Reference No. MVD 225/06 (AK) [2007] NZMVDT 32 (2 March 2007)

Last Updated: 11 February 2008

Decision No. AK 25 /2007

Reference No. MVD 225/06

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN XXXXXXXXXXXXX

Purchaser

AND XXXXXXXXXXXX

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr G Burkett, Assessor

HEARING at AUCKLAND on 20 February 2007

APPEARANCES

The purchaser in person
Mr XXXXXXXX for the trader
Mr XXXXXXXX, witness for the trader
Mr XXXXXXXX, witness for the trader

DECISION

Introduction

Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal appointed Mr G Burkett, an Advanced Trade Certified Automotive Engineer, as expert assessor to assist in the determination of the complaint and Mr Burkett took the oath required by clause 10(2) of Schedule 1 to that Act.

This was an application by Mr XXXXXXXX (“the purchaser”), which was due to be heard by the Tribunal on 8 January 2007 but was adjourned sine die on that date by consent to enable the terms of a settlement reached by the parties to be implemented. The settlement was not implemented to the satisfaction of the purchaser and the application was therefore, at his request, set down for hearing before the Tribunal.

On 20 April 2006 the purchaser bought a 2001 Ford Mondeo vehicle registration number xxxxxx (“the vehicle”) from XXXXXXXX (“the trader”) for $15,000.

The vehicle had, according to the Supplier Information Notice, travelled 85,399 kilometres at the date of purchase. The purchaser’s complaint is that the vehicle was not of acceptable quality and the trader has not succeeded in repairing various faults within a reasonable time. The purchaser purported to reject the vehicle by letter sent to the trader on or about 16 October 2006. The purchaser seeks the Tribunal’s order that he has validly rejected the vehicle and an order for the return of his deposit and other monies paid for the vehicle.

The Purchaser’s Evidence

The purchaser said that after he purchased the vehicle he drove it for about a week before returning it to the trader on 27 April 2006 because it was shaking, the handbrake was not effective, and the steering wheel made a noise when it was turned.

The purchaser said that the trader kept the vehicle for about two days and asked him to collect it on 29 April. The purchaser said that there was an intermittent problem with the handbrake not working properly.

On the 14 August the purchaser said that he experienced a repeat of the problem with the vehicle shaking. In addition the rear wheel was getting hot, a warning light showed on the dashboard, and the handbrake was not effective in holding the vehicle.

The purchaser said that, at the trader’s request he took the vehicle to xxxxx ). They were unable to find any reason that the vehicle was shaking, but were able to fix the handbrake, and also removed silicon from the brake discs and this may have been responsible for the rear wheel overheating.

On 21 August the purchaser said that the car was shaking again and the problem with the handbrake had reappeared. The purchaser took the vehicle to xxxx for assessment who identified three problems; the handbrake was very weak, the vehicle was hard to start, and it was running “rough”. The four spark plugs on the vehicle were replaced. The cost of xxxxxx assessment was $229.30 which was paid by the trader.

[10] The purchaser said that xx had collected the vehicle from xxxxxx and held it for about two weeks during which he understood that the work assessed by xxxxxx was being done. The purchaser said that he collected the vehicle on 22 September and drove it for a day and found that none of the three jobs had been fixed.

[11] On 1 October the purchaser went to the trader and asked for a refund of his purchase price. The trader telephoned xxx and asked them to replace the ignition coil on the vehicle and on 8 October the purchaser took the vehicle back to xx for this to be done. The purchaser said that after the coil was replaced the car still shook and so he took it back to Jxxxx on 12 October when the vehicle had travelled 91,675 kilometres. xxxx replaced the spark plug lead and identified two remaining problems; the need for the correct coil to be fitted, and secondly, a new engine mount to be fitted on the driver’ side.

[12] The purchaser said that after these two jobs were done by xxxI he still experienced some 10-12 seconds delay in the vehicle starting and that it shook sometimes.

[13] On 15 October 2006 the purchaser sent the trader an undated letter by recorded delivery which was apparently received by the trader on 16 October. The letter, a copy of which was produced to the Tribunal (Exhibit 3) recounts the purchaser ’s problems with the vehicle and concludes:

“After all these happenings, I believe that the car I purchased from you on above mentioned date has still above mentioned serious faults and because of that I am entitled to reject the car under Consumer Guarantees Act. This letter is to inform you that I am rejecting the car today. I now require you to refund me the purchase price.”

