Reference No. MVD 50/2010 (Auckland) [2010] NZMVDT 46 (7 May 2010)

Last Updated: 1 June 2010

Decision No. AK 46 /2010

Reference No. MVD 50/2010

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 D Clough, Assessor

HEARING at HAMILTON on 5th May 2010

APPEARANCES

Miss V R XXXX, the purchaser

Mr T D AAAA, Director for the trader

DECISION

Background

[1] On 5th December 2009 Miss XXXX (“the purchaser”) purchased a 2000 Land Rover Discovery registration number RRRR (“the vehicle”) from YYYY (“the trader”) for $14,500. The purchaser has rejected the vehicle because she says it is not of acceptable quality under the Consumer Guarantees Act 1993 and the trader has refused to remedy all the vehicle’s faults.

[2] The trader says that the purchaser did not give it a reasonable opportunity to remedy the vehicle’s defects before she rejected the vehicle, as required by the Consumer Guarantees Act 1993, and hence the purchaser is not entitled to reject the vehicle. The trader says it remains willing to remedy certain defects in the vehicle.

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

Facts

[4] The purchaser says she read an advertisement for the vehicle on TradeMe and when the vehicle did not sell at auction she made contact with the trader and negotiated a price for it and a Nissan vehicle she traded in to buy the vehicle. The price she says she paid for the vehicle was $14,500. A Consumer Information Notice signed by the parties records that the vehicle was sold for $14,950 “By Auction” but the purchaser says she did not purchased it by auction. The trader made no claim that the vehicle had been sold by auction during the Tribunal’s hearing.

[5] Before she agreed to purchase the vehicle the purchaser had the ZZZZ undertake a Pre Purchase Inspection of it on 30th November 2009. The report of the ZZZZ which was unsigned and does not show the name of the Inspector at the Hamilton Inspection Centre who carried out the inspection, was produced. It records the vehicle’s odometer was “113,280 kms” but the Tribunal accepts that this was recorded in error by the Inspector and should have been 113,280 miles because the vehicle’s odometer, being an import from England, shows the odometer reading in miles when the ignition is turned on but can be operated so as to show the odometer in kilometres; something which the Inspector either overlooked or failed to appreciate.

[6] The vehicle was classified as “Grade 3: Likely to require unplanned maintenance and repair” and the Inspector’s comments on it are as follows:
“Rear boot trim panel cracked, Rear seats- adjustment lever broken and seized, interior light lense (sic) missing. Check height adjustment operation.”

[7] The ZZZZ report also records that the steering box housing was leaking, that the radiator coolant concentration was weak and its level low, the engine was leaking oil, the engine oil was dirty and the vehicle required a service, the oil filler cap was missing and the rear arm on the windscreen wiper was missing. The report states that a lamp lens was damaged and there were “miscellaneous minor dents and scratches acceptable for age and mileage of vehicle.”

[8] The purchaser says she agreed to buy the vehicle subject to the trader agreeing to remedy all defects the ZZZZ found with the vehicle. The trader claimed that the ZZZZ made a second inspection of the vehicle after the trader had informed it that all work had been done and apparently found the radiator had not had the antifreeze concentration rectified and the oil cap was still missing and the trader had these attended to. The trader claimed that the ZZZZ were satisfied that the height adjustment operation was working properly but there was no evidence of that produced to the Tribunal.

[9] The vehicle was delivered to the purchaser about the 9th December 2009 and on delivery she was disappointed to find water in the front headlight, a large crack in the driver’s mirror and the vehicle smelt musty and stale. The vehicle seemed to drive satisfactorily and the purchaser says she did not contact the trader about the headlight or mirror.

[10] A few weeks after she took delivery of the vehicle the purchaser noticed water leaking through the sunroof winder and found the sunroof had not been properly sealed. A set of luggage restraining bolts at the back of the vehicle showed signs of rust and the radio speaker cover was rusty. In January 2010 the purchaser’s attention was drawn to the fact that the suspension was low in the rear and the purchaser contacted the trader who sent her a copy of an invoice from BBBB dated 5th August 2009 for the replacement of the air suspension pump with a second hand pump following problems identified with the air suspension system in the vehicle.

[11] On 7th January 2010 the purchaser’s partner took the vehicle to VINZ for a warrant of fitness; the odometer was recorded as 114,470 miles on the check sheet. The vehicle failed its WOF because the headlights required adjustment, the RF headlight required sealing and the steering box was leaking oil.

[12] The purchaser then had a Mr L J CCCC inspect the vehicle. The purchaser is unsure when Mr CCCC inspected the vehicle and his unsigned undated report does not say when he made the inspection or even record the vehicle’s odometer at the time of inspection. Mr CCCC’s report states that the suspension was inoperative due to a faulty suspension pump. The rear bump stops were also missing. The ABS warning lamp was on continuously, the airbag light came on intermittently and the ignition switch was faulty. Mr CCCC’s report states he informed the purchaser that she should have the vehicle scanned for faults. His report also states the interior head lining was found to be very wet due to the roof leaking. The Tribunal is given discretion by clause 8(2) of the Schedule to the Motor Vehicle Sales Act 2003 to accept any relevant evidence or information, whether or not that evidence or information would normally be admissible in a court of law. The Tribunal has decided to accept Mr CCCC’s report but will place limited weight on it because it is undated and unsigned.

