evans 003 Noel Newton 004 Professor Stephen Corones 005 Michael & Sylvia Humphries 006 Stewart Lette 007 Jeanette Stevens 008 Diedre Alexandria 009 Sharyn Littler 010 Jewls Neale, Victoria 011 Pamela Pearce & Benjamin Besanko 012 Connie Cicchini 013 Queensland Law Society 014 Federal Chamber of Automotive Industries 015 RACQ 016 Legal Aid Queensland 017 Motor Traders Association Queensland 018 Australian Automotive Dealer Association Ltd 019 Caxton Legal Centre Inc 020 Fiat Chrysler Australia 021 Bruce Kelson (plus additional information) 022 Consumer Actionn Law Centre 023 Frank Bond 024 Tracy Leigh 025 Queensland Association of Independent Legal Services Inc
68 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Appendix B List of Witnesses In order of appearance before the Committee:
Cairns – 3 September 2015
Mr John Gielis
Brisbane – 28 October 2015
Professor Stephen Corones, Professor of Law, QUT Queensland Law Society (QLS) Mr Shane Budden, Manager, Advocacy and Policy
Mr Ashton Wood - ‘destroy my jeep’ Ms Connie Cicchini - ‘Lemon Laws 4 Aus’ Mr Stewart Lette - ‘Lemon Vehicles in Aus’
RACQ Mr Steve Spalding, Executive Manager, RACQ Technical & Safety Policy Department Legal Aid Queensland Mr Paul Holmes, Civil Justice Services
Federal Chamber of Automotive Industries (FCAI) Mr Tony Weber, Chief Executive Motor Trades Association – Queensland (MTA Qld.) Ms Kellie Dewar, General Manager Australian Automotive Dealer Association Ltd. (AADA) Mr Bruce McDonald, Chief Executive Officer
Legal Affairs and Community Safety Committee 69 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Appendix C Summary of experiences of consumers who have purchased ‘lemon’ motor vehicles
Submitter Experience
Ashton Wood - purchased a new Jeep in 2010 Submission 1 within 13 months, experienced nine issues and three complete failures
requested a refund or replacement vehicle
dealt with both dealer and importer/manufacturer (i.e. Fiat Chrysler head office in Melbourne)
Deidre Evans – purchased a new 2012 Ford Submission 2 experienced stalling and gear/clutch issues within six months of purchase these issues repeated despite servicing and parts being replaced under warranty dealt with various Ford dealers and Ford head office
Noel Newton – purchased a new 2014 Mitsubishi Submission 3 experienced vibration when exceeding 80 kmph after five failed repair attempts submitter requested a refund or replacement dealt with both dealer and manufacturer
Michael and purchased car in 2010 Sylvia it failed to start and required towing eight times Humphries - Submission 5 recurring problems and replacement of parts dealt with both dealer and manufacturer
Stewart Lette – purchased new vehicle manufactured by Fiat Chrysler in 2013 Submission 6 11 different issues, some recurring, and the first of which was detected immediately upon purchase some issues never fixed dealt with dealer and importer/manufacturer (i.e. Fiat Chrysler head office in Melbourne) obtained various reports by independent repairers/specialists – requested a refund or replacement vehicle
Jeanette purchased new Mitsubishi in 2010 Stevens – car driven infrequently and only for small trips, however regularly Submission 7 serviced by dealer
70 Legal Affairs and Community Safety Committee ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
in August 2015, vehicle suffered a system failure, which costs approx. $3,000 to fix manufacturer’s Australian office refused to assist and directed submitter to Japanese head office dealer also contacted Mitsubishi Australia and was told warranty had expired
Diedre purchased new Toyota Alexandria – loud rattle from the start Submission 8 had first service and then returned to be repaired each week for the following six weeks dealt with both dealer and manufacturer manufacturer has not provided assistance requested a recall of the vehicle
Jewls Neale – purchased new Chrysler in April 2014 (in Victoria) Submission 10 first problem reported to dealer within the first eight weeks repeated problems since then repeatedly dealt with dealer, manufacturer and another dealer
Pamela Pearce purchased new Nissan in 2013 and Benjamin within 2 weeks problems started Besanko – Submission 11 various problems occurred and persisted, requiring repeated repair dealt with both dealer and manufacturer sought refund from dealer
Connie Cicchini purchased new Alfa Romeo in 2009 – Submission 12 during the three year manufacturer’s warranty period, the vehicle had been back to the dealer approx. 20 times and spent over 160 days there dealt with dealer, importer, Italian manufacturer and the international CEO of Fiat Chrysler vehicle could not be repaired upon expiration of extended one year manufacturer’s warranty sought refund or replacement from dealer
Frank Boyd – submitter’s wife purchased a Holden Captiva in June 2014 Submission 23 various and repeated problems, the earliest arising within a month of purchase – the motor vehicle has been subject to many repair attempts - some problems remain unrectified dealt with both dealer and manufacturer sought refund from manufacturer
