Reference No. MVD 37/08 (AK) [2008] NZMVDT 40 (27 March 2008)

Last Updated: 22 April 2008

Decision No. AK 35 /2008

Reference No. MVD 37/08

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN XXXX

Purchaser

AND YYYY

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr J W Farnsworth, Assessor

HEARING at AUCKLAND on 25 March 2008

APPEARANCES

Mrs M A XXXX, the purchaser

Mr T XXXX, support person for the purchaser
Mr R I AAAA Director, for the trader
Mr T BBBB, witness for the trader

DECISION

Introduction

[1] On 28 July 2005 Mrs XXXX (“the purchaser”) purchased a new Mini Cooper registration number RRRR (“the vehicle”) from AAAA Limited trading as AAAA (“the trader”) for $47,383. The purchaser experienced a number of problems with the vehicle and, on 29 October 2007 purported to reject it claiming that the vehicle’s faults were of a substantial character. She seeks the Tribunal’s orders upholding her rejection and a full refund of her purchase price. The trader says the vehicle’s faults were all relatively minor, were all remedied within a reasonable time, that there has not been a failure of substantial character and thus the purchaser has no right to return her vehicle to the trader.

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

The Facts

[3] The purchaser experienced a number of faults with the vehicle a summary of which is as follows:

Date Odometer(km) Fault

28/7/05 0 Chrome button on handbrake fell off
10/1/06 4,688 Leather surrounding gear stick cut
15/2/07 22,225 rattle & passenger door panel coming away
19/3/07 23,791 key emblem fell off key
7/5/07 24,663 expansion tank leaking
31/5/07 26,916 coolant thermostat housing leaking
12/10/07 32,831 oil leaking from sump & gear box release bearing & air conditioning odour
11/2/08 37,000 knocking noise in clutch & coolant tank leaking
3/3/08 37,000 cv boot leaking & oil weeping from transmission housing.

[4] Each of the faults listed in the previous paragraph (apart from odour in the air conditioning system) was promptly repaired by the trader under the manufacturer’s warranty at no cost to the purchaser. The trader even sent a member of its staff to the purchaser’s residence to remove oil which had leaked from the sump onto the garage floor. The trader claimed that the air conditioning odour might be caused by the vehicle making a number of short trips resulting in stale water in the cooling system.

[5] The purchaser sent the trader a letter dated 29 October 2007 reciting the problems she had experienced with the vehicle, and claiming after referring to the Consumer Guarantees Act that “if there have been several other faults with the same vehicle these can add up to a serious fault.” She also wrote “I believe that the problems are serious and I no longer want this vehicle. I am rejecting this motor vehicle and request a full refund of the purchase price of $47,385 from your company.”

[6] The trader’s Director, Mr AAAA, met with the purchaser on 12 November 2007 and sent her a letter the same day apologising for the problems she had experienced with the vehicle and saying that “I am however pleased to learn from our meeting that you have no outstanding issues with your vehicle, but more a general disappointment with such items that you’ve reported and set out in your letter in October 29th that needed attention over the 35,000 kilometres since you took delivery.” The purchaser wrote back to Mr AAAA on 16 November saying that there must be a misconception on his part because she thought he was referring at their meeting to any outstanding issues that she had not outlined in her letter of 29 October in which she informed the trader of her decision to reject the vehicle under the Consumer Guarantees Act. She reaffirmed her wish to be fully refunded with the purchase price.

[7] The purchaser had a mechanical inspection carried out on the vehicle by HHHH on 19 February 2008 and produced a copy of the GGGG’s report in which the inspector commented there was a faint noise at idle when the clutch was depressed- possibly the belt tensioner which required further investigation, that the radiator expansion tank was leaking, the left front inner CV boot was leaking grease and there was a slight weeping of oil from the transmission housing. The Tribunal understands that all these items were fixed by the trader between 3 -7 March at no cost to the purchaser.

[8] The purchaser has had the tyres replaced and the vehicle’s wheel alignment corrected at her expense as normal wear and tear items.

