Reference No. MVD 013/08 (WN) [2008] NZMVDT 60 (17 April 2008)

Last Updated: 27 May 2008

Decision No. WN12/2008

Reference No. MVD 013/08

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 WELLINGTON MOTOR VEHICLE DISPUTES TRIBUNAL

N J Wills - Barrister, Adjudicator
J R Harcourt - Assessor

HEARING at CHRISTCHURCH on 27 March 2008

APPEARANCES

Ms XXXX, purchaser
Mr ZZZZ, witness for the purchaser
No appearance for trader

DECISION

Background

[1] On 27 September 2007 Ms XXXX (the purchaser) purchased a 1990 Toyota Camry (the vehicle) from YYYY (the trader) for $2,995.

[2] The purchaser has rejected the vehicle following repairs that were carried out on the vehicle by the trader for an overheating issue and subsequent failure of the automatic transmission. Following this repair a problem developed with a broken oil pipe and the purchaser’s contention is that this relates to the repair of the vehicle carried out by the trader.

[3] The trader does not accept responsibility for the problem with the oil pipe. The trader has however remedied the problem and invoiced the purchaser for those repairs.

[4] The purchasers have rejected the vehicle. The trader does not accept that rejection.

The Facts

[5] On 20 September 2007 the purchasers purchased the vehicle from the trader. The trader arranged finance for the purchaser to purchase the vehicle through AAAA. The salesperson contacted AAAA and made arrangements, and once the paperwork was completed the money was transferred direct to the trader.

[6] Approximately two weeks later and after the purchaser had travelled about 200 kilometres in the vehicle the engine overheated and it was returned to the trader. A badly blocked radiator was diagnosed and the vehicle was repaired by the trader and returned to the purchaser.

[7] About a month after purchase the automatic transmission failed, the vehicle completely losing reverse gear. The trader was informed and the trader subsequently carried out repairs by replacement of the automatic transmission.

[8] Mr ZZZZ, the purchaser's partner picked up the vehicle on a Thursday evening (the Thursday before Christchurch show weekend, 15 November 2007). He noticed there was a problem with changing gears and the purchaser made arrangements with the trader's mechanic to take the vehicle back after the long weekend. Mr ZZZZ gave evidence that from the time he picked up the vehicle on the Thursday evening to the following Monday night he had hardly driven the vehicle. During that time he had only driven the vehicle between work and his home.

[9] On Monday 19 November 2007 (two months after purchase) the vehicle developed a knocking noise in the engine. Mr ZZZZ immediately stopped driving and noticed a large pool of black oil underneath the car. He contacted the trader who came and picked up the vehicle and towed it back to the trader's workshop. The problem was caused by a broken oil pipe at the back of the engine.

[10] There was no appearance by the trader at the hearing. The trader did however set out its views on the cause of the damage in a letter to the purchaser dated 30 November 2007. The letter states:

“...The damage that was found was consistant [sic] with the sump being damaged upward by an external force thus damaging the braided pipe. We were most surprised when the oil leaked out of the engine that the person driving just put more oil in and carried on driving. ... we had arranged for the vehicle to be collected by tow truck and towed to BBBB Where upon the problem was assessed. It was found that a pipe at the back of the engine had fractured, it was also noted that the sump had been damaged.

The consensus of opinion by both the mechanics who had done the transmission were adamant that no such damage was present when the vehicle left their premises after doing the transmission.

Two independent people have inspected the vehicle and both agree that the damage to the sump was caused by an upward force which would have expanded and stretched the top engine mounting which is extremely close to the pipe which would have caused the pipe to degrade.

Therefore the damage was caused by the driver of the vehicle and so it not our responsibility.”

[11] The letter from YYYY enclosed an invoice for $395 from BBBB Ltd addressed to YYYY. The invoice was for towing the vehicle and carrying out repairs to the damaged oil hose. The YYYY letter required the purchaser to pay this invoice and said that if the invoice was not paid late payment penalties and storage fees would apply. The purchaser has not paid this invoice.

[12] When questioned Mr ZZZZ stated that the leaking oil pipe was the oil feed pipe to the vacuum pump on the alternator. This pipe is directly above the right hand axle shaft. The trader’s letter states that the car had been driven onto some protruding obstacle damaging the sump and forcing the engine up to fracture the pipe. Mr ZZZZ explained his view which was that this was not possible as the oil feed pipe moved with the motor. He said this was because it was connected solidly to the engine at both ends and would move with the engine. Even if the engine had moved when the sump was hit (which he denied had happened) it would not have put pressure on the oil pipe. The Tribunal accepts Mr ZZZZ’s evidence. The Tribunal’s assessor Mr Harcourt has experience of this type of engine and his view concurs with Mr ZZZZ’s evidence.

[13] For reasons set out above the Tribunal is satisfied on the balance of probabilities that the damage to the pipe was not caused by the purchaser. The Tribunal finds that the damage to the pipe may have been caused by the repairer hitting it with the axle when he removed it or it may simply have worn out.