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Appendix D Summary of outcome of experiences of consumers who have purchased ‘lemon’ motor vehicles
Submitter Outcome of experience
Ashton Wood - after considerable efforts to resolve, manufacturer offered submitter a Submission 1 trade-in, being $22,500 for a $44,000 vehicle QCAT application dismissed, as claim exceeded $25,000 jurisdictional limit destroyed his Jeep with the assistance of financial sponsors
Deidre Evans – after prolonged difficulties, submitter was offered inferior replacement Submission 2 vehicle (also a manual, instead of an automatic)
Noel Newton – after 63 days and various efforts to resolve, submitter was offered Submission 3 replacement with a like vehicle took possession of replacement at 133 days
Michael and possesses a five year old car with a recurring major failure and expired Sylvia warranty Humphries - Submission 5
Stewart Lette – submitter sought and was initially refused refund or replacement Submission 6 mutually acceptable outcome achieved when agreement reached with new owner of dealership (which meant scheduled mediation did not need to proceed) however submitter still ‘out of pocket’ and noted the time and stress involved
Jeanette no redress obtained and warranty expired Stevens – submitter considers she has been sold a faulty vehicle Submission 7
Diedre no redress obtained Alexandria – rattle persists Submission 8 manufacturer will not recall vehicle another Toyota dealer (i.e. not the seller) is unable to obtain manufacturer’s approval to strip vehicle to identify problem
Jewls Neale – Victorian experience Submission 10 no permanent solution
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problems persist and vehicle not fit for purpose submitter attempted trading in vehicle, but couldn’t recoup initial outlay unable to obtain a replacement vehicle has lost time dealing with the issues, including missing work and appointments and missing opportunities, and losing freedom
Pamela Pearce dealer refused to refund and Benjamin submitter sold vehicle at a loss (paid $32,500, sold for $22,000 at 18 Besanko – months old with 25,000km on clock) Submission 11
Connie Cicchini dealer refused to refund or replace – Submission 12 despite purchasing vehicle for approx. $40,000, submitter made QCAT claim for maximum of $25,000 submitter pursued QCAT action for over two years and won an appeal of a decision where the Adjudicator erred on a matter of law
Frank Boyd – problems not yet resolved Submission 23 submitter suffers from pre-existing injury and has suffered extreme pain and discomfort as a result of ‘lemon’ experiences wife afraid to drive vehicle manufacturer refused to refund or replace, claiming defects were not major and were fixed in a reasonable amount of time has engaged a solicitor currently pursuing the matter with ACCC and OFT
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Appendix E Guarantees and warranties under the ACL and State or Territory legislation and remedies for breaches
74 Legal Affairs and Community Safety Committee Appendix E Guarantees and warranties under the ACL and State or Territory legislation and remedies for breaches
Guarantee or warranty Remedies for breaches
Cth Australian Consumer Law For a breach of the consumer guarantees: The ACL is contained in a schedule to the Competition and Consumer Act 2010 (Cth) (CCA). Schedule 2 is the ACL. The ACL is applied as a Commonwealth law to the conduct of corporations. Each state and territory applies the ACL as a law of its If a minor failure –if supplier given own jurisdiction covering corporations and individuals in the relevant state or territory. chance to repair within a ‘reasonable time’ but refuses to fix or it cannot The main features of the ACL as it applies to consumer transactions1 (with the focus being on the purchase of a motor be fixed within reasonable time – vehicle) are as follows:2 consumer may: applies to ‘consumers’ (generally goods/services up to $40 000 or is over $40 000 but for personal, domestic, get repairs done elsewhere household use. Regarding motor vehicles, applies mainly to sales to consumers from a dealer as opposed to private and recover against supplier sale, the reasonable costs of nine (9) statutory guarantees applying to sales of new and used vehicles. The guarantees are that the vehicle: doing so, or
o is of acceptable quality (probably the most significant of the guarantees. Tests to decide provided in s 54 as will reject the vehicle depend on nature, price and other circumstances about the car). This guarantee will not apply in certain instances if a major failure (or problem cannot (driven in abnormal way), be fixed within reasonable time) –
1 Chapter 3, Part 2 of the ACL sets out the relevant provisions.
2 The ACL also provides core consumer protections which prohibit conduct such as misleading and deceptive conduct, unconscionable conduct and unfair standard contract forms; protections against certain ‘unfair’ practices such as pyramid selling, unsolicited supply of goods and services, component pricing etc. It also sets out a national law for product safety.
