Jorgensen v One Two Two Limited T/A Pearce Brothers - Reference No. MVD 182/2010 (Auckland) [2010] NZMVDT 138 (15 October 2010)

Last Updated: 18 February 2011

Decision No. AK 115 /2010

Reference No. MVD 182/2010

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN TERRI ROZANNE KARENA JORGENSEN

Purchaser

AND ONE TWO TWO LIMITED T/A PEARCE BROTHERS

Trader

BEFORE THE AUCKLAND MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at AUCKLAND on 11 October 2010

APPEARANCES,
Miss T R K Jorgensen, the purchaser
Mr L Bourke, witness for the purchaser
Mr T Pearce, CEO for the trader

DECISION

Background

[1] On 22 May 2010 Miss Jorgensen (“the purchaser”) purchased a 2002 Jeep Grande Cherokee LTD registration number AYF742 (“the vehicle”) from One Two Two Limited trading as Pearce Brothers (“the trader”) for $14,995. The purchaser wants to reject because the engine has seized as a result of overheating.

[2] The trader says that the purchaser caused the damage to the vehicle’s engine by continuing to drive the vehicle after she became aware that it had overheated. The trader says that by doing so the purchaser used the vehicle in a manner inconsistent with that which a reasonable consumer would have used the vehicle and accordingly the vehicle did not fail to comply with the guarantee of acceptable quality and the purchaser is not entitled to reject it.

[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 bought the vehicle from the trader for $14,995 on 22 May 2010. The vehicle had travelled 165,579 kilometres at the date of sale. In July the purchaser noticed a “coolant low” warning light on the instrument panel. She says she purchased antifreeze and added about a litre of water and antifreeze to the vehicle’s radiator expansion tank. The purchaser says it was necessary to top up the radiator with more coolant on the night of 17 August shortly before the purchaser and her partner Mr Bourke set out to drive from Henderson to Manukau City.

[5] When the purchaser and her partner reached their destination in Manukau on the night of 17 August she noticed the vehicle’s temperature gauge had moved from its normal position towards the “hot” position and there was a burning smell coming from the engine. The vehicle’s bonnet was hot. The purchaser’s partner raised the bonnet and says he inspected the level of coolant in the radiator header tank which appeared to be normal. After a short time the vehicle was restarted and driven back along the Southern Motorway towards Henderson by Mr Bourke. Mr Bourke says he did not notice the temperature gauge or whether the engine became hot but, as he and the purchaser were driving the vehicle past the Ellerslie turnoff they became aware of the vehicle’s engine making a clicking sound. They continued to drive the vehicle towards the Greenlane exit from the Southern Motorway and as they did so the vehicle’s engine lost power and stopped.

[6] The vehicle was salvaged by the AA who towed it to the purchaser’s mechanic in Massey, West Auckland on the night of 17 August. The Tribunal spoke by telephone to the mechanic at Tiko Automotive who says that after he received the vehicle he filled its radiator with about 1.5 litres of water and coolant and tested the cooling system. He says there were no external water leaks visible.

[7] The vehicle was towed from Tiko Automotive to Triangle Road Automotive Ltd (“Triangle”) on 23 August where it was inspected by Mr Maskell who is an Assessor for Autosure, the purchaser’s mechanical breakdown insurer. Mr Maskell’s report to Autosure, a copy of which is produced by the purchaser, records that at his first visit on 23 August a Tee Kay test was done (which identifies the presence of exhaust emissions in the coolant) and was positive showing a failed head gasket or cylinder head. A pressure test was also done which showed no visible leaks. Rust film was present in the header tank and the engine oil was full and did not appear to be contaminated. The engine started on 5-7 cylinders, misfired and cleared consistent with a blown head gasket or a cracked cylinder head. There was an erratic knock in the engine varying with engine load. Mr Maskell authorised Triangle to strip the engine to assess the damage.

[8] On his inspection of the stripped down engine on 30 August Mr Maskell’s report records marks in No 2 & 4 cylinder bore consistent with piston skirt contact with the cylinder bore and he notes this is normally caused when lubrication fails especially when overheated. The head gasket appears to be original. He notes that marks in the cylinder bore are usually associated with water contamination over some time. He also notes that the cause of the failure is still to be confirmed.

[9] The purchaser produces a set of 10 colour photographs of the damaged engine parts taken by Mr Maskell figures 2 and 5 of which shows the presence of slight rust on the top of a piston.

