Reference No. MVD 278/07 (AK) [2007] NZMVDT 236 (19 December 2007)

Last Updated: 14 February 2008

Decision No. AK182 /2007

Reference No. MVD 278/07

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN XXXXXX & XXXXXX

Purchasers

AND XXXXXX

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr G Burkett, Advanced Trade Mechanical Member, Assessor

HEARING at AUCKLAND 17 December 2007

APPEARANCES

Mr XXXXXX and Ms XXXXXX, the purchasers
Mr XXXXXX, representing the trader

DECISION

Introduction

[1] This is an application by Mr XXXXXX and Ms XXXXXX (“the purchasers”) to reject a 1978 Ford Transit Campavan registration number XXXXXX (“the vehicle”) and to recover the purchase price they agreed to pay on 5 March 2007 to XXXXXX (“the trader”) for the vehicle of $15,800. The basis of the purchasers’ claim is that the vehicle failed to meet the guarantee of acceptable quality in s.6 of the Consumer Guarantees Act 1993 (“the Act”).

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

The purchasers’ evidence

[3] The account which follows is a summary of the relevant evidence presented by the purchaser, Mr XXXXXX, at the hearing. He says that for about two months he and Ms XXXXXX had noticed the vehicle on the trader’s yard and were interested in purchasing it for a trip around New Zealand they planned to take.

[4] On 5 March 2007 after taking the vehicle for a test drive he entered into a written agreement with the trader to purchase the vehicle for a “price to be agreed by both parties after all costs are available” and paid a deposit of $1000 by cheque to the trader. He produces a copy of a document headed “Tax Invoice” which appears to be an IMVDA standard vehicle sale and purchase agreement which he signed as purchaser on 5 March 2007 and which refers to the other party to it as “the trader”. He says that he was aware that the trader sold vehicles on behalf of their owners and that the vehicle was being sold on behalf of a XXXXXX.

[5] He says that the trader did not sign the agreement and inserted the name XXXXXX, under the words “Dealer’s Stamp” in a box headed “DEALER” at the top left hand corner of the agreement. He says he has no recollection of signing or receiving a Supplier Information Notice although the agreement contains an acknowledgement in clause 2 that he has been given such a document. He says that the trader told him that some work had to be done on the vehicle before it could be issued with a warrant of fitness but he was not told what work had to be done. He says that the price of the vehicle of $15,800 was agreed a day or two later when the trader had calculated the costs of obtaining a warrant of fitness for the vehicle and this sum was entered on the agreement by the trader as the sale price of the vehicle and a personal cheque from Ms XXXXXX for $14,800 was paid to the trader in full payment of the balance of the purchase price. Ownership of the vehicle was transferred into the name of Ms XXXXXX.

[6] He says that although the vehicle recorded the odometer as “91,000” he was aware that was not the genuine distance the vehicle had travelled and was not even sure if that was miles or kilometres but he imagined that the vehicle had been one or two times “around the clock” and had 22 previous owners and many modifications and was not bothered by that.

[7] The purchasers set off on their trip around New Zealand on 1 July and drove some 4,290 kilometres in the vehicle until on 10 September when it was taken for a warrant of fitness to XXXXXX in Christchurch. The vehicle failed its warrant of fitness for a number of reasons which are listed on the warrant checklist as:
“No horn
Drivers seat belt
Washers No Go
Stop light top right
Drivers side wing mirror to secure
Corrosion along front cross member
Rear brake pipe on diff corroded
Fuel leaking at tank
Rust lower A pillar right side
Passengers seat belt starting to fray
Rust top hinge drivers door rust lower hinge
Rust along left side A pillar top to door hinges
Play R/R wheel
Drivers side door lock- secure.”

