Larsen v Speedy 8000 Limited T/A Speedy 5000 - Reference No. MVD 167/2011 (Auckland) [2011] NZMVDT 125 (30 September 2011)

Last Updated: 16 October 2011

Decision No. AK 101 /2011

Reference No. MVD 167/2011

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN ANDRE ALEXANDER LARSEN

Purchaser

AND SPEEDY 8000 LIMITED T/A SPEEDY 5000

Trader

BEFORE THE AUCKLAND MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 27 September 2011

APPEARANCES
Mr A A Larsen, the purchaser
Mrs J E Larsen, witness for the purchaser
Mr S Clarke, Director representing the trader

DECISION

Background

[1] On 4 February 2011 Mr Larsen (“the purchaser”) purchased a 1995 Mitsubishi Pajero registration number BJF637 (“the vehicle”) for $5,000 from Speedy 8000 Limited trading as Speedy 5000 (“the trader”). The purchaser has applied to the Tribunal to reject the vehicle and obtain a refund of the costs he has incurred in repairing it.

[2] The trader says that the purchaser notified it of a problem with the head gaskets on the day after he purchased the vehicle and the trader paid the purchaser $2,200 towards the costs of replacing the head gaskets and reconditioning the cylinder heads. However the trader says that the purchaser did not require the trader to repair the crankshaft and replace the main and big end bearing sets before he incurred $4,249.59 in repairing those items. The trader says it does not consider that it has any obligation to pay for those repair costs which it also considers to be overpriced.

[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] The purchaser operates a garden maintenance business in Taranaki. He says he decided to replace an Isuzu Bighorn and a Ford Falcon which he owned for a Mitsubishi Pajero as a family vehicle for private use. On 4 February 2011 he agreed to sell his two vehicles to the trader in Auckland for $5,000 in exchange for the vehicle. The vehicle had travelled 149,574kms at the time of purchase.

[5] After he purchased the vehicle the purchaser drove it from Auckland to his home in Inglewood but on the way the vehicle overheated. The purchaser obtained and fitted a new electric fan in Hamilton. The purchaser notified the trader within a day of returning to Ingelwood of the overheating problem and the purchaser obtained an oral estimate from his repairer, Combined Motors (1991) Ltd (“Combined”) of a little over $2,000 to replace the vehicle’s head gaskets and recondition the cylinder heads. The purchaser telephoned the trader and they discussed Combined’s oral estimate and the parties agreed that the trader would contribute $2,200 towards the cost of that work. The final cost charged to the purchaser for replacing the head gaskets and head repairs was $3,557.96 and the purchaser also paid a further $219.27 to diagnose the fault and $705.73 to have the thermostat, radiator cap and fan hub replaced. The purchaser makes no claim against the trader for those additional amounts.

[6] Within a few days of having the vehicle returned to him the purchaser noticed that the oil warning light would flicker at idle. Combined diagnosed the cause of this as low oil pressure. Combined removed the engine and stripped it on 10 March 2011 according to evidence given to the Tribunal by Mr B R Williams, the owner of Combined who gave evidence at the hearing by telephone conference call. Mr Williams told the Tribunal that work did not commence on repairing the crankshaft and bearings until 4 April 2011.

[7] In the meantime the purchaser said that he had sent the following text to the trader at 7-50pm on 13 March 2011:
“Hay man Andre here I got the pajero of u got the headgaskit done but that was hiding another problem the bottom end isn’t holding any oil pressure and the seals need to be fixed as well I will need u 2 pay 4 this aswell I havn’t been able to use it yet”

[8] The trader replied by text to the purchaser on 15 March at 2-03pm as follows:
“I will give u a call later today 2 discuss!! For the price I paid before I could have put a new motor in! Your mechanic has misdiagnosed and does not want to take responsibility! I am on holiday at the moment will call you when I have better service.”

[9] The purchaser says that the trader did not call him back and so on 15 March the purchaser telephoned Mr Clarke who told him that he was busy and could not talk to him about the vehicle but promised to get back to him. However the trader did not get back to the purchaser and Mr Clarke in giving evidence said that he was “lax” in that regard.

[10] The purchaser said that he needed to have the vehicle repaired so he told Combined to proceed with the repairs which they did completing the work and returning the vehicle to the purchaser about 13 April. Combined charged the purchaser $4,249.59 for the repairs to the crankshaft and bearings. Combined charged the purchaser for 39.3 hours of labour at their labour rate of $79.73 inclusive of GST.