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
Queensland Parliamentary Library and Research Service Research and Information Service Page 1 Guarantee or warranty Remedies for breaches
o is fit for specified purpose, consumer may: o fits description, reject the vehicle, o matches sample/demonstration model, o satisfies any additional express warranties made about it, recover compensation for o is free of encumbrances (guarantee of clear title) unless first informed buyer of limits on title, loss of value, or o is able to enjoy undisturbed possession, seek damages for o is free of hidden securities/charges, and reasonably foreseeable loss o manufacturers or importers guarantee to take reasonable steps to make spare parts and repair facilities available suffered. for a reasonable time after purchase. s 262 sets out certain circumstances if any statutory guarantees not met but it is not a major failure to comply (minor failure) consumer cannot, at first in which a consumer cannot the instance, reject the car and demand refund/replacement. Must allow supplier to remedy/repair failure within a vehicle, including that rejection reasonable time. What is a ‘reasonable time’ depends on matters such as availability of parts given age and type of period has elapsed, consumer has vehicle etc, lost or destroyed the vehicle or if a statutory guarantees not met and it amounts to a major failure to comply, the consumer can reject vehicle and used/driven abnormally. exercise other rights (compensation, damages). A ‘major failure’ is defined under s 260 – in essences will be where reasonable consumer would not have bought if had known about the problem, vehicle substantially unfit for normal purpose or for disclosed/specified purpose, it is unsafe, significant departure from description/demonstration model,
the ACL rights and remedies are additional to any dealer’s or manufacturer’s warranty that provide for repairs, replacement or refund of a vehicle if it does not remain free of defects for a specified time. Thus the nine consumer guarantees still operate and enable the consumer to reject the car and seek a replacement or refund as well as compensation for a reasonably foreseeable loss (see column to right). The ACL rights and guarantees may also be as good as or better than any extended warranty that a consumer might be inclined to purchase, and
the ACL also provides for product recalls and when vehicles are bought under a linked credit arrangement.
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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Qld Motor Dealers and Chattel Auctioneers Act 2014 (Qld) (MDCAA), Schedule 1; Part 3 of the Fair Trading Act 1989 (Qld) Used cars covered by Sch 1 of the applies the Australian Consumer Law as Queensland law (Australian Consumer Law (Queensland) Act (Qld)). MDCAA:
Used vehicles if dealer does not accept the Schedule 1 of the MDCAA provides statutory warranties for used vehicles (not new vehicles) bought from licensed dealers: defect is covered or fails to a dealer selling a used car warrants that it is free of defects at the time of taking possession and the dealer will repair within the 14 days or does repair any defects appearing during the warranty period at no cost to the buyer, not repair it properly, the buyer can apply to the Queensland warranty only applies to a used vehicle that has been driven less than 160 000 km and the date of manufacture is Consumer and Administrative less than 10 years before the sale, Tribunal (QCAT) for an order warranty expires after 3 months or after being driven 5 000 km (whichever first occurs), (see s 13 MDCAA)
warranty does not apply to some vehicles, such as commercial vehicles, vehicles being sold on consignment for a the orders made include private seller etc), extending the warranty period, warranty does not apply to some defects such as defects in tyres, airbags, radiator hoses, oil filters etc, the dealer pay the reasonable costs of having the repair must give written notice to dealer of defect before warranty expires and deliver vehicle to dealer or nominee for undertaken elsewhere. repair. The time allowed for repair is 14 days unless a reasonable excuse, and New cars covered by ACL (Qld) Act. cooling off period for used cars of one day and some types of sales excluded. Various provisions apply regarding the cooling off period and how termination is to occur.
New vehicles
MDCAA warranties will not apply. Buyer must rely on the dealer’s and/or manufacturer’s warranty and the 9 consumer guarantees under the ACL apply and the remedies therein (as applied in Queensland as the Australian Consumer Law (Queensland) Act (Qld)).
