The answer is NO. If the water pump had failed it would not leak water into the engine oil, the water pump is not linked anywhere into the oil gallery of the engine. Typically if the water pump fails and needs to be removed, some/most timing belt cars would require the removal of the timing belt to gain access to the water pump. At that point in time it would be recommended to replace the belt, therefore not having to repeat the job in a few months, kilometres later. On a job like that I would install a new timing belt kit, which would include belt, pulleys, seals, water pump and tensioner. This can be a bit of an overkill at 100,000km but at least it's piece of mind. Sounds to me they have misdiagnosed the issue and don't want to hand back money. If the water pump had failed it would do one of a few things. It would become noisy i.e. whine or a rumbling type noise, it would leak i.e. front seal or inspection/bleed hole in the housing, or engine temperature would climb because the impeller wasn't pumping water around the engine. The impeller issue is quite common on Audi & VW, not late model Toyota. The noise you were complaining about could have been an alternator bearing, power steering pump, air con compressor or even the idler/tensioner pulleys for the timing belt. If it was me (and this is why I do not take my car to mechanics even under warranty- being one I know how many dodgy guys there are out there-NOT ME), I would demand a refund and if they do not refund the costs contact your Department of Fair Trade. If they are a Franchise i.e. Ultra Tune, Auto Masters, Midas, KTAS, etc, contact the head office and complain, they'll do virtually anything to rectify or refund. Then I would take the car elsewhere and have it repaired properly, because the original place will keep ripping you off. Good luck