[8] The inspector at XXXXXX told him he did not know how the vehicle had got a warrant of fitness on 9 March 2007. He said that he then went to XXXXXX in Christchurch who took photographs of the vehicle and said that they would contact XXXXXX at XXXXXX who had issued the warrant of fitness. After three days he had not heard from XXXXXX Christchurch and when he contacted them he was put in touch with a Mr XXXXXX of XXXXXX XXXXXX who suggested that he pursue the trader and not to bother contacting XXXXXX.

[9] He says that he had XXXXXX Ltd renew rear metal brake pipes over the axle and overhaul a second hand master cylinder at a cost of $405 for which he produces the invoice (Exhibit 5) and drove the vehicle back to Auckland without a warrant of fitness.

[10] On 11 October he took the vehicle back to XXXXXX XXXXXX where it was inspected in his presence by Mr XXXXXX of XXXXXX and he produces a copy of Mr XXXXXX’s report dated 19 October 2007 (“the XXXXXX report” (Exhibit 7). Mr XXXXXX’s findings and his conclusions are as follows:
“Findings
1. Previous repairs & visible corrosion to left hand and right hand A pillar and sill areas through door apertures
2. Previous repairs to left chassis rail front spring hanger area. Some welds & plating visible, large amounts of sealers and under-seal visible. Corrosion perforation visible.
3. Previous repairs to right chassis rail front spring hanger area. Some welds & plating visible, large amounts of sealers and under-seal visible. Corrosion perforation visible.
4. Front cross- member has had significant repairs carried out with large amounts of under-seal visible with very uneven surface visible.
5. Both front chassis out riggers have had previous repairs carried out. The repair to the right hand out rigger is very sub standard with visible corrosion.
6. Both radiator support up-rights have visible signs of significant filler and under-seal applied to them.
7. Visible corrosion perforation and filler around right front inner guard forward area.
8. Right side door catch broken from attachment points.
9. Right lower B pillar visible corrosion.
10. Visible corrosion rear brake pipe across rear axle, please note replaced on vehicle for safety reasons.
Conclusions
As a result of my findings, I conclude that the vehicle did not meet WoF requirements when the WoF was issued on 9^th March 2007.”

[11] He also produces copies of six colour photographs which he says he took on or about 19 November 2007 before he filed his application to the Tribunal (Exhibit 6).

[12] He says that Mr XXXXXX at XXXXXX told him where he could find the trader- who had shifted from XXXXXX to XXXXXX- and he visited the trader there. He says the trader claimed that he had paid $500 to a firm called XXXXXX to fix rust in the vehicle. In spite of subsequent requests by email to the trader to refund the purchasers their purchase price- culminating in an email to the trader on 6 November rejecting the vehicle, the purchasers have not received any satisfactory response from the trader.

[13] In reply to the Assessor he says that the vehicle broke down a couple of times on the trip he and Ms XXXXXX took in the vehicle; first in Coromandel due to the glow plugs being faulty. The vehicle was started using a can of ether. The second occasion was in Wellington and was caused by a loose wire. He did not notice rust in the door until about half way through the trip when he noticed the bubbling paint.

The trader’s evidence

[14] Mr XXXXXX for the trader says the trader was operating as a car market and had sold the vehicle on behalf of the owner. He produces copies of emails which he sent to the owner Mr XXXXXX (Exhibit A), the first of which dated 7 January 2007 reported an offer of $14,000 from potential purchasers subject to the vehicle having a new WOF and registration. The email from the trader to Mr XXXXXX says “ I put it through the testing station and it failed on some rust, wipers, washers, left hand wheel bearing, back tyres do not match and a leaking windscreen which will cost around $1500 to put right..” He says that he thought that this warrant of fitness inspection would have been done about 6 January 2007. Mr XXXXXX replied on 8 January 2007 advising that his bottom line was $12,000 after all repairs, storage fees etc had been taken care of.

