Reference No. MVD 176/09 (AK) [2009] NZMVDT 143 (20 November 2009)

Last Updated: 1 December 2009

Decision No. Ak 109 /2009

Reference No. MVD 176/09

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 M Whinham, Assessor

HEARING at AUCKLAND on 17 November 2009

APPEARANCES

Mr Nthe purchaser

Mr AAAA, Director of the trader

DECISION

Background

[1] On 2 October 2009 Mr XXXX (“the purchaser”) purchased a 1992 Mitsubishi Chariot registration number RRRR (“the vehicle”) for $1,750 from YYYY (“the trader”). Within a week after purchasing the vehicle the purchaser discovered that the vehicle’s front and rear rubber engine mountings were torn. The purchaser requested the trader to replace the engine mountings but the trader refused to do so. The purchaser now seeks the Tribunal’s order that the trader is to pay the estimated cost of replacing the engine mountings of $702.

[2] The trader disputes its responsibility for the cost of repairs and says first that the vehicle was a trade in and because of this it has no responsibility to the purchaser. Second, that there is doubt from a BBBB inspection obtained recently by the purchaser as to whether the engine mountings require replacement. Third that the purchaser continued to drive the vehicle after its warrant of fitness expired and has now driven 3,544 kilometres in the vehicle since he purchased it.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal appointed Mr M Whinham, as expert assessor to assist in the determination of the complaint however the application was determined by the Adjudicator alone. Mr Whinham took the oath required by clause 10(2) of Schedule 1 to that Act.

Facts

[4] The purchaser purchased the vehicle on 2 October 2009 for $1,750 after seeing the vehicle advertised on CCCC for $1,750 and test driving the vehicle.

[5] The trader failed to prominently display a Consumer Information Notice (“CIN”) on the same internet page as the offer or display for sale appeared in breach of regulation 6(2) of the Consumer Information Standards (Used Motor Vehicles) Regulations 2008 and also failed to attach or display a CIN with the vehicle in breach of regulation 6(3) of the same regulations. The trader also failed to provide the purchaser with a copy of the CIN or a Vehicle Offer and Sale Agreement (“VOSA”).

[6] Before he agreed to purchase the vehicle the purchaser asked the trader’s salesman if the vehicle had been checked by a mechanic and was told by the trader’s salesman that the engine and clutch were OK.

[7] The purchaser says that at the time he purchased the vehicle he noticed that the warrant of fitness was about to expire on 19 October 2009. A new warrant of fitness that had been issued within one month before the date of sale was not provided by the trader.

[8]. Immediately after he purchased the vehicle the purchaser noticed that when he went over bumps in the road or accelerated he noticed a knocking sound coming from the engine and on 5 October he took the vehicle to DDDD who reported to him in writing on 12 October a copy of which he produces. The DDDD report identifies a number of faults including a leaking exhaust chamber, torn front and rear rubber engine mountings and both left and right steering rack boots torn. DDDD advised the purchaser the vehicle was unlikely to pass a warrant of fitness inspection when the current WOF expired on 19 October 2009. DDDD estimated the cost of repairing the vehicle to be $920 of which they estimated $600 to remedy the fault with the torn engine mountings.

[9] The purchaser sent the trader an email on 6 October advising it of the torn engine mountings and requiring the trader to remedy this fault. The trader replied by email on 15 October offering to buy the vehicle back for $1,300 or contribute $100 towards the cost of replacing the engine mountings. The purchaser rejected the trader’s offer.

[10] On14 November the purchaser submitted the vehicle for a warrant of fitness test by BBBB. The odometer was then 157,543 kilometres or 3,544 kilometres more than at the time of sale to the purchaser. The vehicle failed its WOF because the left front steering rack boot was split.

[11] On 16 November the purchaser obtained an estimate from DDDD of the cost to replace the engine mountings of $702.

[12] Mr AAAA for the trader says that he did not know the trader was required to display a CIN when selling vehicles on CCCC. He says that the vehicle was a trade in and produces a copy of the Vehicle Offer and Sale Agreement between the trader and the person from whom the vehicle was purchased by the trader on 9 September 2009 for $2,200.

[13] Mr AAAA says that there is a discrepancy between the DDDD estimate on 12 October which reported the engine mountings were torn and the BBBB WOF report which does not identify any damage to the engine mountings. Mr AAAA also comments that although the purchaser claims the vehicle was unsafe with the broken engine mountings he has still used the vehicle to drive 3,544 kilometres since purchasing it.

