Reference No. MVD 204/07 (AK) [2007] NZMVDT 186 (9 October 2007)

Last Updated: 14 February 2008

Decision No. AK147 /2007

Reference No. MVD 204/07

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN XXXX AND XXXX

Purchasers

AND XXXX TRADING AS XXXX

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr R G Lewis, Registered Engineering Associate, Assessor

HEARING at AUCKLAND on 1 October 2007

APPEARANCES

Mr & Mrs Xxxx, the purchasers

Mr x Xxxx, CEO, for the trader

DECISION

Introduction

[1] Mr and Mrs Xxxx (“the purchasers”) farm near XXXX. In April 2006 they were looking to buy a reliable vehicle for Mrs Xxxx’s personal use. The purchasers arranged for a friend, Xxxx, to inspect and test drive on their behalf a 2002 Toyota Land Cruiser Prado 3 litre diesel registration number XXXX (“the vehicle”) at the premises of Xxxx trading as Xxxx (“the trader”) in Xxxx. Mr Xxxx recommended the vehicle to them and they agreed to buy it from the trader for $34,999 with completion of the sale and delivery of the vehicle taking place on 22 April 2006 in Taupo. The purchaser provided $23,000 of the purchase price for the vehicle by trading in their XXXX vehicle according to the Vehicle Offer and sale Agreement.

[2] The purchasers claim that the vehicle was not of acceptable quality at the date of sale under the Consumer Guarantees Act 1993 because its engine overheated and its cylinder head was damaged some 10 months after they purchased the vehicle. In their application the purchasers seek the Tribunal’s order that the trader pay their repair costs of $3,096-31 and also that the trader be ordered to refund their purchase price and take the vehicle back.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr R G Lewis, as expert assessor to assist in the determination of the complaint. Prior to the hearing Mr Lewis took the oath required by clause 10(2) of Schedule 1 to that Act.

The Purchaser’s evidence

[4] The account which follows is a summary of the relevant evidence presented by the purchasers at the hearing. It is assessed later in this decision. The purchaser Mrs Xxxx says that whilst the vehicle’s odometer at the date of sale was 94,189 kilometres as recorded on both the Supplier Information Notice and the Vehicle Offer and Sale Agreement which she signed, she thinks that the actual odometer at the time the vehicle was delivered to the purchasers in Taupö was 1500 to 1800 kilometres greater than that.

[5] She says that the vehicle was driven mainly by her for personal and family use, not as a farm vehicle. The purchasers had the vehicle serviced by Xxxx in Xxxx on 17 October 2006 (Exhibit 1) at 104,000kms, and again on 19 January 2007 (Exhibit 2) at 111,095 kms.

[6] On 27 February 2007 she says she had driven the 29 kilometres from the purchasers’ farm into XXXX and had made a short stop in Xxxx before restarting the vehicle and driving another short distance and had just pulled into Xxxx when the vehicle suddenly emitted a “glug glug” sound and stopped. She says the odometer at the time was 118,056 kilometres.

[7] She had Xxxx examine the vehicle and diagnose the problem as a blown cylinder head. The cylinder head had to be replaced because it was found that it had a defect under the pre combustion chamber on No 2 cylinder according to the report of Xxxx (XXXX) Xxxx who pressure tested the cylinder head for Xxxx. A copy of their report was produced (Exhibit 4).

[8] She says that she telephoned the salesman who sold the vehicle, Xxxx, of the trader company who said that it was the purchasers’ problem after finding out that the vehicle had been driven more than 21,000 kilometres. She says she also asked to speak to the trader’s manager and believes she spoke to Mr Xxxx who, similarly, was not prepared to assist the purchasers in meeting the vehicle’s repair costs.

[9] She says she also approached Xxxx and understands that one of their technical staff travelled from Xxxx to examine the engine but that she subsequently heard that Xxxx were not prepared to meet the purchasers’ repair costs.

