Laila v Gordine T/A Carsels - Reference No. MVD 164/2010 (Auckland) [2010] NZMVDT 127 (1 October 2010)

Last Updated: 18 February 2011

Decision No. AK 106 /2010

Reference No. MVD 164/2010

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN BAIQ ASRO LAILA

Purchaser

AND SELWYN ARTHUR GORDINE TRADING AS CARSELS

Trader

BEFORE THE AUCKLAND MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S Gregory, Assessor

HEARING at AUCKLAND on 28 September 2010

APPEARANCES
Mrs B A Laila, the purchaser

Miss V R Handayani, daughter of and witness for the purchaser
Mr S A Gordine, the trader

DECISION

Background

[1] On 22 July 2010 Mrs Laila (“the purchaser”) purchased a 1999 Landrover Freelander registration number FLG533 (“the vehicle”) from Mr Selwyn Gordine trading as Carsels (“the trader”) for $5,600. On 31 August 2010 the purchaser rejected the vehicle because the engine had overheated and she says it has serious faults.

[2] The trader has offered to contribute one half of the cost of replacing the vehicle’s engine or repurchase the vehicle from the purchaser for $3,000 but the purchaser has rejected both of those offers.

[3] Prior to the commencement of the Tribunal’s inquiry, the Tribunal appointed Mr Gregory who took the oath required of an assessor by Schedule 1 cl. 10(2) of the Motor Vehicle Sales Act 2003. As an assessor Mr Gregory assisted the adjudicator but the application was determined by the adjudicator alone.

Facts

[4] The purchaser says she bought the vehicle for her daughter’s use in travelling to and from University. The trader arranged and paid for A-Grade Vehicle Inspections to carry out a pre-purchase check of the vehicle on 20 July 2010. The vehicle’s odometer was recorded as 108,700kms. The trader says the inspector who did the report telephoned the purchaser and discussed the report with her. The report records that the vehicle’s sun roof was faulty, the wipers were worn, the aerial was broken, the exhaust leaked, and the vehicle required a service and tune.

[5] The trader promised to repair the vehicle’s faults (except the sunroof) and the purchaser agreed to buy the vehicle for $5,600 on 22 July. The Vehicle Offer and Sale Agreement (“VOSA”) and the Consumer Information Notice record the odometer as 108,713kms. A special condition in the VOSA was “client to fix sunroof at there (sic) cost”. Before he supplied the vehicle to the purchaser the trader had Ashfield Automotive Ltd (“Ashfield”) change the oil and filter, replace the wiper blades, repair the aerial, check the cooling system and replace the radiator cap at a total cost of $158.45. There is no record that the exhaust leak was repaired.

[6] On 26 July the muffler fell off the vehicle and the following day Miss Handayani, the purchaser’s daughter gave evidence that she paid $338.74 to PitStop to have a new muffler fitted. Unfortunately she had the muffler replaced at her cost before she told the trader it required replacement. The trader made no offer to reimburse her with the cost of the muffler.

[7] Miss Handayani gave evidence that she checked and topped up the radiator with about a litre of water and antifreeze in equal proportions on the morning of 3 August before leaving her home in Avondale to drive to University. About 20 minutes after starting her journey the vehicle’s engine suddenly started to smoke. She says she immediately stopped the vehicle and called the AA who arranged to tow the vehicle to her home for a fee of $42.

[8] On 6 August Miss Handayani telephoned Mr Gordine to enquire if there was any security over the vehicle and Mr Gordine told her there was none. Miss Handayani did not disclose that the vehicle had overheated the previous Tuesday. The following day Miss Handayani and her father went to see the trader to tell him the vehicle had overheated. Miss Handayani explained her failure to tell the trader earlier about the overheating by saying that she was sitting exams that week and she was also reluctant to have any confrontation with the trader until she had her father with her. The trader requested that the vehicle be towed to Ashfield which the purchaser arranged on 11 August. Towage costs from Avondale to Ashfield in Glenfield were $127.50 which the purchaser paid.

[9] Ashfield had the vehicle for almost 3 weeks before they informed Miss Handayani that the engine had overheated because it had run out of water, the cylinder was damaged and was irreparable and that a new engine would cost $3,000 to $3,400 to supply and fit. Miss Handayani produced a report from Ashfield dated 30 August confirming this. The Tribunal spoke to Mr Tony Ryan of Ashfield by telephone conference call during the hearing and he confirmed that water had leaked onto the ground when he filled the radiator up. Mr Ryan also confirmed that he had done a pressure test on the cooling system when the vehicle had been taken to him on 22 July before it was supplied to the purchaser and he had replaced the radiator cap because he noticed the coolant level was low.

