Defective Motor Vehicle Claims in NSW. How Marks v Gateway Automotive Clarifies Your Right to Reject Under the ACL
This article explores the recent NCAT decision in Marks v PT Wollongong Pty Ltd t/as Gateway Automotive [2025] NSWCATCD 63, which provides important guidance for consumers dealing with defective motor vehicle claims in Australia. The case involved a 2022 Mitsubishi Outlander that developed numerous defects within months of purchase and was returned to the dealer for repairs at least twelve times over 18 months. NCAT found that the defects, taken collectively, amounted to a major failure under the Australian Consumer Law (ACL) and ordered a refund of $60,294.98 upon return of the vehicle.
The decision highlights that a consumer may lawfully reject a vehicle where there has been a major failure or where minor failures are not rectified within a reasonable time, even if the vehicle remains technically drivable. It reinforces the importance of documenting all defects, allowing reasonable repair opportunities, acting within the rejection period, and insisting on evidence where the supplier blames consumer conduct or modifications.
If you believe you have purchased a defective motor vehicle, or a dealer or manufacturer has refused your request for a refund or replacement, contact Arida Lawyers today for a free 10-minute telephone consultation. We will assess your situation, advise on the strength of your claim, and outline the best strategy to protect your rights and achieve the remedy you are entitled to under the Australian Consumer Law.
Marks v PT Wollongong Pty Ltd t/as Gateway Automotive [2025] NSWCATCD 63
Table of Contents
Key Takeaways
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A motor vehicle can be rejected under the ACL where there is a major failure or where minor failures are not rectified within a reasonable time.
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The test for “acceptable quality” is objective, based on what a reasonable consumer would find acceptable, not the purchaser’s personal tolerance.
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Multiple minor defects, even if the car remains drivable, can amount to a major failure, considering the circumstances as a whole.
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Consumers must act promptly and reject the vehicle within the rejection period, which is assessed objectively by reference to the circumstances.
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Maintain a detailed record of all defects, repair attempts, and communications with the dealer or manufacturer to support your claim.
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Suppliers must provide proper evidence if alleging that consumer conduct or modifications caused the defect. Speculation is not sufficient.
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Early legal advice can be crucial. Contact Arida Lawyers for a free 10-minute telephone consultation to discuss your defective motor vehicle matter.
Overview
Consumers in Australia enjoy statutory protections under Part 3-2 Division 1 of the Australian Consumer Law (ACL), Schedule 2 of the Competition and Consumer Act 2010 (Cth) when buying motor vehicles. The decision of the Consumer and Commercial Division of NCAT in Marks v PT Wollongong Pty Ltd t/as Gateway Automotive [2025] NSWCATCD 63 offers a clear roadmap of the legal principles governing a consumer’s right to reject a lemon and or defective motor vehicle where there has been a “major failure” to comply with the guarantee of acceptable quality.
This article explores the Tribunal’s reasoning and explains what they mean in practice for consumers dealing with motor vehicle disputes.
Factual Background
The applicant purchased a new 2022 Mitsubishi Outlander in December 2022. Within four months, defects began to appear, leading to repeated returns to the dealer for repairs, which occurred at least twelve times over a period of approximately 18 months. The faults included persistent issues with the dash cluster resetting and noise from the front struts, among others. Despite numerous request for repairs, and subsequent repair attempts, the issues were not resolved. By August 2024, the Applicant had lost confidence in the vehicle and the dealership and manufacturer’s ability to repair the defects, and issued a letter of demand, formally rejecting the vehicle and commencing NCAT proceedings soon thereafter.
Acceptable Quality and the Objective “Reasonable Consumer” Standard
At paragraphs [59] to [61] of the decision, the Tribunal carefully articulated the test under s 54 of the ACL. It reiterated that whether goods are of “acceptable quality” is assessed objectively through the lens of a reasonable consumer. Importantly, the Tribunal found that the guarantee is not limited to goods being “safe” or “capable of being driven”, but rather, it requires that goods be free from non-trivial, recurrent defects that would cause a reasonable consumer to hesitate before purchase.