[10] The vehicle was repaired by Xxxx , according to its invoice, a copy of which she produces (Exhibit 3) on 27 March 2007 at a total cost of $3,096-31 which included a new cylinder head kit at a cost of $1863. The invoice records the odometer as “117,000.” She also produces a written report from Mr Xxxx, of Xxxx dated 29 June 2007 regarding the vehicle in which Mr Xxxx writes that “the vehicle turned up at our workshop starting to misfire, it was not over heating, and had just started to misfire, coolant was just down to top of radiator core. We filled coolant and checked for leaks. None!
On removal of cylinder head it was sent to Xxxx in Xxxx and found to be cracked No 2 cylinder (Note before it was sent we checked for any warpage, there was none. A new cylinder head has since been fitted (Genuine Toyota) no problems since. There is no reason why the cylinder head should have cracked that I know of. ( Signed) xx Xxxx Owner”

[11] She says the purchasers want to reject the vehicle because they are concerned that the engine may fail again and also because an oil warning light came on 6 or 7 weeks ago. She took the vehicle into Xxxx Xxxx who put oil in it although she has no record of how much oil they put in it. She says that she then took the vehicle back to Xxxx for a service which they did on 15 August 2007 at about 131,000 kilometres but she has no invoice for that work.

[12] In reply to questions from the Assessor she says she thinks the vehicle has travelled 132,000 to 133,000 kilometres now. It did not use any oil in the first 10 months the purchasers owned the vehicle. It has not required any further oil top up since being serviced on 15 August 2007. The vehicle operates at just below half way on the temperature gauge and she has not noticed any increase in the vehicle’s operating temperature. The vehicle misfired when Mr Xxxx tried to start it after its sudden failure on 27 February. Xxxx Xxxx Xxxx is not a Xxxx dealer. She says she does not know if the engine’s coolant was changed at 120,000 kilometres.

Mr Xxxx’s Evidence

[13] He says that he drives the vehicle only occasionally. The reason the purchasers have applied to the Tribunal is that the trader refused to help them with the repair costs for the vehicle. He says the engine failure occurred suddenly “out of the blue” 10 months after it was purchased.

[14] He says he is sure that the vehicle‘s engine now burns oil although not a huge amount; he thinks he has topped it up with 500 mls since 15 August 2007 when it was last serviced.

The Trader’s Evidence

[15] Mr Xxxx for the trader says the vehicle was a New Zealand new vehicle and was serviced by the trader at its scheduled service interval before sale. He says he does not think it likely that there was any discrepancy between the odometer reading at the date of sale and what was written on the Supplier Information Notice and Vehicle Offer and sale Agreement of 94,189 kilometres.

[16] He says that Mr Xxxx would have referred the purchasers’ request for the trader to pay the repair costs to the Used Vehicle’s Sales Manager, a Mr Xxxx, who would have reported the request to him but he cannot recall speaking on the telephone to Mrs Xxxx. He says that he would, however, have agreed with the decision not to pay the purchasers’ repair costs because of the distance of 23,800 kms they had travelled in the vehicle since the date of sale and because the engine failed some 10 months after the date of sale. He says he considers that the trader met its obligations.

[17] In reply to the Tribunal he says that he would not have thought the vehicle’s engine would have lasted so long had there been a fault with the engine at the date the vehicle was sold to the purchasers.

Was the vehicle of acceptable quality?

[18] Section 6 of the Consumer Guarantees Act 1993 imposes on a supplier (in this case the trader) "a guarantee that the goods are of acceptable quality." Section 2 of the Act defines "goods" as including "vehicles".

[19] The expression "acceptable quality" is defined in Section 7 as follows:

“(1) For the purposes of section 6, goods are of acceptable quality if they are as -¾

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects: and

(d) safe; and

(e) durable, ¾

as a reasonable consumer fully acquainted with the state and

condition of the goods, including any hidden defects, would regard as acceptable, having regard to ¾

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:
(i) any representation made about the goods by the supplier or the manufacturer

• (j) all other relevant circumstances of the supply of the goods."
  