[15] He says that when the vehicle went through the warrant of fitness test in January the XXXXXX XXXXXX inspector who rejected it for rust at that time had marked the rust present in the left hand chassis rail with a crayon but he says that the whole area was in quite rough condition. He says that when the purchasers agreed to buy the vehicle in March he had the crayon marked rust repaired by XXXXXX who plated the marked areas and sprayed them with under-seal and the vehicle was then submitted and passed an inspection done again at XXXXXX XXXXXX on 9 March.

[16] He says he agrees with the contents of the XXXXXX report.
[17] He says that he does not consider that the trader is responsible to the purchasers for the refund of their purchase price because the trader was set up as a park to sell operator to provide a facility for people to sell their vehicles. He says that the Supplier Information Notice- a copy of which he is unable to produce- would have shown the owner’s name as the seller. He is unable to find the original vehicle offer and sale agreement and says that XXXXXX name appears as the “dealer” on Exhibit 1 because that is who the trader was selling the vehicle for. He says that the trader is just facilitating the sale of the vehicle for the owner of the vehicle which he explained to the purchaser Mr XXXXXX when he came to see him after the XXXXXX inspection in October.

[18] In reply to questions from the Assessor he says that the vehicle had been on the trader’s yard since 24 August 2006 and he agreed that the first WoF inspection by XXXXXX in January 2007 was not completed because the work had not been done at that time and the second inspection was done on 9 March 2007.

Legal Principles

[19] In terms of s.89 of the Motor Vehicle Sales Act 2003 the Tribunal has jurisdiction to inquire into and determine applications or claims between a Motor Vehicle Trader and the purchaser of a motor vehicle. In doing so, it may apply the provisions of the Sale of Goods Act 1908, the Fair Trading Act 1986 or the Consumer Guarantees Act 1993, as applicable to the circumstances of the case. The Tribunal considers that the Consumer Guarantees Act 1993 is relevant to the facts of this application.

The Consumer Guarantees Act 1993

[20] The Act applies to all suppliers and s.2 defines a “supplier” as including “a person who, in trade, is acting as an agent for another, whether or not that other is supplying in trade”

[21] Section 6 of the Act 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".

[22] 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 –

(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.

(2) Where any defects in goods have been specifically drawn to the consumer’s

attention before he or she agreed to the supply, then notwithstanding that a

reasonable consumer may not have regarded the goods as acceptable with

those defects, the goods will not fail to comply with the guarantee as to

acceptable quality by reason only of those defects.

(3) Where goods are displayed for sale or hire, the defects that are to be treated

as having been specifically drawn to the consumer’s attention for the purposes

of subsection (2) of this section are those disclosed on a written notice

displayed with the goods.

(4) Goods will not fail to comply with the guarantee of acceptable quality if—

(a) The goods have been used in a manner, or to an extent which is

inconsistent with the manner or extent of use that a reasonable consumer

would expect to maintain from the goods; and

(b) The goods would have complied with the guarantee of acceptable quality if

they had not been used in that manner or to that extent.

(5) A reference in subsections (2) and (3) of this section to a defect means any

failure of the goods to comply with the guarantee of acceptable quality.”

[23] 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."

[24] 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

[25] The Tribunal is satisfied, first that although the trader attempted to present the sale of the vehicle as having been concluded between XXXXXX and the purchasers by inserting the words “XXXXXX” in the dealer box at the top of the vehicle offer and sale agreement this was a mere sham to try and avoid the trader appearing to be the motor vehicle trader who sold the vehicle. In fact the trader was selling the vehicle on behalf of the owner because the trader displayed the vehicle on its yard, negotiated the sale with the purchasers, arranged for the vehicle to be sent to XXXXXX XXXXXX for a warrant of fitness inspection and received the purchase price from the purchasers. The trader, a registered motor vehicle trader, was selling the vehicle “on behalf” of the owner and thus was the “supplier” for the purposes of the Act.