The issues before the Tribunal

[14] Having considered the facts, the Tribunal concludes that the following issues require consideration:
[a] Whether the vehicle failed the guarantee of acceptable quality provided for in the Consumer Guarantees Act?
[b] If so whether the purchaser required the trader to remedy any defect?
[c] If so, what remedy is available to the purchaser under the Consumer Guarantees Act?

Legal Principles

[15] 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 relating to the sale of a motor vehicle. The Tribunal may apply the provisions of the Fair Trading Act 1986 the Consumer Guarantees Act 1993 or the Sale of Goods Act 1908, as applicable to the circumstances of the case. In this case the facts and the issues raised require consideration of the Consumer Guarantees Act 1993.

The Consumer Guarantees Act 1993 (“the Act”)

[16] 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”.

[17] The expression "acceptable quality" is defined in Section 7 as follows:

“7 Meaning of acceptable quality

(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.”

[18] 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."

[19] In Stephens v Chevron Motor Court Limited [1996] DCR1, the District Court held that the correct approach to the CGA 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 Section 19 of the CGA. 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/her right to reject the vehicle within a reasonable time.

Issue (a): Whether the vehicle failed the guarantee of acceptable quality provided for in the Consumer Guarantees Act?
[20] The guarantee of acceptable quality is in three parts. A set of quality elements set out in s. 7(1)(a) to (e), a reasonable consumer test which applies a consumer’s objective evaluation of those quality elements and a set of factors in s.7(1)( f) to (j) which are to be taken into account by the reasonable consumer to modify his or her assessment of the quality of the goods.

[21] The Tribunal is satisfied on the basis of the purchaser’s evidence and the contents of the DDDD estimate dated 12 October that immediately after taking delivery of the vehicle the purchaser noticed it knocked or thumped when going over bumps or accelerating. Within a few days he had this fault identified by DDDD as caused by torn engine mountings. The fact that BBBB did not identify the torn engine mountings when they gave the vehicle a warrant of fitness inspection test on 14 November does not surprise the Tribunal. It does not amount to an inconsistency between the BBBB and the DDDD reports as claimed by the trader because BBBB do not drive vehicles any distance as part of the WOF test and the torn engine mountings and the thumping sound associated with them is normally only discernible when the vehicle is driven over bumps, accelerated, or gear changes are made.

[22] The relevant factors in determining the acceptable quality in this case are that the goods are a 17 year old second hand vehicle with a mileage of 154,000 kilometres. It was sold for only $1,750. Bearing in mind those factors the Tribunal finds that the torn engine mountings, which the Tribunal is satisfied were in that damaged condition at the time of sale, amount to a failure in the guarantee of acceptable quality. This is because the vehicle was not free from minor defects at the time of sale. The split left front steering rack boot which has been found by BBBB within 6 weeks of sale is also a failure of the same guarantee because it shows the vehicle was not as durable as a reasonable purchaser would expect- even of such an old cheap vehicle as this one.

Issue (b): Whether the purchaser required the trader to remedy any defect?

[23] The purchaser notified the trader on 6 October of the fault with the torn engine mountings and requested the trader to remedy that fault. The trader, apparently thinking (wrongly) that because the vehicle was a trade in it had no liability to the purchaser, it refused the purchaser’s request and made him an unrealistic offer to contribute only $100 towards his repair costs. Accordingly the Tribunal is satisfied that the purchaser required the trader to remedy the defect with the torn engine mountings but the trader refused to do so.

Issue (c): What remedy is available to the purchaser?

[24] The Tribunal after reviewing the evidence is satisfied that the purchaser was entitled after the trader refused to repair the vehicle, to elect to have the fault repaired elsewhere in terms of s.18(2(b)of the Act. The purchaser is entitled to recover the reasonable costs he will incur in having the failure remedied. The Tribunal on the advice of its Assessor finds that the estimated repair cost of $702 for the replacement of the engine mountings is reasonable and will order the trader to pay this sum to the purchaser together with the estimated cost of replacing the left front steering rack boot of $100 and the filing fee on the application of $50; a total of $852.

Order

The trader shall pay the purchaser the sum of $852 by Bank Cheque.

DATED at Auckland this 20th November 2009.

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.