Lim v Direct Auction Import Limited - Reference No. MVD 144/2011 (Auckland) [2011] NZMVDT 112 (16 August 2011)

Last Updated: 18 September 2011

Decision No. AK 92 /2011

Reference No. MVD 144/2011

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN CLIFF TEEYOON LIM

Purchaser

AND DIRECT AUCTION IMPORT LIMITED

Trader

BEFORE THE AUCKLAND MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr G Middleton, Assessor

HEARING at Auckland on 10 August 2011

APPEARANCES
Mr C T Lim, the purchaser
Mr C W Khoo, support person for the purchaser
Mr Y Sena, Director, for the trader
Mr E Williams, witness for the trader

DECISION

Background

[1] On 11 June 2011 Mr Lim (“the purchaser”) who lives in Wellington purchased, sight unseen, a 2003 Honda Odyssey Absolute vehicle registration number FZC92 (“the vehicle”) for $9,320 from Direct Auction Import Limited (“the trader”) in Auckland. The purchaser has applied to the Tribunal to uphold his rejection of the vehicle for a fault which prevents its engine operating properly.

[2] The trader says that the vehicle’s fault is not serious and can be readily repaired and that the trader is and always has been willing to repair it but the purchaser has refused to allow it to do so.

[3] Prior to the commencement of the Tribunal’s inquiry, the Tribunal appointed Mr Middleton 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 Middleton assisted the adjudicator but the application was determined by the adjudicator alone.

Facts

[4] In early June 2011 the purchaser saw the vehicle advertised on TradeMe for a price of $8,990. The vehicle was advertised as having amongst other features 19 inch Antera mag rims with four new tyres, a “full aero low-down body” and a “brand new cambelt”. The trader’s advertisement also said the vehicle had been fully serviced and groomed. The price included a 1 year Protecta mechanical warranty. The purchaser asked the trader if the vehicle had been smoked in and if it had an RA8 or RA9 chassis and the trader replied that it had not been smoked in and the chassis was RA8. The purchaser then agreed to buy the vehicle for the reserve or “buy now” price of $8,990 on the evening of 11 June and agreed to pay the trader an additional $330 for on road costs and $400 to have it transported to him in Wellington. The vehicle’s advertised odometer reading was 102,000kms and the Consumer Information Notice recorded the odometer as 102,011kms.

[5] The vehicle was delivered to the purchaser in Wellington on 16 June. When the purchaser took the vehicle for a short drive that evening to fill the petrol tank an engine warning light came on. The purchaser drove into Wellington and on the return journey to his home in Tawa the vehicle lost power when he accelerated. The purchaser says he was almost rear-ended by another car and had to drive the vehicle off the motorway and use back roads to drive it at 40kph to his home.

[6] On 17 June the purchaser telephoned the trader and told it about what he thought was a transmission issue, and that he would be having the vehicle examined by his mechanic. Mr Sena for the trader apparently told the purchaser it was unlikely to be a transmission fault but more likely wet spark plugs.

[7] The purchaser had Hup Lee Trading Ltd trading as HL Autos come to his home on 17 June and scan the vehicle. HL Autos’ diagnosis was faulty crankshaft and camshaft sensors. They quoted the purchaser a total of $1,486.72 to replace the camshaft and crankshaft sensors with 6 hours labour. They also charged the purchaser $178.25 for their diagnosis and call out. When the purchaser telephoned the trader to relay the diagnosis he had been given by HL Autos, Mr Sena asked him to have HL Autos use compressed air to blow dry them.

[8] The purchaser had also discovered on receiving the vehicle that its Antera wheels were fitted with a concealed valve for which a special adaptor is required to enable a user to gain access to the tyre valves to check the tyre pressures. On being told about that matter Mr Sena asked the purchaser to take the vehicle to a tyre shop. The tyre shop to which the purchaser took the vehicle told him that the Antera brand was not imported into New Zealand and the purchaser might be better off to replace the wheels.
[9] The purchaser sent an email to the trader on 18 June claiming that the vehicle had major problems, that it had broken down on the day of delivery (16 June) it had a faulty camshaft sensor which caused loss of power, jerking and stalling, and there were concealed valves on the wheels. He rejected the vehicle under the Consumer Guarantees Act 1993. The trader replied the same day advising the purchaser that he wanted the opportunity to remedy the defect with the engine and offered to pay for the vehicle to be repaired. The trader also promised to obtain the wheel valve adaptor from Japan if it is not available in New Zealand and also offered the purchaser $200 cash to compensate him for his inconvenience. The purchaser rejected that offer.