[14] The purchaser filed her application with the Tribunal on 23 January 2008. On 24 January 2008 the vehicle was delivered back to the purchaser with a letter stating:

“Dear XXXX and ZZZZ

As you can see we have delivered your car back home to you, as the only alternative was to place the car into storage at a cost of $10 per day which would have been charged to you.

The brief facts are that you instructed us to carry out work to your vehicle which we did satisfactorily, please find a copy of the invoice attached which you have 7 days to pay or it will be handed over to CCCC..

Although you may have a claim against YYYY Ltd as you are aware this has nothing to do with us, so once again we ask you to settle this account.”

[15] The purchaser’s evidence was that the trader and BBBB Ltd were related companies as the signatory on that letter – DDDD – was the same person who had earlier signed the letter from the trader.

[16] The purchaser has not paid the account and is currently in possession of the vehicle. Shortly after the purchaser received the vehicle back, the engine seized. Mr ZZZZ, the purchaser’s partner, who is a mechanic gave evidence that he took the sump off the vehicle and discovered that the number one con rod had seized. He said that an estimate of the repairs was around $2,370.

Consumer Guarantees Act 1993

[17] Section 6 of the Consumer Guarantees Act 1993 provides:

"6 Guarantee as to acceptable quality

(1) Subject to section 41 of this Act, where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality.

(2) Where the goods fail to comply with the guarantee in this section,—

(a) Part 2 of this Act may give the consumer a right of redress against the supplier; and

(b) Part 3 of this Act may give the consumer a right of redress against the manufacturer."

[18] Section 6 of the Consumer Guarantees Act 1993 provides:

"7 Meaning of “acceptable quality”
(1) For the purposes of section 6 of this Act, 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,—
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):
(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 obtain 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."

[19] The Tribunal is satisfied that the leak from the oil pipe to the vacuum pump was a failure in the guarantee of acceptable quality. This problem occurred approximately two months after purchase. The Tribunal is satisfied notwithstanding that the vehicle has high mileage and is 18 years old and sold for the price of $2,995.00, a reasonable consumer would not expect to encounter such a problem within such a short space of time.

[20] The remedies available to the purchasers are set out in s.18 of the Consumer Guarantees Act 1993 as follows:

"18 Options against suppliers where goods do not comply with guarantees
(1) Where a consumer has a right of redress against the supplier in accordance with this Part of this Act in respect 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 of this Act:
(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 of this Act, reject the goods in accordance with section 22 of this Act.
(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21 of this Act, the consumer may—
(a) Subject to section 20 of this Act, reject the goods in accordance with section 22 of this Act; 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) of this section, 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] In this case the purchasers asked the trader to remedy the problem. The trader's position was that the purchaser had caused the damage.

[22] The purchasers then wrote to the trader rejecting the vehicle. Their letter is dated 27 November 2007. The Tribunal finds that the purchasers have validly rejected the vehicle and are entitled to a refund of the purchase price.

[23] Finance was arranged for the purchaser through AAAA Limited. Pursuant to s.89(2) of the Motor Vehicle Sales Act 2003, a Disputes Tribunal may order that the rights and obligations of the buyer of the motor vehicle under a collateral credit agreement rests in the motor vehicle trader if:

"89 Jurisdiction of Disputes Tribunal

(2) A Disputes Tribunal may order that the rights and obligations of the buyer of a motor vehicle under a collateral credit agreement vest in a motor vehicle trader if—

(a) the collateral credit agreement is associated with the contract for the sale of that motor vehicle; and

(b) the motor vehicle trader is a party to that contract for sale; and

(c) either 1 of the following circumstances applies:

(i) the buyer exercises the right conferred by the Consumer Guarantees Act 1993 to reject that motor vehicle and, on a claim by the buyer under section 47(1) of that Act, the Disputes Tribunal orders the motor vehicle trader to refund any money paid, or other consideration provided, for that motor vehicle; or

(ii) the Disputes Tribunal finds that the buyer has suffered, or is likely to suffer, loss or damage by the conduct of the motor vehicle trader that constitutes, or would constitute, any of the conduct referred to in section 43(1) of the Fair Trading Act 1986 and the Disputes Tribunal makes an order under section 43(2) of that Act declaring the whole or any part of the contract for sale to be void."

[24] The Tribunal is satisfied on the evidence that the finance agreement with AAAA is a collateral credit agreement as contemplated by s.89(3) of the Motor Vehicle Sales Act 2003.

[25] In those circumstances the Tribunal concludes that it is able to order that the rights and obligations of the purchasers under the agreement with AAAA vest in the trader.

Orders

1. The purchaser validly rejected the vehicle by letter dated 27 November 2007.
   
2. The purchaser shall deliver the vehicle to the trader.
   
3. The rights and obligations of the purchaser under the finance agreement between the purchaser and AAAA, loan number LLLL dated 20 September 2007 shall immediately vest in the trader.
   
4. The trader shall refund the purchaser the amount of all principal payments made to date under the agreement referred to in 3 above.
   
5. If the purchaser and the trader cannot agree on the appropriate amount of the refund provided for in order 4, leave is reserved for that matter to be put back before the Tribunal.
   

DATED at WELLINGTON this 17th day of April 2008

___________________
N Wills
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.