The Tribunal relied on the decision of Frediani v Hall t/as Happy Camper Conversions [2024] NSWCATAP 134 (Frediani), which contained the mandatory considerations to establish whether or not goods are of acceptable quality under s 54(2)(a) to (e) of the ACL, and the relevant parts of that decision are extracted below:
“18. The matters in s 54(3) are “mandatory considerations” to establish whether or not goods are not of acceptable quality under s 54(2)(a)-(e) such that a reasonable consumer, fully acquainted with the state and condition of the goods, would regard the goods as being of acceptable quality, determined at the date of the supply of the goods (Ford Motor Company of Australia Pty Ltd v Capic [2023] FCAFC 179 (Capic-Appeal) at [43] and [56]).
19. The principles applicable to s 54(2) of the ACL can be summarised as follows:
(1) The “reasonable consumer” in s 54(2) is assessed objectively, and idiosyncratic subjective views by the consumer about the state or condition of the goods or what is, or is not, acceptable, is irrelevant (Toyota Motor Corporation Australia Limited v Williams (2023) 296 FCR 514; [2023] FCAFC 50 (Williams-Appeal) at [42]-[43]).
(2) Section 54 of the ACL requires consideration of at least some knowledge acquired after supply, or else it would not be possible to hold that goods were not of acceptable quality by reason of a latent or hidden defect (Capic-Appeal at [57]).
(3) The statutory language of s 54(2) does not confine “acceptable quality” to “not potentially fatal” or “unusable” (Capic-Appeal) at [53].
(4) The existence of a manufacturer’s warranty should generally have no bearing on the question of whether the goods comply with the statutory guarantees of acceptable quality (Capic-Appeal at [63], applying Jayco at [43]; and Toyota Motor Corporation Australia Limited v Williams (2023) 296 FCR 514; [2023] FCAFC 50 at [45]).
(5) The consumer guarantee in s 54 should not be “read down” because it could otherwise lead to a “disproportionate outcome” (Capic-Appeal at [75]).
(6) A reasonable consumer in the hypothetical circumstances in s 54 would be aware that motor vehicles are complicated pieces of machinery that may develop future problems that may require rectification by the vehicle’s manufacturer during its lifetime, and a merely speculative theoretical possibility of a future problem may not be regarded as unacceptable by a reasonable consumer (Dwyer v Volkswagen Group Australia Pty Ltd t/as Volkswagen Australia [2021] NSWSC 715 at [158]; Dwyer v Volkswagen Group Australia Pty Ltd [2023] NSWCA 211 at [154]-[156]).
(7) A reasonable consumer being aware that motor vehicles are complicated pieces of machinery that may develop problems is different to a reasonable consumer accepting that a vehicle, because of a defect already present at the time of supply, cannot be used in a reasonable and normal way without malfunctioning and consequently exposing the vehicle one or more non-trivial adverse consequences (Williams v Toyota Motor Corporation Australia Limited [2022] FCA 344 at [198]; Capic v Ford Motor Company Pty Ltd [2021] FCA 715 at [636]).
61 The Appeal Panel in Frediani also considered the appropriate remedy under s 259 and 260 of the ACL, where a consumer guarantee had not been complied with, and at [22] summarised the principles to be applied:
“22. In summary, the following principles apply:
(1) The consumer has a right to claim damages under s 259(4) of the ACL against the supplier for reasonably foreseeable loss caused by breach of the consumer guarantee, irrespective of whether or not the breach is repairable, or is a “major failure”.
(2) There are different remedies against the supplier available depending upon whether or not the goods are repairable or the goods have a “major failure” (s 259(2) and (3)).
(3) If the goods cannot be repaired or have a “major failure”, the consumer may notify the supplier he or she rejects the goods and the grounds of rejection (s 259(3)(a)).
(4) If the goods have been rejected in compliance with s 262, the supplier must, in accordance with the election of the consumer, either: (a) provide a refund (being monies paid by the consumer to the supplier for the goods, and any amount equal to the value of any other consideration provided by the consumer for the goods); or (b) replace the goods with goods of the same type and of similar value that are reasonably available to the supplier (s 263(4)). The consumer must return the goods to the supplier in accordance with s 263(2) and (3) of the ACL.”