Buyers of used cars can seek rely on ACL guarantees where statutory warranty under MDCAA does not apply or has expired. The ACL rights apply for a reasonable amount of time after purchase and depends on factors such as
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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type of car, price, quality and other factors which may – depending on the circumstances – be more generous than the MDRA warranty,
rights under ACL cannot be excluded by contract,
redress depends on whether defect amounts to a major failure of supplier to comply with guarantee or a minor failure,
if a minor failure must initially allow supplier to repair – must repair within a reasonable time,
if a major failure (or refusal of failure to repair within reasonable time), buyer can reject the vehicle and seek a refund or replacement or can keep the vehicle and seek compensation for any drop in value due to the defect, and
If a major failure and want to reject and seek a refund or to keep the car and seek compensation for reduced value or to recover damages for foreseeable loss (s 259 ACL), then s 50 of the ACL (Qld) Act provides:
o if it amounts to a minor civil dispute (up to $25 000) go to QCAT, or
o if it falls outside a minor civil dispute, go to the court with relevant monetary jurisdiction.
NSW Motor Dealers and Repairers Act 2013 (MDRA), Part 4; Fair Trading Act 1987 (NSW), Part 3. Part 5 MDRA:
Part 4, Division 4 MDRA – ‘Dealer guarantees’ apply to licensed dealers under MDRA in respect of new and used vehicles: unjust conduct - Fair Trading Secretary can seek enforceable obliged to repair (by repairer possessing a tradesperson’s certificate) a vehicle (with full fitted accessories) if it is undertakings, defective within the limitation period. The obligation is to place the vehicle in a reasonable condition, having regard to its age, dispute resolution – informal and formal complaints, ‘defective’ means in breach of a consumer guarantee under ss 54-57 of the ACL. It must be or become defective investigations, before the end of the limitation period, whether or not it is known during this period, rectification order – requires limitation period: new vehicles – 12 month less 1 month for each 2,000 km that the vehicle was driven before it
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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was sold or 20 000 km dealer guarantee, provided it was driven less than 15 000 km when sold (s 69). If it has dealer/repairer to rectify defect been driven for 15 000 km or more when sold, the limitation distance is 5 000 km and time limit is 3 months, within timeframe, and
does not apply to some vehicles (eg sold at auction) and some exclusions (eg misuse or negligence after sale), and rescission orders – application made by Secretary to court if cooling-off period only for linked credit arrangements (1 day only). vehicle in irreparable condition. Part 3 of the Fair Trading Act 1987 (NSW) applies the ACL to NSW as the Australian Consumer Law (NSW) Act: Part 8 MDRA – Motor Dealers’ buyers of new and used cars can seek rely on ACL guarantees where statutory warranty under MDRA does not Compensation Fund enables apply or has expired. The ACL rights apply for a reasonable amount of time after purchase and depends on factors consumers to make a claim if they such as type of car, price, quality and other factors which may – depending on the circumstances – be more suffer loss due to conduct of repairer generous than the MDRA warranty, or dealer such as incompetent repair for example if the vehicle might have travelled more than 15 000 km at time of sale or if the warranty has expired work, a breach of contract, or failure (provided the requirements/prerequisites for ACL applying exist), to give clear title. Maximum compensation payable is $40 000 rights under ACL cannot be excluded by contract, and
redress depends on whether defect amounts to a major failure of supplier to comply with guarantee or a minor failure.
NT Consumer Affairs and Fair Trading Act (NT), Part 10 (warranties by motor vehicle dealers) and Part 4 applying the ACL. Consumer can contact NT Consumer Affairs for assistance which may be Part 10 Division 5, Subdiv C – dealer warranties in respect of new and used vehicles: via a dispute resolution process. dealer liable to repair and make good the defect so as to place the vehicle in a reasonable condition having regard to its age and distance travelled,
defect must appear or occur (for new cars):: o if vehicle was sold subject to an unexpired manufacturer’s warranty – before its expiry, or
o in any other case – the expiry of 3 months after the sale or before being driven 5 000 km (whichever first
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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occurs), and
o some exclusions from liability under s 169 (eg misuse of vehicle, use for motor racing, certain commercial vehicles,
purchaser can sign a document specifically excluding application of above warranties (subject to specified warning being given by authorised person who must also witness purchaser’s signature to document),
Fair Trading Commissioner may grant temporary exemption from application of warranties for up to 12 months, and
no cooling-off period.