[14] The current odometer reading of the vehicle is 96,643 kilometres.

The Trader’s Evidence

[15] Mr XXXXXXXX, and Mr XXXXXXXX gave evidence on behalf of the trader company and Mr XXXXXXXX of xxx gave evidence in support of the trader.

[16] Mr XXXXXXXX said that the vehicle had been imported from Singapore and underwent compliance inspection by Deluxe Compliance under VINZ supervision in April 2006 and the appropriate warrant of fitness issued for 1 year. It was sold with a three year mechanical insurance policy issued by Drive Right with the normal $150 excess.

[16] Soon after the vehicle was sold to the purchaser he returned it with some minor complaints and the trader contacted an authorised Drive Right mechanic, xxx, and referred the purchaser to that company. The trader understood the purchaser was happy with the repairs carried out at that time.

[17] In August 2006 the purchaser returned with the vehicle claiming there were different problems and xx in order to ensure that there was no doubt as to the mechanical state of the vehicle, referred it to xxxxx, a Ford franchisee, for a report. This was issued and xxx instructed xxxxx to carry out the repairs itself so that the purchaser could be assured that a Ford dealer had completed the necessary work. No excess under the Drive Right policy was charged to the purchaser for this work and the cost of the repairs was borne by xxx.

[18] The trader had attempted to resolve the dispute with the purchaser by offering him another vehicle but the purchaser could not find a replacement vehicle suitable to him.

[19] The trader’s position was that there is nothing wrong with the vehicle sold to the purchaser that would not be common for a vehicle of its age. The fact that the purchaser is still driving the vehicle sold to him 10 months ago indicated that the vehicle is mechanically sound and there are no grounds for the purchaser’s claim.

[20] Mr XXXXXXXX of xxx on behalf of the trader said that 10 to 12 days after he purchased the vehicle the purchaser came to him complaining that the brakes were ineffective. On examining the rear disc brakes Mr XXXXXXXX said he found them totally glazed indicating the vehicle may have been driven with the brakes applied. On that occasion he put a new set of pads on the brakes and removed silicon from the discs.

[21] Mr XXXXXXXX said that he had suggested to the purchaser that he take the vehicle to xxxxx and after it was assessed by that company he had the vehicle for two weeks during which he gave the purchaser the use of a courtesy car. Mr XXXXXXXX said that the report he received from xxxxx identified the need for the brake callipers to be checked and he had removed the left and right rear callipers and sent them to Autostop Brake & Clutch in Manukau City for overhaul. Mr XXXXXXXX produced a copy of the tax invoice sent to Drive Right Ltd dated 13 September 2006 for $752-94 for this work.

[22] Mr XXXXXXXX said that he had also replaced the front engine mount and the rear mount, as diagnosed by xxxxx, as well as the rear dog bone mount. The cost of this work amounted to $799.50 for which he produced an invoice dated 27 October sent to Drive Right Ltd. Mr XXXXXXXX said that although the jobs were charged to Drive Right on two invoices in September and October he recalled doing both jobs about the same time and there had been some delay in invoicing Drive Right for the second job. Mr XXXXXXXX also produced a copy of an invoice dated 30 October 2006 for $388-12 sent to the trader for the new coil and labour to fit it.

[23] Mr XXXXXXXX said that he had explained to the purchaser that he should bring the vehicle back about two weeks after the brake callipers were refitted so that the brakes could be re-adjusted.

[24] Mr XXXXXXXX concluded his evidence by saying that in his opinion there was now nothing wrong with the vehicle and that the purchaser had told him the problems with the vehicle “were all in his head”.

[25] Mr XXXXXXXX said that as the manager of the trader he did not want to see his customers incur costs in repairing vehicle sold by the trader and therefore a three year mechanical warranty was included with the sale of the vehicle. Mr XXXXXXXX said that the trader had paid a total of $617.42 to xxxxx for the assessment report, replacement spark plugs and spark plug lead as well as the $150 excess on the Drive Right policy claim for the work done by EFI.

[26] Mr XXXXXXXX said that in his opinion there was now nothing wrong with the vehicle and the purchaser had no reason to return it to the trader.

The Consumer Guarantees Act 1993

[27] 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. In this case the enactment of particular relevance is the Consumer Guarantees Act 1993.

[28] 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".

