The car has been sold and it's been signed off then the insurance company won't do anything about it. Did your friend get insurance for the car before buying it? if not, there's no way of claiming for the car. Best of luck for him going back to seller and trying to work something out. Seller isn't liable after he's sold/signed the papers over.

My advice get an NRMA inspection before buying the vechile and going for a test drive if he didn't, for next time.