[13] On 16th February 2010 the purchaser took the vehicle to DDDD in Lower Hutt. Its odometer was then recorded as 187,716 kilometres. DDDD scanned the vehicle’s systems and reported faults with the suspension pump, there were no bump stops, the left ABS sensor, and both front seat belt pre-tensioners. DDDD gave an estimate of the cost of repairing each item as follows (all amounts plus GST):
2nd hand ABS sensor $250 and $551.30 new
2nd hand seat belt pre tensioners $360 and $855.37 each new
New suspension pump $1400
Labour – 6 hours $468
Scanning (after work done) $120.

[14] On 18th February 2010 the purchaser sent the trader an email discussing the problem with the faulty suspension pump which she said made the vehicle unsafe and the fourth paragraph of her letter she writes:
“Please let me know what day(s) you can book the vehicle into LR in Hamilton and that the following will be rectified:-
1. Suspension Pump- LR to fit brand new (obviously second hand does not work)
2. The ABS needs to be corrected for safety
3. The pre-tensioners need to be fixed to allow the airbags to work- SRS light came on the dash and stayed on for the whole journey I was doing- not happy to drive at the time!
4. A minor thing but still needs to be fixed- the key was always difficult to get in from the day I bought it and it now comes to light the reason why, there is a ballbearing that has now dropped and on occasions affects the electric windows and they fail to open or shut- again a safety aspect, especially with children.
5. Apparently with the rubber bump stops missing this is a WOF failure....these need to be added too!
I look forward to hearing from you so I can get this situation rectified.”...

[15] The trader replied to the purchaser’s email of 18th February within two hours as follows:
“I will rectify the suspension and the power steering leak and that is it as I spoke to you on the phone a week ago, these are items I or my suppliers have paid for already so will be of no cost to me
Do not send it back to get the rest of it done as I will not do it.”..

[16] On 3rd March 2010 the purchaser sent the trader a letter claiming it had a serious fault from the beginning and a number of other faults. Her letter listed the faults. The purchaser informed the trader that she was rejecting the vehicle under the Consumer Guarantees Act and wanted a refund of her purchase price. The purchaser sent the trader the WOF check list and a copy of DDDD’s invoice with the letter of rejection.

[17] The purchaser says that since filing her application with the Tribunal the trader has made no attempt to contact her to discuss the application. The trader confirms that he did not contact the purchaser after 18th March 2010.

[18] Mr AAAA for the trader says that the trader had the work identified by the ZZZZ in its report done before delivering the vehicle to the purchaser. He says the steering box was repaired at a cost of $161.43 but he does not have a copy of the repair invoice to produce to the Tribunal to show this was done. He says the ZZZZ rechecked the vehicle after it had been repaired and the vehicle was issued with a new WOF before being delivered to the purchaser, He says that the purchaser has driven 6,670 kilometres in the vehicle since purchasing it on the basis that its present odometer is 189,000 kilometres and at the date of sale it had done 182,330 kilometres (converting miles to kms by multiplying by 1.609344).

[19] Mr AAAA says the ABS and SRS were not faulty at the time of sale nor when the WOF was done by the purchaser on 7th January 2010 and the leaks were not noticed by the ZZZZ or by himself. He says he drove the vehicle 800 miles before he sold it to the purchaser.

The issues before the Tribunal

[20] Having considered the facts, the Tribunal concludes that the following issues require consideration:

[a] Whether the vehicle was of acceptable quality within the meaning of section 7 of the Consumer Guarantees Act 1993?

[b] If not, did the purchaser require the trader to remedy any defects and give it the opportunity to do so?

[c] Do any defects amount to a failure of substantial character?

Issue (a): Whether the vehicle was of acceptable quality within the meaning of section 7 of the Consumer Guarantees Act 1993 (“the Act”)?

[21] 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.”

[22] 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.”

[23] The remedies for a breach of s.6 are contained in section 18 of the Act which 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.”

[24] 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 has exercised his/her right to reject the vehicle within a reasonable time.
[25] 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.

[26] The time at which the quality of the vehicle is assessed is at the time of sale- although the durability characteristic will of necessity involve consideration of evidence of failure at a later date.

[27] The goods the subject of this application are a 9 year old second hand Land Rover Discovery which was imported from England in 2008 and which had traveled 113,295 miles or 182,330 kilometers at the date it was sold to the purchaser for $14,500. The vehicle was sold with a warrant of fitness issued on 7th December 2009. The Tribunal notes that at the time of sale the purchaser had a pre purchase inspection done by the ZZZZ which identified several faults with the vehicle including a leaking steering box. The trader claimed that it had this repaired but the Tribunal saw no evidence to support that and when the purchaser had the vehicle submitted for a WOF on 7th January 2010 after the vehicle had traveled 114,470 miles or 184,221 kilometers or a further 1,891 kilometers since it had been purchased, the vehicle failed a WOF because, amongst other faults its steering box was leaking.