[10] The purchaser also produces a copy of an undated report written by Mr Parsons of Triangle stating that on stripping the engine he found “substantial water marks and damage to the rear piston bore indicating that this problem had been there for some time..” It was Mr Parson’s opinion that water marks and pitting of the cylinder bore generally does not occur as a result of being overheated once. Mr Parsons says in his report that the engine will need a complete recondition including boring of cylinders or a second hand engine of lower or equal Km’s fitted.

[11] On 27 August the purchaser says she contacted the trader and spoke to its manager Mr Taylor Campbell informing him of the problem and where the vehicle could be inspected. Mr Taylor initially attempted to claim that as the trader had not been given the first opportunity to check the vehicle they could not be responsible for its repair. After further discussions with Mr Taylor the trader agreed to uplift the vehicle for their own diagnosis. Subsequently Mr Taylor informed the purchaser that the trader was only going to offer a minor contribution towards the repair costs and repeatedly informed the purchaser that she only had a “30 day warranty”.

[12] On 3 September 2010 the purchaser sent the trader an email advising it that the vehicle had a serious fault; a blown head gasket and extensive damage to the vehicle’s engine and that her mechanic’s report and assessor’s report supported that. She gave her reasons in that email as to why she was rejecting the vehicle.

[13] Mr Pearce for the trader confirmed by questioning the purchaser and Mr Bourke that there had during the purchaser’s ownership been two top-ups of coolant. The purchaser confirmed that the temperature gauge and a burning/hot smell had alerted her to a problem with the vehicle’s engine when she reached Manukau on the night of 17 August. Mr Bourke confirmed that he had shortly afterwards driven the vehicle back towards Auckland without checking the temperature gauge. On hearing an intermittent clicking sound from the engine he had driven the vehicle off the motorway where its engine had seized.

[14] Mr Pearce says that in his opinion the facts show that the purchaser and Mr Bourke were remiss in continuing to drive the vehicle from Manukau towards Auckland after it had overheated. He says that in his mechanic’s opinion the vehicle had been loosing coolant over the entire time the purchaser had the vehicle yet the purchaser did not return the vehicle to the trader to have the leak investigated. He says the severity of the damage to the engine could have been avoided if the purchaser and Mr Bourke had not chosen to drive it 15- 20km from Manukau to Greenlane on the evening of 17 August. He says if the vehicle had been left at Manukau the engine damage would have been minor; probably nothing more than a new head gasket and the planeing of the cylinder heads.

[15] Mr Pearce produces a black and white photograph of the engine area below the water pump and says that the photograph shows a leak from the water pump which he says the trader believes to have been the cause of the engine overheating. In reply to the Tribunal’s Assessor as to the colour of the material which has leaked out he says it is of a light colour.

[16] Mr Pearce says the trader was sure that it should not be responsible for the full cost of repairing the engine but had nevertheless offered the purchaser that the trader would, at its cost, rebuild the engine by replacing the damaged parts. He says rebuilding the engine with new parts is about $1,000 more in cost but preferable to simply replacing the engine with a second hand engine. In the event that the purchaser’s application to reject the vehicle is dismissed by the Tribunal the trader would still extend this offer to rebuild the engine at the trader’s cost to the purchaser.

Issues

[17] The facts raise the following issues:
[a] Whether the vehicle failed the guarantee of acceptable quality in section 6 of the Consumer Guarantees Act 1993 (“the Act”)?
[b] If so what remedies are available to the purchaser?

The Consumer Guarantees Act 1993

Issue (a): Did the vehicle fail the guarantee of acceptable quality in section 6 of the Act?

[18] 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.”

[19] 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.”

[20] 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.

[21] 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.
[22] 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 a 6 year old NZ new Jeep Grande Cherokee LTD which had travelled 165,579 kilometres and was sold for $14,995. The vehicle’s engine overheated severely and has been damaged as a result. The purchaser has used the vehicle for a little over 12 weeks and driven 3,730kms in it since purchasing it.

[23] The Tribunal, on the advice of its Assessor considers that it is probable that water has been leaking into the vehicle’s cylinders through a minute gap in the head gasket for some time. The Tribunal’s reasons are first, because there is no indication coolant has been leaking from the water pump. If coolant had been leaking from the water pump and this was the cause of the overheating, the Tribunal would have expected to see an orange rust coloured coolant trail or a green coolant trail from the aperture of the water pump. Neither Mr Parsons nor Mr Mansell noted the presence of such a trail. A white trail from the aperture as appears from the monochrome photograph produced by the trader is normally due to condensation from the water pump, not a leak. The second reason the Tribunal does not think the water pump was leaking is because the pressure checks done by Tiko Automotive and Triangle would have pronounced the water leak from the water pump.