Part 4 of the Consumer Affairs and Fair Trading Act (NT) applies the ACL to the NT as the Australian Consumer Law (NT) Act
buyers of new and used cars can seek rely on ACL guarantees where statutory warranty under Part 10 does not apply or has expired. The ACL rights apply for a reasonable amount of time after purchase and depends on factors such as type of car, price, quality and other factors which may – depending on the circumstances – be more generous than the MDRA warranty,
rights under ACL cannot be excluded by contract, and
redress depends on whether defect amounts to a major failure of supplier to comply with guarantee or a minor failure.
TAS Motor Vehicle Traders Act 2011 (Tas) (MVTA), Part 4, Australian Consumer Law (Tasmania) Act 2010 (Tas)
Under the MVTA, Part 4: Rescission orders up to 90 days after delivery if contract does statutory warranties apply to new and used non-commercial vehicles (warranted vehicles) that have travelled less not meet certain requirements than 120 000 km at time of sale and fitted with compliance plates less than seven years before sale, (time limits apply), for new vehicles, trader warrants fitness for purpose to such extent as is reasonable in the circumstances to expect,
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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having regard to the age and other stated matters and that vehicle and all its parts in working order, compensation order where trader convicted of MVTA length of warranty is from day of taking delivery to expiry of 3 months or being driven 3000 km (whichever first offence resulting in loss to occurs), consumer (can also bring civil purchaser must claim for repair usually within 7 days of defect occurring and trader must repair to accepted industry claim), and standard and, once repaired, vehicle must be fit for purpose for which such vehicles are commonly purchased as is dispute resolution assistance reasonable to expect having regard to relevant circumstances, and is in a reasonable condition having regard to stated from Consumer Affairs and Fair matters, Trading Tas. some instances where warranty ceases (use of vehicle for racing or rally driving, as a hire car, emergency vehicle or taxi, repossession or is sold, or if odometer reading altered),
number of defects not covered listed in s 45(2) MVTA (eg arising from misuse or negligence after delivery, unauthorised repairs or modifications, intentional damage etc),
section 32 of MVTA also imposes requirement that trader ensure vehicle is fit for purpose, breach of which is an offence, and
no cooling-off period.
Under the Australian Consumer Law (Tasmania) Act 2010 (Tas):
buyers of new and used cars can seek rely on ACL guarantees where statutory warranty under the MVTA does not apply or has expired. The ACL rights apply for a reasonable amount of time after purchase and depends on factors such as type of car, price, quality and other factors which may – depending on the circumstances – be more generous than the MDRA warranty,
rights under ACL cannot be excluded by contract, and
redress depends on whether defect amounts to a major failure of supplier to comply with guarantee or a minor failure.
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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Vic Motor Car Traders Act 1986 (Vic) (MCTA), Chapter 2 of Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACL dispute resolution options with (Victoria)) assistance of Consumer Affairs Victoria Used motor vehicles: statutory guarantees under the MCTA apply only to used vehicles purchased from licensed traders (if up to 10 rescission of contract by VCAT years old and travelled less than 150 000 km) and lasts 3 months or 5 000 km(whichever first occurs). Motor Car Traders Guarantee vehicles bought from licensed traders are subject to a 3 day cooling-off period. Fund enables consumers to make a claim if they suffer loss New motor vehicles: due to conduct of trader (such The MCTA will not apply re the guarantees (but does apply to some aspects of contract for new cars).. Must rely on ACL. as failure to comply with Chapter 2 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) applies the ACL to Victoria as the Australian warranties, transfer of clear Consumer Law (Vic) Act: title) (s 76 specifies conduct). buyers of new cars can seek rely on ACL guarantees, Claims limited to $40 000. buyers of used cars where statutory warranty under the MCTA does not apply or has expired. The ACL rights apply for a reasonable amount of time after purchase and depends on factors such as type of car, price, quality and other factors which may – depending on the circumstances – be more generous than the MCTA warranty,
rights under ACL cannot be excluded by contract, and
redress depends on whether defect amounts to a major failure of supplier to comply with guarantee or a minor failure.