[10] The purchaser says that the suspension on the vehicle is not the Mugen suspension which he expected and that the trader had failed to disclose that the vehicle did not have Mugen suspension or that the vehicle’s suspension had been lowered. He produces as evidence that the Mugen suspension is a feature of the Honda Odyssey Absolute a printed extract from Wikipedia dated 7 August 2011 which refers to the Second Generation (RA6-RA9 chassis) Honda Odyssey and includes a paragraph which reads:
“A sporty “Absolute” version with all the chassis for the first time has appeared. This co-Mugen tuned version differs by the modified suspension of the European-like car’s behaviour, 17-inch wheels and some exterior/interior changes”.

[11] The purchaser says that the words in the trader’s advertisement: “full aero low-down body” did not convey to him that the vehicle had been lowered and it is not possible to tell from the photograph of the vehicle on the TradeMe advertisement that the vehicle’s suspension had been lowered.

[12] The purchaser also says the words “brand new cambelt” in the trader’s advertisement are misleading because the cambelt was changed at 94,560kms, 7,000kms before it was supplied to him.

[13] The purchaser had the vehicle inspected by Autostop Johnsonville on 12 July at his home. He produces Autostop’s tax invoice which records that they found “ crank sensor issue will need to remove cambelt covers and replace or repair crank sensor issue. Will need to be towed as engine cuts out after 3 minits (sic).” Autostop quoted $829.50 to replace the crank sensor including the cost of towing the vehicle to its workshop and $149.20 for their call out and diagnosis.

[14] The Tribunal, prior to the hearing, requested the purchaser to have the vehicle inspected and assessed by a Honda franchised dealer and for the Honda dealer to report on the load and speed rating of the tyres, the suspension, and the engine operation. The purchaser arranged for Honda Cars Wellington (“Honda”) to inspect the vehicle on 4 August and he produces their report which states that the load and speed rating of the tyres (235/35/R19 91Y) is OK however the wheels and tyres fitted are larger than the original specification of 215/55/R17 93V which will cause the speedo to read slightly higher. The Tribunal notes first, that the New Zealand tyre industry does not support a rolling diameter difference exceeding 4% (this example is only 3.2%); and second that the speed odometer with this fitment may read 3.3% too fast which is also acceptable. Honda report that the suspension has a lowering kit but is within WOF requirements. With regard to the engine Honda’s report states the engine light is on, they scanned the vehicle for fault codes and found one code; the CKP sensor. When they checked the sensor they found it was OK but there is an open circuit in the wiring between the vehicle’s ECU (computer) and the sensor which requires further investigation to trace the broken wire. The Honda report notes that the engine cuts out after starting and the steering becomes heavy as the power steering pump is driven when the engine is running. Honda charged the purchaser $241.50 for their diagnosis and report and the cost of towing the vehicle from Tawa to their workshop. The purchaser incurred $85 in towage fees having the vehicle towed back to his home.

[15] The purchaser acknowledges that the trader has offered to have the vehicle repaired by either Autostop or HL Autos at its expense.

[16] The Tribunal arranged to speak to Mr Alan Dunn the Service Consultant at Honda during the hearing by conference call. Mr Dunn confirmed that the crankshaft sensor itself was not faulty; the fault lay in a broken wire between the sensor and the ECU which he estimated might take as long as 2 hours to find and rectify. He also told the Tribunal that Honda would consider running another wire between the sensor and ECU as a fix but it would be an untidy solution. He says that the vehicle’s steering would be heavy once the engine had cut out but that would not cause a driver to lose control.