Following the above, NCAT emphasised several points:
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A major failure may be constituted by a single significant defect or by a series of defects, which, taken together, materially diminish the value or utility of the vehicle.
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A reasonable consumer is entitled to expect some “teething problems”, but repeated defects over a prolonged period will erode that tolerance.
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The cost and difficulty of repair relative to the purchase price, and whether the defects can be rectified within a reasonable time, are key considerations in determining whether a major failure exists.
When a Defective Vehicle Warrants Rejection
At paragraph [69] of the decision, NCAT addressed the factual question: would a reasonable hypothetical consumer, knowing the history of defects and failed repair attempts, still have purchased the vehicle?
The Tribunal answered in the negative. While acknowledging that modern vehicles can have isolated faults, the extent, frequency and multiplicity of the defects, coupled with the inconvenience of repeated repair visits, tipped the balance. The Tribunal concluded that the defects amounted to a major failure, thereby enlivening the applicant’s statutory right to reject the vehicle within the rejection period.
Evidentiary Considerations
Another instructive aspect of the decision is found at paragraph [74], where Mitsubishi suggested that the applicant’s aftermarket installation of a dash camera “may” have contributed to the defect in the fuse box connector. NCAT was unpersuaded, observing that no evidence was adduced to support this assertion. This highlights a critical litigation point: speculative or hypothetical causes will not displace an established breach of the statutory guarantee without cogent, admissible evidence.
Practical Implications for Consumers with Lemon Vehicles
The Tribunal’s reasoning provides several key takeaways for consumers pursuing a claim involving a defective motor vehicle:
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It is critical to maintain a meticulous record of all defects and service history. Copies of repair orders, photographs, videos, and correspondence with the dealer or manufacturer are invaluable in demonstrating the pattern of faults and the supplier’s repair attempts, successful or otherwise, to rectify them.
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Where the problem may be characterised as a “minor failure,” the ACL contemplates that the supplier must be given a reasonable opportunity to rectify it. A consumer’s case for rejection is stronger when they can demonstrate that the dealer had multiple opportunities to repair the defect but failed to do so within a reasonable time.
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The consumer must reject the vehicle within the rejection period. There is no legislatively prescribed period; instead, the rejection period is assessed objectively, having regard to the nature of the goods, the type of defect, and all surrounding circumstances. Consumers are expected to act without undue delay once it becomes apparent that the lemon vehicle fails to comply with the statutory guarantee of acceptable quality, and when they know, or ought reasonably to know, that they are entitled to reject under ss 259(2) and (3) of the ACL. Delay once that awareness arises may be fatal to the remedy.
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Where a manufacturer or dealer seeks to attribute the defect to consumer conduct or aftermarket modifications, proper evidentiary support should be insisted upon. Mere conjecture or speculative assertions will not displace an otherwise established breach of the statutory guarantee.
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Consumers should be aware that consequential damages will generally be adjusted to reflect usage. When a refund is ordered, it will typically be net of certain amounts for benefits already consumed, such as registration, compulsory third-party insurance, or partially used add-on products. In this decision, NCAT made precise deductions before awarding a refund of $60,294.98 upon return of the vehicle, plus damages.
What to Do if You Have a Defective Motor Vehicle
The Tribunal’s reasoning in its decision provides a practical guide to what constitutes a major failure and when a consumer may lawfully proceed with rejecting a defective motor vehicle. The decision affirms that a series of minor defects, persisting after reasonable repair opportunities, is sufficient to ground a rejection claim, even where the vehicle remains technically operable.
If you believe you have purchased a defective or lemon motor vehicle, you should seek timely advice. Arida Lawyers has assisted clients with defective vehicle claims, including drafting letters of demand and formal notices of rejection, preparing NCAT applications and Points of Claim, obtaining expert mechanical evidence, and providing representation before NCAT and the Courts. Contact Arida Lawyers to discuss your situation and obtain tailored legal assistance to protect your rights under the Australian Consumer Law.
FAQs for Rejecting a Defective and Lemon Motor Vehicle
Q1. What is considered a “defective motor vehicle” under Australian Consumer Law?