[29] The expression "acceptable quality" is defined in Section 7 as follows:
For the purposes of section 6, goods are of acceptable quality if they are as -

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,
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
(f) the nature of the goods:
(g) the price (where relevant):
any statements made about the goods on any packaging or label on the goods:
any representation made about the goods by the supplier or the manufacturer
all other relevant circumstances of the supply of the goods."

[30] Under s.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
(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,

(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

(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.

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."

[31] The right of rejection does not automatically arise in every case in which there has been a failure to comply with the guarantee of acceptable quality. Section 18 is quite clear that this option is only available where the failure to comply with a guarantee cannot be remedied or is of a substantial character, or where the supplier has refused or neglected to remedy a failure which is capable of being remedied or has not succeeded in doing so within a reasonable time.

[32] 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 purchaser required the trader to remedy any faults within a reasonable time in accordance with s.19 of the Act. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s.21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser has exercised his or her right to reject the vehicle within a reasonable time (s.20).

[33] The notice of rejection need not be in writing, but should in clude a statement of the grounds for rejection (s.22). A reasonable time for rejection is measured from the date of supply or delivery of the vehicle, and having regard to factors referred to in s.20(2). In Nesbit v Porter [2000] NZCA 288; [2000] 2 NZLR 465, the Court of Appeal held that a reasonable time must be one which suffices to enable a customer to become fully acquainted with the nature of the defect. The purchaser's own experience is relevant but in the end an objective assessment is required – when would the defect become apparent to the ordinary buyer, in the sense that the cause of the defect has been identified, the buyer knows what needs to be done to fix it and what that will cost? Only then does the buyer know whether the defect is substantial.

[34] In Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407, His Honour Judge Hubble said of the Consumer Guarantees Act, 1993:

“The Act clearly vests the consumer with new rights focused on reasonable consumer expectations rather than the previous rigid and technical approach. Where it is found there has been a breach of the Act a consumer is given the option under s 18(2) of requiring the supplier to remedy the defect within a reasonable time or alternatively to reject the goods and seek damages and compensation.

The Stephens case settled the issue of whether or not these rights could be exercised sequentially in favour of the view that they could not, but made the further finding that where a defect of a substantial character is remediable, a supplier must give the consumer sufficient information on which to make an informed decision as to whether to reject the goods or not. In other words a consumer’s election to have repairs carried out by the dealer may not prejudice a subsequent right to reject the goods if the consumer has not been provided with sufficient information by the dealer to make an informed decision whether to reject or not. In Stephens the Court awarded a full refund of the purchase price of a motor car despite the passage of some 14 months and 15000km between the date of purchase and the date of the decision.”

[35] In considering the facts of this application, the Tribunal accepts the purchaser’s evidence that, when the vehicle was sold to him there were some defects with it. It appears that the vehicle’s ignition coil and engine mounts were defective and probably caused the shaking the purchaser complained of. The brakes were ineffective- possibly because the purchaser had driven the vehicle with the brakes applied causing the brake discs to heat and “glaze” or possibly because their condition was not detected on compliance by Deluxe Compliance or when the vehicle had its first warrant of fitness inspection by VINZ Mount Wellington on 12 April 2006. Taken together these defects amounted to a breach of the guarantee of acceptable quality. The purchaser, when he discovered these problems promptly took the vehicle back to the trader who arranged for repairs to be done by xxx. The Tribunal is satisfied on the evidence of Mr XXXXXXXX, that these repairs were carried out promptly. When the purchaser came back to the trader three months later in August with further concerns, these were also handled promptly and efficiently by the trader and xxx by involving xxxxxx to have the vehicle’ s faults identified by an independent party and a Ford dealer. The trader paid xxxx costs for this work.

[36] Furthermore, the Tribunal is satisfied, that by the time the purchaser sought to reject the vehicle in mid November the trader and xxxhad fixed all the problems of which the purchaser had complained. The Tribunal notes that at the hearing the purchaser acknowledged that there was now only one matter which concerned him; that it took longer to start the vehicle than he expected. The Tribunal is not satisfied that this is a “fault” with the vehicle; it may simply be a characteristic of this model of vehicle.

Conclusion

[37] For the foregoing reasons the Tribunal is not satisfied that the purchaser had grounds upon which to reject the vehicle and accordingly his application is dismissed.

DATED at AUCKLAND this day of February 2007

C H Cornwell
Adjudicator