[28] The Tribunal also accepts, on the evidence of the DDDD report dated 16th February 2010 that within a little more than two months of purchase and 5,386 kilometers of use the suspension pump had failed, there were no bump stops on the vehicle, the left front ABS sensor had failed and the front seat belt pre- tensioners were faulty. The Tribunal also accepts the evidence of the purchaser (supported by the photographs she produced showing water dripping from the rear sunroof winder) that the vehicle’s sunroof was also leaking. The Tribunal thinks, from looking at the photographs that the vehicle was probably leaking at the time of sale; the rusty luggage stays and radio speaker cover and musty smell the purchaser noticed were the symptoms of that. Having regard to all those faults the Tribunal considers first, that on a balance of probabilities the vehicle was faulty at the time of sale (the steering box and the leaks in its sunroof) and, second, that it was not as durable as a reasonable purchaser paying $14,500 would expect of such a vehicle. Thus the Tribunal finds the vehicle did not comply with the guarantee of acceptable quality in s.6 of the Act.

Issue (b): Did the purchaser require the trader to remedy any defects and give it the opportunity to do so?

[29] Section 18(2) of the Act requires a purchaser to give a supplier of goods a reasonable opportunity to rectify faults if those faults are capable of being remedied. The Tribunal accepts the faults with the vehicle were all capable of being remedied. The evidence produced by the purchaser- in particular her email letter to the trader of 18th February 2010 showed that the purchaser was willing to give the trader the opportunity to remedy the various faults with the vehicle but the trader’s terse reply sent to the purchaser at 2-49pm the same day was unequivocal. The trader said in that email that it would only agree to repair the suspension and the power steering leak because the trader or its supplier had already paid to repair them and there would be no cost to the trader to repair those items. The trader went on in its email to state quite clearly that it refused to repair any other items and the purchaser should not expect it to do so. The Tribunal views the trader’s response to the purchaser’s request as a refusal to remedy the defects and in terms of s.18(2)(b) of the Act that refusal then gave the purchaser the option of having the repairs done and recovering the reasonable cost from the trader or rejecting the vehicle. The purchaser’s letter of 3rd March informed the trader she was rejecting the vehicle.

Issue (c): Do any defects amount to a failure of substantial character?

[30] Section 21 of the Act defines what, for the purposes of s.18(3) is a failure of “substantial character”. 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."

[31] The Tribunal considers that the failure of the vehicle’s ABS and SRS systems made the vehicle unsafe. Accordingly, for those faults alone, the failure of the vehicle to comply with the guarantee of acceptable quality was one of substantial character in terms of s.21 (d) of the Act. Furthermore, the Tribunal also considers that s.21(a) of the Act is satisfied because no reasonable purchaser would have acquired the vehicle if fully acquainted with the nature and extent of the failures to the suspension system, the failure of the ABS and the SRS systems and the cost to repair those items which, on the basis of the quotations given to the purchaser by DDDD were $2,922 or 20% of the cost price of the vehicle.

Costs

[32] 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

(b) any applicant to the Disputes Tribunal, after receiving notice of the hearing, fails to attend the hearing without good cause.
(2) In any case to which subclause (1) applies, the Disputes Tribunal may order a party to pay---

• (a) to the Crown either or both of the following:
  • (i) the reasonable costs of the Disputes Tribunal hearing:
  • (ii) the fees and expenses of any witness that have been paid or are payable by the Crown; or

(b) to another party the reasonable costs of that other party in connection with the proceedings.”

[33] The Tribunal is satisfied that the trader did not make contact with the purchaser after her application to the Tribunal was filed to take part in the discussions referred to in clause 5(1)(b) of the Schedule to the Motor Vehicle Sales Act 2003. The Tribunal considers that the matter ought to have been settled by the trader before proceeding to a hearing and will therefore order the trader to pay the reasonable costs of the Tribunal’s hearing of $450 to the Crown.

Orders

1. The purchaser’s rejection of the vehicle is upheld.

2. The trader shall pay the purchaser the sum of $14,500 by Bank Cheque.

3. As soon as the trader has paid the purchaser the sum of $14,500 it shall, at its expense arrange to uplift the vehicle from the purchaser’s home in Upper Hutt and transport it back to Hamilton.

4. The trader is to pay the Tribunal’s reasonable hearing costs of $450 to the Crown payable at the Auckland District Court, Corner Albert Street and Kingston Street, Auckland within 28 days of the date of this order.

DATED at Auckland this 7th day of May 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 subs.(2). The notice is only to be published once the circumstances described in subs.(3) have occurred. The Chief Executive is directed accordingly