WA Motor Vehicle Dealers Act 1973 (WA) (MVDA), Part 3, Fair Trading Act 2012 (WA), Part 3, applying the ACL as the disputes arising under MVDA Australian Consumer Law (WA) repair obligation dealt with by Commissioner can make certain Used motor vehicles: orders (e.g. repairs) (see ss 36- statutory warranties under MVDA apply only to used vehicles (mainly passenger vehicles) purchased from 37A) can be enforced in
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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licensed dealer, priced at $4000 or more. Length of warranty depends on age of vehicle and kms travelled at time Magistrates Court of sale. Obligation on dealer to repair a defect to make the car roadworthy and place it in a reasonable condition and having regard to age the parties may also apply to the New motor vehicles: Magistrates Court for Not covered by MVDA. Must rely on ACL. Part 3 of the Fair Trading Act 2012 (WA) applies the ACL as the Australian determination of a used car Consumer Law (WA): warranty dispute no statutory warranties under MVDA for new vehicle. buyers of new cars can seek rely on ACL guarantees,
buyers of used cars where statutory warranty under the MCTA does not apply or has expired. The ACL rights apply for a reasonable amount of time after purchase and depends on factors such as type of car, price, quality and other factors which may – depending on the circumstances – be more generous than the MCTA warranty,
rights under ACL cannot be excluded by contract,
redress depends on whether defect amounts to a major failure of supplier to comply with guarantee or a minor failure, and
no cooling-off period.
ACT Sale of Motor Vehicles Act 1977 (ACT) (SMVA)and Fair Trading (Australian Consumer Law) Act 1992 (ACT) Part 9 of the SMVA: Motor vehicle dealers compensation fund Under Part 3 of the SMVA: a buyer suffering financial loss obligation (which becomes term of contract) to repair applies to new and used vehicles, because of the failure of a applies to a new vehicles that has travelled up 15 000 km at time of sale and lasts for the time up to it being licensed dealer to comply with driven 20 000 km after manufacture or after 12 months (less one month for each 2000 km driven before sold by an obligation imposed on them dealer) (whichever occurs first), or or their failure give unencumbered title to vehicle applies to a new vehicles that has travelled 15 000 km or more at time of sale and lasts for the time up to it being
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
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driven 5000 km after sale or 3 months ) (whichever occurs first), may apply to the Commissioner for compensation for the loss, used motor vehicles have a three month or 5 000km warranty on all used cars less than 10 years old that have travelled less than 160 000km, must lodge claim within 6 months of becoming aware of dealer must repair or make good the defect to place the vehicle in a reasonable condition having regard to age, the loss, defect must be reported to dealer within a reasonable period after it becomes apparent, commissioner must be satisfied some excluded defects (eg defects in tyres or batteries, fitted accessories, defects arising from accidental damage, that the applicant has taken all misuse or negligence by driver, and obligation does not apply to some vehicles (eg commercial vehicles). Minister reasonable steps to enforce any can make declaration to exempt certain vehicles (but prospective buyers must be notified by dealer), and remedies available against dealer under s 60(1), and cooling off period is three clear business days from the time of purchase in which you may terminate purchase of a new or used car by giving requisite notice to dealer. Dealer is entitled to retain $100 or 1% of the purchase commissioner can refuse or price. grant compensation. Refusal can be reviewed by Magistrates Under the Fair Trading (Australian Consumer Law) Act 1992 (ACT): Court.
buyers of new and used cars can seek rely on ACL guarantees where statutory warranty under the SMVA does not Other remedies apply or has expired. The ACL rights apply for a reasonable amount of time after purchase and depends on factors such as type of car, price, quality and other factors which may – depending on the circumstances – be more If a person cannot claim against the generous than the MDRA warranty, Fund, they could attempt to recover any loss from the dealer at court or rights under ACL cannot be excluded by contract, and at ACT Civil and Administrative redress depends on whether defect amounts to a major failure of supplier to comply with guarantee or a minor Tribunal (ACAT). The Office of failure. Regulatory Services may also be able to help resolve the problem.
Prepared at client request. The responsibility for the use of the contents of this report or its further distribution either in whole or part lies with the Member. This paper has been prepared to support the work of the Queensland Parliament using information publicly available at the time of production. The views expressed do not reflect an official position of the Queensland Parliamentary Library, nor do they constitute professional legal opinion.
Queensland Parliamentary Library and Research Service Research and Information Service Page 10 ‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Appendix F International jurisdictional overview of ‘lemon’ laws
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‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Appendix G ‘Lemon’ law criteria in the United States of America
76 Legal Affairs and Community Safety Committee
‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Appendix H Information on New York's New Car Lemon Law
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‘Lemon’ Laws – An inquiry into consumer protections and remedies for buyers of new motor vehicles
Appendix I Information on Indiana Lemon Law
78 Legal Affairs and Community Safety Committee