[20] Under Section 18 of the Act, where a consumer has a right of redress against the supplier in accordance with Part 2 of the Act as a result of the failure of any goods to comply with a guarantee, the consumer may exercise the following remedies:

(2) Where the failure can be remedied, the consumer may ¾

(a) require the supplier to remedy the failure within a reasonable time in accordance with section 19:

(b) where a supplier who has been required to remedy a failure refuses or neglects to do so, or does not succeed in doing so within a reasonable time, ¾

(i) have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied; or

(ii) subject to section 20, reject the goods in accordance with section 22.

(3) Where the failure cannot be remedied or is of a substantial character within the meaning of Section 21, the consumer may ¾

(a)subject to section 20, reject the goods in accordance with section 22; or

(b) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.

(4) In addition to the remedies set out in subsection (2) and subsection (3), the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure."

[21] Section 21 of the Act defines the circumstances in which a failure to comply with the guarantee as to acceptable quality will be regarded as being a failure of a substantial character for the purposes of section 18(3). Section 21 provides as follows:
“ 21 Failure of substantial character

“For the purposes of section 18(3), a failure to comply with a guarantee is of a substantial character in any case where ¾

(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b) the goods depart in 1 or more significant respects from the description by which they were supplied or, where they were supplied by reference to a sample or demonstration model, from the sample or demonstration model; or

(c) the goods are substantially unfit for a purpose for which goods of the type in question are commonly supplied or, where section 8(1) applies, the goods are unfit for a particular purpose made known to the supplier or represented by the supplier to be a purpose for which the goods would be fit, and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose; or

(d) the goods are not of acceptable quality within the meaning of section 7 because they are unsafe."

[22] In Stephens v Chevron Motor Court Limited [1996] DCR1, the District Court held that the correct approach to the Act was first to consider whether the vehicle was of “acceptable quality”. If the vehicle was not of acceptable quality, the next point to consider was whether the purchasers required the trader to remedy any faults within a reasonable time in accordance with Section 19 of the Act. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of Section 21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchasers have exercised their right to reject the vehicle within a reasonable time.

Tribunal’s Assessment
[23] The Tribunal notes, first that the vehicle’s engine failure on 27 February 2007 was, as described by both purchasers, sudden and unexpected. Mr Xxxx particularly emphasised that the vehicle was not using oil or coolant and went well before it failed.

[24] When the vehicle failed the cylinder head was found to have a defect under the pre-combustion chamber on No 2 cylinder. There was, according to Xxxx Xxxx Xxxx’s report some loss of coolant down to the top of the radiator core at the time of failure but there were no other visible indications of overheating.

[25] The Tribunal’s Assessor therefore thinks that the fault in the pre- combustion chamber was a sudden failure not a latent defect caused by a manufacturing fault within the cylinder head. The failure may have been caused by lack of protection against sudden localised overheating through the poor quality of the coolant in the cooling system at that time.

[26] There was no evidence produced by the purchasers to establish any manufacturing defect in the cylinder head. The trader’s witness Mr Xxxx described the vehicle’s engine as “bullet proof”. The Tribunal notes that according to Mrs Xxxx a representative of Xxxx inspected the vehicle and Xxxx did not accept liability for the fault.

[27] Finally, and perhaps most significantly, the Tribunal would have expected, had there been a latent defect in the engine at the time of sale, that such defect would have resulted in the vehicle’s engine failing within a few thousand kilometres after the vehicle was sold to the purchasers not, as here, some 22,000 kilometres (according to Mrs Xxxx) or 23,800 kilometres (if the Supplier Information Notice and Sale Agreement’s record of the odometer at the date of sale are accurate.) Accordingly, the Tribunal does not consider that the purchasers have established, to the standard of proof required, that is, on a balance of probabilities that the vehicle was not of acceptable quality at the date of sale to the purchasers. Thus the purchasers’ application for a refund of their repair costs and to rescind the sale must both be dismissed.

The Order

The purchasers’ application for a refund of their repair costs and to reject the vehicle is dismissed.

DATED at AUCKLAND this 9th day of October 2007

C.H.Cornwell

Adjudicator