Reference No. MVD 60/08 (AK) [2008] NZMVDT 53 (10 April 2008)

Last Updated: 27 May 2008

Decision No. AK 43 /2008

Reference No. MVD 60/08

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 8 April 2008

APPEARANCES

Miss XXXX, the purchaser

Mr ZZZZ, witness for the purchaser
Mrs XXXX, witness for the purchaser
Mr AAAA, Director, for the trader

DECISION

Introduction

[1] On 19 January 2008 Miss XXXX (“the purchaser”) purchased a 1997 Mitsubishi Lancer Evolution registration number RRRRR (“the vehicle”) from YYYY (“the trader”) for $15,500. The vehicle’s odometer reading was 127,869 kilometres at the date of sale. The purchaser claims to reject the vehicle and recover her full purchase price and incidental costs because she says that the vehicle failed to comply with the guarantee of acceptable quality and the failure was one of a substantial character within the meaning of section 21 of the Consumer Guarantees Act 1993 (“the Act”).
[2] The trader claims that it was unaware before it received the purchaser’s application that she was dissatisfied with the vehicle and that the trader was not given a reasonable opportunity to remedy any issues the purchaser has with the vehicle before she purported to reject it and thus the purchaser is not entitled to reject the vehicle. The trader claims that it remains willing to repair any defects with the vehicle.

[3] 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

[4] The purchaser took the vehicle for a long test drive before agreeing to purchase it for $15,500 which she paid in cash on 19 January 2008. The vehicle, which had been imported from Japan in October 2007, did not have a current warrant of fitness issued within one month before the date of sale and the parties agreed that the purchaser should return the vehicle the following week so that it could be submitted for a warrant of fitness (“WOF”) test by the trader.

[5] The purchaser returned the vehicle to the trader the following Saturday, 26 January 2008, and it was submitted and failed a WOF by BBBB (“BBBB”) because there was noise coming from the vehicle’s rear suspension. The vehicle’s odometer at that date is recorded on the WOF checksheet as 128,324 kilometres. There was 5 weeks of delay from 26 January in repairing the defect. This delay was caused by the purchaser’s wish to use the vehicle during the week so that she would only make it available to the trader to be worked on during Saturdays, and delay by the trader in getting a part from Japan and having it fitted to the vehicle.

[6] On 1 March the vehicle’s suspension was eventually fitted with a part which was cannibalised from another car when it was found that the imported part was the wrong size. The purchaser also told the trader the same day that the ABS warning light had come on about 20 February. The trader’s mechanic removed the left rear ABS line and promised to send the purchaser a replacement part which she could have fitted rather than return the vehicle to the trader to have this small job done. The vehicle was then issued with a WOF by BBBB without a full WOF inspection first having been carried out; the previous WOF test having expired on 26 February 2008 before the vehicle was retested. Had BBBB carried out a fresh WOF check as they should have done at that time, the vehicle would have again been failed a WOF for the faulty ABS system and worn front tyres.

[7] The purchaser was unhappy with the manner in which BBBB had issued a WOF without carrying out a full recheck on the vehicle and she suspected that their apparent carelessness in this regard was indicative of a generally careless approach to issuing WOF’s. Accordingly, the next day, 2 March 2008, she decided to resubmit the vehicle for a WOF check to CCCC at DDDD. Its odometer reading was then 129,910 kilometres. The vehicle failed this WOF test on 2 March for two reasons; the fault in the ABS system and also both the vehicle’s two front tyres were found to be less than the minimum tyre tread depth of 1.5mm.

[8] The purchaser said in giving her evidence that she telephoned the trader on 2nd March and told its manager, a man named “EEEE” that the vehicle had failed its WOF and the reasons why. She says that the trader’s manager promised to telephone her back later that day after looking into the matter and discussing it with the salesperson involved. He failed to telephone the purchaser on that day or on the 3rd March and on 5 March 2008 she posted a letter to the trader dated 4 March rejecting the vehicle for the faulty ABS and the two tyres which she claimed in her letter were not of a road worthy standard. The trader claimed it did not receive that letter.

[9] The purchaser also had the vehicle inspected by FFFF on 28 March and she produces a copy of their report which records the vehicle’s odometer as 131,603 kilometres at the date of inspection and lists a number of faults with the vehicle including the worn front tyres and that the ABS warning lights stays on at all times.

Legal Principles

[10] 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 1993.

Consumer Guarantees Act

[11] 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" and also defines “supplier” as including (b)(iv) “a person who, in trade, is acting an as agent for another, whether or not that other is supplying in trade;”

[12] 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.”

[13] 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."

[14] 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."

[15] 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.

Was the vehicle of acceptable quality?

[16] The vehicle, the subject of this application is an 11 year old Japanese imported high performance vehicle. It had done 127,859 kilometres when it was sold to the purchaser for $15,500 in January 2008 and the vehicle has now driven over 131,603 kilometres of which the purchaser has driven some 1700 kilometres since purporting to reject the vehicle on 4 March because of the faulty tyres and defective ABS system.

[17] The Tribunal accepts the purchaser’s evidence which was not challenged by the trader, that, in effect, the vehicle was not free from minor defects or safe when it was sold by the trader because it was sold without a current WOF issued within a month before the date of sale and when the trader tried to get a warrant of fitness for the vehicle on 26 January the vehicle was rejected. The purchaser required the trader to repair the vehicle. The trader repaired the noise in the rear suspension but not before another safety fault had appeared; the defective ABS system. The Tribunal accepts from the purchaser’s account of her dealings with the trader’s mechanic that she agreed that if the trader sent the replacement ABS brake line to her in the post, she would have it fitted to save her the inconvenience of bringing the vehicle back to Auckland from her home in GGGG to have the trader do this. The Tribunal also notes that the trader sent this part to her within a few days so that she had it and could have had it fitted before she sent her letter of rejection to the trader on 5 March.