[10] On 1 September Miss Handayani met the trader who offered to contribute $1,700 being one half of the repair costs of $3,400 or to repurchase the vehicle for $3,000. Neither of those offers was acceptable to the purchaser. Miss Handayani left a letter dated 31 August rejecting the vehicle with the trader and a copy of the report from Ashfield dated 30 August.

Issues

[11] The facts raise the following issues:
[a] Whether the vehicle complied with the guarantee of acceptable quality in section 6 of the Consumer Guarantees Act 1993 (“the Act”)?
[b] If not whether the failure was of substantial character as defined in s.21 of the Act?
[c] Whether the purchaser is entitled to reject the vehicle and have a refund of her purchase price?

[12] In terms of s.89 of the Motor Vehicle Sales Act 2003 the Tribunal only 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, the Consumer Guarantees Act 1993, or the Contractual Remedies Act 1979 as applicable to the circumstances of the case. The Consumer Guarantees Act is relevant to this application.

The Consumer Guarantees Act 1993

Issue (a): Did the vehicle comply with the guarantee of acceptable quality in section 6 of the Consumer Guarantees Act (“the Act”)?

[13] Section 6 of the Act imposes on a supplier and the manufacturer of consumer goods "a guarantee that the goods are of acceptable quality." Section 2 of the Act defines "goods" as including "vehicles.”

[14] 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.”

[15] In considering whether or not goods meet the guarantee of acceptable

quality, the Tribunal must consider the quality elements as set out in section

7(1)(a) to (e) of the Act as modified by the factors set out in section 7(1)(f) to

(j) from the perspective of a “reasonable consumer”. The test is an objective

one; it is not a view of those factors from the purchaser’s subjective perspective.

[16] 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 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 exercised her right to reject the vehicle within a reasonable time.
[17] The factors to be considered by the Tribunal in this case in deciding if the vehicle was of acceptable quality are that the vehicle was, at the time of sale an 11 year old Landrover Freelander which had travelled 108,713kms and was sold for $5,600. The Tribunal considers it to be a “relevant circumstance of the supply of the goods” that the trader’s mechanic, Mr Tony Ryan of Ashfield tested the vehicle’s cooling system and considered it necessary after doing so to replace the vehicle’s radiator cap to cure a fault found with the cooling system.

[18] Within 4 days of the date of supply the vehicle’s muffler fell off and within a further 8 days the vehicle cooling system failed and the engine overheated so severely that the trader’s mechanic (the same person who checked the cooling system and replaced the radiator cap 12 days previously) now considers it necessary to replace the engine. The Tribunal therefore has little hesitation in finding as a fact that at the time of sale the vehicle was neither free from minor defects nor as durable as a reasonable purchaser paying $5,600 for a second hand vehicle would regard as acceptable because its cooling system was clearly faulty. The vehicle was thus not of acceptable quality at the time of sale.

Issue (b): Whether the failure is of substantial character as defined in s.21 of the Act?

[19] 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:

“ 21 Failure of substantial character
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."

[20] The Tribunal does not consider that any reasonable consumer would have acquired the vehicle if they had been fully acquainted with the nature and extent of the failure of the vehicle’s cooling system and accordingly the Tribunal considers the vehicle’s failure to comply with the guarantee of acceptable quality falls squarely within s.21(a) of the Act.

Issue (c): Whether the purchaser is entitled to reject the vehicle and have a refund of his purchase price?

[21] In terms of s.18(3) of the Act the failure, having being found by the Tribunal to be of substantial character, the purchaser is entitled to reject the vehicle. The Tribunal is satisfied that the purchaser complied with s.22(1) of the Act by giving the trader notice on 31 August 2010 that she was rejecting the vehicle with her grounds for doing so and that rejection was exercised within about five weeks of the date of supply and as soon as she was aware of the extent of the vehicle’s engine fault from receiving the Ashfield report. This was within a reasonable time of the time of supply. The Tribunal will therefore uphold the purchaser’s rejection of the vehicle on 31 August and order the trader to refund the purchaser’s full purchase price and the towing charges she has incurred of $169.50. The purchaser did not require the trader to replace the muffler before having PitStop replace it on 27 July and hence the Tribunal is unable to order the trader to refund that cost to her.

Orders

1.The purchaser’s application to reject the vehicle under the Consumer Guarantees Act 1993 is upheld.

2. The trader shall within 10 days of the date of this order repay the purchaser her purchase price of $5,600 and her towing charges of $169.50; a total of $5,769.50 by bank cheque.

DATED at Auckland this 1 October 2010

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.