Legal Principles

[9] 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 purchaser claims that the trader has breached the provisions of the Consumer Guarantees Act; in particular she founds her claim to reject the vehicle on there being a failure of a substantial character within the meaning of section 21.

Consumer Guarantees Act

[10] 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".

[11] 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.”

[12] 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."

[13] 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:
“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."

[14] 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 purchaser has exercised his right to reject the vehicle within a reasonable time.

Tribunal’s Assessment under Consumer Guarantees Act- does the purchaser have the right to reject the vehicle?

[15] The vehicle sold to the purchaser in July 2005 had one minor defect at the time of sale; its handbrake button fell off. The trader attempted to repair this and eventually supplied and fitted a new handbrake kit. In the course of repairing the handbrake the leather surrounding the gear stick was accidentally cut. There did not appear to be any other faults until the vehicle had travelled 22,225 kilometres some 13 months later and these were, in the Tribunal’s view very minor in nature and easily and readily fixed by the trader. The five problems which followed in the period from May until October 2007 when the purchaser sent the trader her letter of rejection were as Mr AAAA described them “minor irritating issues” and each was fixed at no cost to the purchaser under the manufacturer’s warranty.

[16] The Consumer Guarantees Act gives a consumer a choice of remedies. The consumer may require the supplier to remedy a failure (under section 18(2)) and where the failure is not remedied within a reasonable time the consumer can get it remedied elsewhere and recover the cost form the supplier. In the alternative if the failure is not remedied the consumer can elect to reject the goods. If the failure is one of a “substantial character” as defined in section 21 the consumer can elect to reject the goods and need not give the supplier the opportunity to remedy the failure (section18(3) so provides).

[17] In order to amount to a “failure of a substantial character” one of four situations must be present; these are set out in section 21 (a) to (d). They are, in summary, first, the failure must be one where the goods would not have been acquired by a reasonable consumer fully aware of the nature and extent of the defect, second the goods must depart in 1 or more significant respects from their sale description, third the goods must be substantially unfit for the purpose for which they were supplied, or fourth, the goods must be unsafe. The Tribunal is not convinced that any of the defects which the purchaser experienced amounted to a “failure of a substantial character”- within that definition.

[18] Even in the case of a substantial failure the remedies in section 18(2) and 18(3) are not able to be exercised sequentially as decided in Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407; (1997) 6 NZBLC 102,108. Hence a consumer cannot require a supplier to remedy a failure and, having had the failure remedied, then reject the goods but instead must make an election whether to reject the goods or have them repaired by the supplier.

[19] There may however be circumstances where a number of relatively minor defects- sometimes called a “congeries of defects” collectively constitute a substantial breach of the guarantee of acceptable quality and as such entitle the consumer to reject the goods. In the Cooper case (above) at 417 Hubble J said “In the conjerie situation a point will eventually be reached where the consumer could say convincingly that he or she had no “confidence in the reliability of the vehicle”. ...In such a case the consumer...would be expected to reject immediately at the point where he could be said to have lost confidence in the reliability of the vehicle.”

[20] In the Tribunal’s opinion this is not a situation in which the purchaser can reject the vehicle on the grounds of a congeries of defects for two reasons. First, because the purchaser made her election to have the trader remedy the various minor faults as they arose. Secondly, because the Tribunal was not convinced after listening to the purchaser that the purchaser had reached the point of having “no confidence in the reliability of the vehicle” but the purchaser wanted to reject it because she had been inconvenienced in terms of time and put to some cost in having to travel to the trader’s premises to deliver and collect the vehicle for minor repairs; repairs which she did not consider to be acceptable for a vehicle sold for the price she had paid. Whilst the Tribunal has sympathy for the purchaser’s feelings of disappointment with the vehicle it does not consider the purchaser is entitled to the remedy she sought under the Consumer Guarantees Act and her application must be dismissed.

Order

[21] The purchaser’s application is dismissed.

DATED at Auckland this 27th day of March 2008

C.H.Cornwell
Adjudicator