[17] Mr Sena for the trader says the vehicle was imported to New Zealand in March 2011 and went through compliance by VTNZ on 11 May 2011. The front brake pads were replaced. The purchaser’s first enquiry about the vehicle was whether it had been smoked in and the trader advised it had not. The purchaser also enquired what chassis model the vehicle was and was advised it was an RA8. The purchaser accepted the buy now price of $8,990 at 8-07pm on Saturday 11 June 2011 without inspecting the vehicle or asking the trader any other questions about it.

[18] After he purchased the vehicle the purchaser asked if the water pump had been replaced, and about the wheel alignment. Mr Sena says at no time did the purchaser make any enquiry about the suspension or ask if it had Mugen suspension or make any enquiry about the Antera mag wheels. Mr Sena says he does not believe from the enquiries he has made in Japan that Mugen suspension is a standard feature of Honda Odyssey Absolute vehicles.

[19] Mr Sena says that he estimates he drove about 50kms in the vehicle before having it transported to the purchaser and he says the engine warning light did not come on nor did he experience any other problems with the vehicle. He says he has obtained the valve tool adaptor which he is willing to provide to the purchaser without charge and that replacement adaptors can be obtained at a fairly low cost from Japan.
[20] As soon as he was contacted by the purchaser on 18 June seeking to reject the vehicle he wrote the purchaser an email offering to have the fault with the engine repaired and promising to obtain the valve took adaptor and also offered the purchaser $200 cash to compensate him. Mr Sena says the trader remains willing to have the vehicle repaired in Wellington at its cost at an MTA approved independent garage and he would be willing for Honda to do the repair work.

Issues

[21] The facts raise the following issues:
[a] Whether the vehicle was of acceptable quality at the time of sale in terms of the guarantee in s6 of the Consumer Guarantees Act 1993?
[b] If not, whether the failure of the vehicle’s fault is one of substantial character?
[c]If not, whether the purchaser required the trader to remedy the fault and gave it a reasonable time within which to do so?
[d] Was the vehicle misrepresented to the purchaser by the trader?

The Consumer Guarantees Act 1993 (“the Act”)

[22] 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.”

[23] The expression "acceptable quality" is defined in s 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.”

[24] 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.

[25] 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 s19 of the Act. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser exercised his/her right to reject the vehicle within a reasonable time.
Issue (a): Whether the vehicle was at the time of sale of acceptable quality in terms of the guarantee in s6 of the Act?

[26] The vehicle in this application is an 8 year old Japanese imported Honda Odyssey Absolute 7 seat van which had travelled 102,011 when it was sold for $9,320 inclusive of on road costs. It is not disputed by the trader that as soon as the vehicle was delivered to the purchaser its engine showed a fault. This was first diagnosed by HL Autos as due to a faulty camshaft and crankshaft sensors, then as a faulty crankshaft sensor by Autostop and finally, and in the Tribunal’s Assessor’s view most reliably and recently, by Honda as a fault in the wiring loom between the ECU and the crankshaft sensor. Clearly the vehicle was not fit for all the purposes for which goods of the type in question are commonly supplied, it was not free from minor defects and it was not as durable as a reasonable purchaser paying $9,320 for the vehicle would regard as acceptable. Accordingly the Tribunal finds that the vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act.

[27] The purchaser claimed that the fact that the engine cut out made the vehicle unsafe but the Tribunal notes first, that the purchaser was able to drive the vehicle to his home on the night of 16 June- even though in limp home mode and at 40kph and, second, the Tribunal accepts the opinion of Mr Alan Dunn of Honda that the vehicle was still able to be driven to the side of the road. The Tribunal is therefore unwilling to categorize the vehicle as unsafe.

[28] The purchaser claimed that the vehicle’s wheels were unsafe because he did not have the necessary tool to get access to the tyre valves and that even with the tool he might lose it in the future making the tyres unsafe. The Tribunal does not accept that argument because the common sense solution is to carry the valve adaptor tool in the vehicle at all times. The trader has offered to supply the valve adaptor tool free of charge to the purchaser.