[24] The trader has claimed that the purchaser and Mr Bourke were remiss or negligent in the manner they used the vehicle. The trader says that is the reason the vehicle’s engine was so badly damaged on the night of 17 August. In particular because the purchaser and her partner, knowing that there was a leak in the coolant system of the vehicle (because they had topped up the coolant at least twice in the previous month) and also because (on the basis of the purchaser’s evidence) they had become aware on the evening of 17 August that the vehicle’s engine had overheated in the course of being driven from West to South Auckland, that the purchaser caused the damage to the engine by continuing to drive the vehicle back towards Henderson and, in effect, drove the engine to its destruction.

[25] Section 7(4) of the Act directs the Tribunal to consider two matters which are made relevant by the trader’s claim that the purchaser caused the damage by misusing the vehicle. First, the Tribunal must consider in terms of s.7(4)(a) of the Act whether the manner in which the goods (here the vehicle) have been used is consistent with “the manner or extent of use that a reasonable consumer would expect to obtain from the goods”. In addition the Tribunal is required by s.7(4)(b) of the Act to consider if the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent. The Tribunal’s view is that the purchaser and Mr Bourke were remiss in continuing to drive the vehicle back from Manukau towards Henderson when they knew the vehicle had overheated from the temperature gauge, the burning smell given off by the engine and also because the bonnet was hot. Furthermore Mr Bourke gave evidence that, knowing the vehicle had overheated he drove the vehicle back along the motorway towards Henderson without keeping a close watch on the temperature gauge and did not drive the vehicle off the motorway until he heard a clicking sound (caused by pre-ignition resulting from an extremely overheated engine). Hence the Tribunal accepts the trader’s claim that the purchaser and Mr Bourke were remiss and considers the purchaser used the vehicle in a manner that a reasonable consumer would not have; namely by continuing to allow the vehicle to be driven when she knew its engine had overheated.

[26] However the Tribunal is also required to consider whether the vehicle would have complied with the guarantee of acceptable quality if its engine had not been used in the manner which the Tribunal has found the purchaser used it. The Tribunal still considers that as a result of the faulty head gasket which it believes caused the loss of coolant into the cylinders and in turn caused the loss of coolant in the radiator resulted in the engine overheating so that the vehicle was neither as free from minor defects nor as durable as a reasonable consumer would regard as acceptable having regard to the age and price paid for the vehicle. Consequently the Tribunal finds that the vehicle did not comply with the guarantee of acceptable quality in section 6 of the Act.

Issue (b): What remedies are available to the purchaser?

[27] Section 18 of the Act sets out the remedies available to the purchaser in respect of a failure in the guarantee of acceptable quality. It provides 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 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 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 s.21, the consumer may—

(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.”

[28] The purchaser claimed in her letter of rejection to the trader that the vehicle’s failure to comply with the Act was “serious” by which the Tribunal understands the purchaser was claiming that the failure was one of substantial character as defined in section 21 of the Act. Section 21 provides:

“ 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."

[29] The Tribunal accepts the purchaser’s argument that no reasonable consumer would have purchased the vehicle with a leaking headgasket which gave rise to the engine failure and accepts that the failure is one of substantial character within the meaning of section 21 (a) of the Act.

[30] The purchaser has elected under section 18(3)(a) of the Act to exercise her right to reject the vehicle and have a refund of her purchase price and the Tribunal will accordingly order that remedy because it is satisfied the purchaser complied with section 22 and rejected the vehicle in writing within a reasonable time of the time of supply. The Tribunal noted the trader’s very reasonable offer to rebuild the vehicle’s engine. That is an offer that the purchaser may wish to consider and discuss with the trader because she may come to the view that she would be better off to accept the trader’s offer of a rebuilt engine in the vehicle instead of requiring a refund because at the end of the day she will probably get a far more reliable engine than any other she buys in a vehicle for $15,000. That, of course, is a matter for her to decide.

Order

1. The purchaser’s application to reject the vehicle is upheld.

2. The trader shall refund the purchaser with her purchase price of $ $14,995.

3. As soon as the trader has refunded the purchaser the sum of $14,995 the trader shall at its cost arrange to collect the vehicle.

`
DATED at Auckland this 15th day of October 2010

C.H.Cornwell
Adjudicator