[26] The purchasers paid the trader $15,800 for a 29 year old van which had 22 previous owners and had probably done in excess of 290,000 kilometres when it was sold to them. In considering whether the goods were of acceptable quality the Tribunal has had regard to these facts in considering whether the vehicle was fit for all the purposes for which vehicles of this type are commonly supplied and whether it was as safe and as durable as a reasonable consumer fully acquainted with the condition of the vehicle, including any hidden defects would regard as acceptable having regard to the age, and price of the vehicle.

[27] In considering the condition of the vehicle at the relevant date- the date of sale to the purchasers- and considering if the vehicle met the guarantee of acceptable quality at that date the Tribunal places considerable reliance on first, the warrant of fitness inspection done by XXXXXX and the laundry list of faults recorded on its checksheet dated 10 September 2007 (Exhibit 4), second the XXXXXX report dated 19 October (Exhibit 7) and, third, the colour photographs of the corrosion which were produced by the purchasers (Exhibit 6). The Tribunal accepts the opinion of Mr XXXXXX in the XXXXXX report, in particular that “the vehicle did not meet WoF requirements when the WoF was issued on 9 March 2007”. The Tribunal considers that these reports and photographs- taken together- are sufficient and compelling evidence that at the date of sale to the purchasers the vehicle was not of acceptable quality and thus failed to comply with s.6 of the Act because its chassis was severely and dangerously corroded. Mr XXXXXX in the XXXXXX report recommended “In my opinion the above mentioned vehicle poses a serious risk to transport safety, occupants and other road users. The amount of sub standard repairs, body filler and under seal used has clearly not brought the vehicle back into a state of safe tolerance or as per manufactured and is clearly not fit for purpose.”

[28] The vehicle cannot be economically repaired and the purchasers gave the trader written notice of their wish to reject the vehicle on 6 November within a reasonable time after the seriousness of the defects became apparent to them following the issue of the XXXXXX report. The Tribunal considers the purchasers are entitled to a refund of the full purchase price of $15,800 as well as the sum of $405 paid by the purchasers to XXXXXX Ltd to make the brakes safe to drive the vehicle back to Auckland. Ordinarily the purchasers would be required under s 22(2) of the Act to return the vehicle to the trader but in this case the nature of the failure to comply with the guarantee which gave rise to the right to reject the vehicle means that the vehicle cannot be driven on the road and that it must be transported to the trader. This cannot be done without significant cost to the purchasers. The Tribunal will therefore order that the trader is to collect the vehicle from the purchasers.
[29] As at the date of hearing the vehicle’s odometer reading was 97,306 kilometres, showing a distance travelled since the date of sale of 6,306 kilometres. Unfortunately, the Tribunal does not have jurisdiction to make any adjustment in the trader’s favour by way of a mileage/depreciation allowance because the Act provides no means of compensating the trader for the use of the vehicle in the interim period. It has been suggested that the absence of any such jurisdiction is a deliberate policy of the Legislature in order to create an incentive for the suppliers of goods to act promptly on any valid notice of rejection by taking the goods back and providing a refund at that stage. (See Stephens v Chevron Motor Court Ltd [1996] DCR1,8).

Tribunal’s Orders

(a) That the trader shall immediately pay the purchaser the sum of $16,205 by bank cheque.

(b) The trader shall as soon as it has paid the purchasers the sum of $16,205 arrange at its cost to collect the vehicle from the purchasers.

DATED at AUCKLAND this 19th day of December 2007

C.H.Cornwell
Adjudicator

DIRECTION TO THE CHIEF EXECUTIVE, MINISTRY OF JUSTICE.

Section 94 of the Motor Vehicle Sales Act 2003 provides that if an application is made to this Tribunal which falls within its jurisdiction and that in determining the application the Tribunal decides against a motor vehicle trader, the Tribunal must direct the Chief Executive of the Department for Courts (now Ministry of Justice) to publish a notice in the Gazette containing the particulars set out in subsection (2). The notice is only to be published once the circumstances described in subsection (3) have occurred. The Chief Executive is directed accordingly.