Issue (b): Whether the failure is one of substantial character?

[29] 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."

[30] The Tribunal does not accept that the failure is one of substantial character as defined in s21 of the Act because the fault with the broken wire between the crankshaft sensor and ECU can, according to Mr Dunn of Honda be rectified in about two hours which will cost $241.50 in labour at Honda’s labour charge rate of $110 per hour plus GST. If the fault requires another wire to be attached to the loom between the ECU and the sensor the Tribunal expects, on the advice of its Assessor that the vehicle can be made to operate properly at a cost of less than $300.

Issue (c): Whether the purchaser required the trader to remedy the fault and gave it a reasonable time within which to do so?

[31] 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 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."

[32] Where the failure is not one of substantial character, as is the case in this application, the Act requires a purchaser to require the trader to remedy the defect and to allow the trader a reasonable time within which to do so. In this application the purchaser decided to reject the vehicle within 48 hours of receiving it without giving the trader the opportunity to remedy the fault because he apparently thought the fault was one of substantial character. The Tribunal, having found that the failure to comply with the guarantee of acceptable quality was not one of substantial character it follows that the purchaser was not entitled to reject the vehicle. He should have given the trader a reasonable opportunity to remedy the fault. The Tribunal accepts from reading the exchange of emails between the parties on 18 June 2011 that the trader was from the outset, and remains willing to fix the fault at its cost but that the purchaser refused to allow it to do so. The Tribunal considers that the purchaser is therefore not entitled to reject the vehicle and it will dismiss his application for rejection. The trader should now make arrangements with the purchaser to have the vehicle towed back to Honda, repaired and returned to the purchaser at the trader’s cost.

[33] The Tribunal considers that the costs the purchaser has incurred in having the vehicle examined and its fault diagnosed were all reasonably foreseeable. Accordingly, pursuant to s18(4) of the Act the trader will be ordered to reimburse the purchaser with the costs he has incurred in having, HL Autos, Autostop, and Honda diagnose the fault, and in having the vehicle towed back to the purchaser’s home totalling $653.95. The Tribunal also considers the trader should send the purchaser the valve adaptor tool it has purchased, free of charge and provide the purchaser with the name and address of the supplier of the tool so that if the need arises in the future, he can obtain a replacement.

Issue (d): Was the vehicle misrepresented to the purchaser by the trader?

[34] The purchaser claimed that the trader failed to notify him that the vehicle’s suspension had been lowered, that the vehicle did not have a Mugen suspension system, and that it misrepresented the age of the cambelt by describing it as “brand new” when the purchaser says he believes it was replaced at 94,560kms.

[35] With regard to the suspension system the Tribunal does not think that the trader had any responsibility at law to disclose to the purchaser that the vehicle had been lowered or that it did not have a Mugen suspension system. If either of those two features had been important to the purchaser he should have had the vehicle inspected before he purchased it or asked the trader specifically whether the vehicle had been lowered and whether it had a Mugen suspension system. The purchaser did not ask the trader about either matter before he purchased the vehicle and the Tribunal therefore does not consider the purchaser was misled or deceived by the trader.

[36] With regard to the cambelt the purchaser says that the engine contains a sticker written in Japanese which records that the cambelt was replaced at 94,560kms. He says that because the vehicle was sold to him when it had done 102,011kms the cambelt had been used over 7,451kms and it was not “brand new”. The purchaser did not offer any evidence of the loss that he had suffered as a consequence of that mis-statement and in any event the Tribunal considers that this is a matter of de minimus; a trifling issue which in the absence of any proof of loss by the purchaser it does not propose to treat as an actionable misrepresentation.

Orders

1.The trader should make arrangements with the purchaser to have the vehicle towed to a repairer of the trader’s choice, repaired and returned to the purchaser within a reasonable time –all at the trader’s cost.

2. The trader shall pay the purchaser his consequential losses of $653.95.

3. The trader shall supply the purchaser with the valve adaptor tool free of charge.

DATED at Auckland this 16th August 2011.

C.H.Cornwell
Adjudicator