[18] However in the meantime the purchaser had become concerned at the irregular way in which BBBB had issued the WOF for the vehicle on 1 March and in particular their failure to give the vehicle a new WOF test. When the purchaser submitted the vehicle to CCCC for another WOF on 2 March it failed – as she no doubt expected it would because she knew the ABS light would remain on-, and also because (unknown to her) both front tyres were worn. The Tribunal considers that the purchaser again acted reasonably in requesting the trader to replace the two front tyres.

[19] The Tribunal considers it very unlikely that the BBBB WOF check sheet was correct in recording that each tyre had 6mm of tread depth on 26 January 2008 because the CCCC WOF check sheet showed the two front tyres as having failed because of insufficient tread depth on 2 March. The Tribunal does not accept as likely that the vehicle’s front tyres could each have lost 4.5mm of tyre tread in 36 days travelling over a distance of only 1,586 kilometres between the BBBB WOF inspection on 26 January 2008 and the CCCC WOF inspection on 2 March 2008. The rear tyres had lost no more than 1mm over the same period and distance. In summary the vehicle, at the date of sale by the trader was not of “acceptable quality” within the meaning of section 6 of the Act having regard to the meaning of “acceptable quality” in section 7 of the Act because it had defective suspension, a fault in the ABS system which, within a month became evident, and two worn front tyres.

Was the purchaser entitled to reject the vehicle?

a) Failure to remedy defect within a reasonable time

[20] The Tribunal considers that the purchaser was entitled to reject the vehicle on 5 March for two reasons. First, because the trader’s manager, after being requested on 2 March to replace the two front tyres, neglected to do so within a reasonable time. The manager promised to get back to the purchaser by telephone on 2 March. He did not do so. He made no further contact with the purchaser until the day before the hearing when he sought to obtain her agreement to a settlement proposal. The purchaser therefore became entitled to reject the vehicle pursuant to section 18(2)(b) (ii) of the Act in accordance with section 22 which she did by letter dated 4 March sent on 5 March.

b) Failure of substantial character

[21] The second reason why the Tribunal considers that the purchaser was entitled to reject the vehicle is because the failure of the front tyres to meet the WOF standard made the vehicle unsafe and thus the failure of the tyres to comply was a failure of a substantial character within the meaning of section 21 (d) of the Act. This gave the purchaser the right to reject the vehicle without even requiring the trader to remedy the defect. The purchaser rejected the vehicle on 5 March by letter to the trader within a reasonable time in accordance with section 20 of the Act. Accordingly the purchaser’s rejection of the vehicle is upheld.

[22] Normally a consumer who exercises the right to reject goods is required to return them to the supplier unless the goods cannot be returned or transported without significant cost to the consumer in which case the supplier shall collect the goods at the expense of the supplier. In this case the Tribunal considers that as the vehicle no longer has a current WOF it cannot be lawfully driven on the road and must be returned to the trader by transporter. The cost of transporting the vehicle from GGGG to HHHH will be significant hence the Tribunal will order the trader to collect the vehicle from the purchaser’s residence at its expense.
Costs

[23] The Tribunal has limited power to make an award of costs to or against a party to any proceedings under clause 14(1) of Schedule 1 to the Motor Vehicle Sales Act 2003. The relevant provision is as follows:

“14 Disputes Tribunal may award costs in certain circumstances

(1) The Disputes Tribunal may award costs to or against a party to any proceedings before it only if,-

• (a) in the opinion of the Disputes Tribunal,-
  

(i) the proceedings are frivolous or vexatious or ought not to have been brought:

(ii) the matter ought reasonably to have been settled before proceeding to a hearing but that the party against whom an award of costs is to be made refused, without reasonable excuse, to take part in the discussions referred to in clause 5(1)(b) or acted in a contemptuous or improper manner during those discussions; or...”

[24] The Tribunal notes that the trader did not contact the purchaser after receiving notice of the application to discuss the application as required by clause 5(1)(b) of the Schedule to the Motor Vehicle Sales Act 2003. Had it done so the matter ought reasonably to have been settled before proceeding to a hearing. The purchaser made it clear to the Tribunal that she would have been receptive to an offer to settle her claim but it was not until the morning before the day of the hearing that the trader’s manager made an attempt to contact her and by then she had insufficient time to consider the trader’s proposed settlement offer. Accordingly the trader will be ordered to pay the purchaser’s filing fee of $50.

[25] The trader shall also pay the purchaser her costs of obtaining a further WOF of $49 from CCCC and the costs of having the vehicle inspected by FFFF of $50 because the Tribunal considers these costs were reasonably foreseeable as liable to result from the trader’s failure and will be ordered under section 18 (4) of the Act.

Orders

[26] The Tribunal makes the following orders:

1. That the purchaser has validly rejected the vehicle in accordance with the provisions of the Consumer Guarantees Act 1993.

2.The trader shall pay to the purchaser the sum of $15,649 by Bank Cheque within seven (7) days of the date of this order being the total of:
a) the agreed purchase price of $15,500; and
b) the purchaser’s filing fee of $50; and
c) inspection fees of $99.

3. As soon as the trader has paid the purchaser the sum of $15,649 by Bank Cheque as provided in Order 2 (above) the trader is to collect the vehicle from the purchaser’s home at its own expense.

DATED at Auckland this 10th day of April 2008

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.