[11] After having the vehicle repaired the purchaser sent the trader a letter on or about 24 May 2011 purporting to reject it for the previously repaired fault with the headgaskets and the fault with the crankshaft and bearings. The trader replied on 7 June by email saying it would not be providing a refund because the purchaser had not contacted the trader regarding the repairs before having them done. On 14 July the purchaser sent the trader an email saying he had proof that he had contacted the trader by text regarding the repairs to the vehicle.

Issues

[12] The facts raise the following issues:
[a] Whether the vehicle supplied to the purchaser complied with the guarantee of acceptable quality in s6 of the Consumer Guarantees Act 1993 (“the Act”)?
[b] If it did not comply, whether the purchaser required the trader to remedy the problem with the crank shaft and engine bearings and gave the trader a reasonable time within which to do so before proceeding to have the work done by Combined?
[c] If so, what amount is reasonable in having the failure remedied?
[d] Is the purchaser now entitled to reject the vehicle?

[13] In terms of s.89 of the Motor Vehicle Sales Act 2003 (“the MVSA”) 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. The Tribunal may apply the provisions of the Sale of Goods Act 1908, the Fair Trading Act 1986, the Contractual Remedies Act 1979 or the Consumer Guarantees Act 1993, 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 s 6 of the Act?

[14] 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.”

[15] The expression "acceptable quality" is defined in s7 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.”

[16] 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.

[17] 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 s 21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser exercised his right to reject the vehicle within a reasonable time.
[18] 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 in February 2011 a 16 year old Mitsubishi Pajero which had travelled 149,574kms and was sold for only $5,000. However, on the day it was supplied to the purchaser the vehicle overheated because there was a leak in the headgaskets. When they was repaired, with financial contribution from the trader, the bottom end of the vehicle’s engine was found to be faulty with low oil pressure and excessive wear in both the big end and main bearings. The Tribunal considers that even though no reasonable purchaser would expect much in the way of durability or longevity from such an old, cheap, well travelled car near the end of its economic life, yet a reasonable purchaser would be entitled to expect a few months of use before the vehicle needed repairs costing over $4,000. Accordingly the Tribunal finds that the vehicle did not comply with the guarantee of acceptable quality because it was not as durable as a reasonable purchaser would regard as acceptable.

Issue (b): Whether the purchaser required the trader to remedy the problem with the crankshaft and engine bearings and gave the trader a reasonable time within which to do so before proceeding to have the work done by Combined?

[19] Section 18 of the Act 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."

[20] The trader’s defence to the purchaser’s claim was, in essence that the trader had never been required to remedy the defect with the engines crankshaft and bearings and so it could not be liable for the purchaser’s reasonable repair costs. However the Tribunal accepts the purchaser’s evidence that he sent the trader a text message on 13 March which is reproduced in paragraph 7 (above) notifying the trader that there was another fault with the vehicle in the bottom end of the engine which was not holding sufficient oil pressure and that the purchaser required the trader to pay to have it fixed. The Tribunal considers that text message which was received by the trader’s director Mr Clarke because he responded to it by text on 15 March in the form reproduced in paragraph 8 (above), to be an adequate notification to the trader of the purchaser’s requirement that he wanted the trader to rectify a fault with the vehicle in terms of s18(2) of the Act.

Issue (c): What remedy is the purchasers entitled to?

[21] The purchaser is entitled under s18(2)(b)(i) of the Act to recover the reasonable costs he incurred in having the vehicle’s engine repaired. The purchaser claimed the sum of $4,249.59 however the Tribunal considers, on the advice of its Assessor, that the charge for 39.3 hours of labour for the work done by Combined is excessive and thus unreasonable The Tribunal considers that a fair and reasonable time spent for this work would be 30 hours. Mr Williams told the Tribunal that his company’s hourly rate is $79.73 inclusive of GST and the value of the extra 9.3 hours at that rate is $741.49. The Tribunal will therefore order the trader to pay the purchaser $4,249.59 less $741.49 or $3508.10.

[22] The purchaser also sought to reject the vehicle after the repairs had been done. The remedies of recovery of reasonable costs and rejection are not able to be exercised sequentially (see Ashley & Johnson Motors Ltd [1997] DCR 170), so the purchaser is not entitled to both recover the reasonable costs of repair and reject the vehicle and obtain a refund.

Order

The trader shall pay the purchaser the sum of $3,508.10

DATED at Auckland this 30th September 2011

C.H.Cornwell
Adjudicator