A defective motor vehicle is one that fails to meet any of the consumer guarantees contained in the ACL. These include:
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the vehicle must be safe, durable, free from defects, acceptable in appearance and finish, and fit for all common purposes for which vehicles of that kind are supplied (s 54 of the ACL);
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if you informed the dealer/supplier that you required the vehicle for a particular purpose, it must be reasonably fit for that purpose. This also extends to any purpose that is ordinarily implied for goods of that kind, meaning the vehicle must be suitable for the common and expected uses to which such vehicles are typically put;
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if sold by description, the vehicle must match that description; and
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if supplied by reference to a sample or demo model, the vehicle must match the sample in quality.
A motor vehicle can therefore be considered defective and give rise to a right of rejection, even if it remains drivable. This may occur where the vehicle suffers from a major failure (such as faults that, taken together, would have deterred a reasonable consumer from purchase, render the vehicle substantially unfit for its ordinary purpose, or cannot be remedied within a reasonable time) or where there are one or more minor failures that the supplier has not remedied within a reasonable time despite being given the opportunity to do so. Rejection may also be justified where the vehicle fails to meet a disclosed purpose, does not match its description, or differs materially from the demonstration mode.
Q2. What is a “major failure” and why does it matter?
A major failure occurs where a reasonable consumer, fully aware of the defect, would not have purchased the vehicle; or where the vehicle is substantially unfit for its ordinary purpose and cannot be fixed within a reasonable time; or where it is unsafe. Establishing a major failure is critical because it allows the consumer to reject the vehicle and demand a refund or replacement, rather than being limited to repair attempts.
Q3. How many repair attempts must occur before I can reject my vehicle?
There is no statutory limit on the number of repair attempts. The Tribunal or Court will consider the totality of the circumstances, including the number of returns to the dealer, the length of time the vehicle has been off the road, and whether the defects remain unresolved. In Marks v Gateway Automotive, the vehicle was returned at least twelve times over 18 months, which gave rise to NCAT deciding that a major failure existed and allowed the consumer to reject the vehicle.
Q4. What is the “rejection period” under the ACL?
The ACL does not prescribe a fixed rejection period. Instead, the rejection period is assessed objectively by reference to the nature of the vehicle, the type of defect, and the surrounding circumstances as a whole. Consumers are expected to act promptly once they know, or ought reasonably to know, that the vehicle fails to comply with the consumer guarantees and that they are entitled to reject it under ss 259(2) to (3) of the ACL. Delay in exercising the right to reject may result in the rejection period expiring.
Q5. What happens after I reject a defective motor vehicle?
Once rejection is validly made, the supplier must comply with the consumer’s election under s 263 ACL by either refunding the purchase price (including the value of any consideration provided) or providing a replacement vehicle of the same type and similar value if reasonably available. The consumer must return the vehicle in accordance with s 263(2) to (3) of the ACL.
Q6. Can the manufacturer deny liability for the defect?
Yes, manufacturers or dealers may allege that the defect was caused by consumer misuse, poor maintenance, or aftermarket modifications. However, they bear the onus of proving this allegation with clear evidence. Speculative or unsubstantiated claims will not defeat a consumer guarantee claim. In Marks, Mitsubishi’s suggestion that a dash camera installation “may” have caused the defect was rejected because there was no evidence supporting that assertion.
Q7. Can I claim compensation for losses beyond a refund?
Yes. Under s 259(4) ACL, a consumer may claim damages for any reasonably foreseeable losses caused by the failure to comply with the statutory guarantee, including costs of towing, temporary hire cars, finance interest, or other out-of-pocket expenses, regardless of whether the breach was repairable or constituted a major failure.
Q8. Do I need legal representation to reject a defective motor vehicle?
It is not legally required to have a lawyer to exercise a rejection right or commence NCAT proceedings. However, legal representation can be highly beneficial in preparing a strong claim, gathering and presenting evidence, quantifying consequential losses, and ensuring compliance with procedural requirements. This is particularly important where a manufacturer or dealer disputes the existence of a significant failure or resists a refund.
This article provides general information relevant to our legal services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.
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