Prinsep v Ezy Buy Car Auctions Limited - Reference No. MVD MVD 77/11 (Auckland) [2011] NZMVDT 69 (19 May 2011)

Last Updated: 14 June 2011

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Decision No. AK 59 /2011

Reference No. MVD 77/11

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN MARTIN JOHN PRINSEP

Purchaser

AND EZY BUY CAR AUCTIONS LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at AUCKLAND on 10 May 2011

APPEARANCES

Mr M J Prinsep, purchaser

Mr J P Newman, witness for the purchaser
Mr M Clarke, Sales Manager for the trader

DECISION

Background

[1] On 22 March 2011 Mr Prinsep (“the purchaser”) agreed to purchase a 2001 BMW 540i registration number CSN999 (“the vehicle”) for $9,860 from Ezy Buy Car Auctions Limited (“the trader”). The purchaser claims the vehicle is faulty and he seeks an order that the trader pay the cost he has been quoted to repair the vehicle’s engine.

[2] The trader says that the vehicle was supplied to the purchaser by competitive tender and accordingly the Consumer Guarantees Act 1993 (“the Act”) does not apply to the sale of the vehicle to the purchaser. In the alternative the trader says that if the Act does apply there was nothing wrong with the vehicle’s engine at the time of sale, and that the vehicle was of acceptable quality at the time of supply.

[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 was asked by his brother-in-law in Christchurch, Mr Newman to buy him a vehicle to replace one owned by Mr Newman which had been damaged in the Christchurch earthquake. The purchaser says he and Mr Newman discussed the vehicle which had been advertised for sale by the trader for $9,600 on TradeMe. The purchaser went to the trader’s premises where he inspected the vehicle and took it for a test drive of about 5kms. He says he was not permitted by the trader’s salesman to take the vehicle on the motorway so the test drive was conducted at speeds of up to 50kph only. The vehicle had no service history although the purchaser says he noticed a service sticker on the inside of the windscreen from BM Workshop.

[5] The purchaser initially offered the trader $9,000 for the vehicle but was told by the trader that it had other higher offers than that. He then offered the trader’s salesman $9,600 for the vehicle and the salesman, in his presence, telephoned Mr Clarke the trader’s Sales Manager who apparently referred the offer to the vehicle’s owner who agreed to accept it because within 10 minutes of the purchaser making the offer of $9,600 the trader’s salesman orally accepted the purchaser’s offer.

[6] The purchaser was then asked to sign a document dated 18 March 2011 headed “Tender Form” which describes the vehicle and contains the purchaser’s name and address and particulars of his driver’s license, telephone numbers, email address and date of birth. It contains the agreed offer price of $9,600 and a buyer’s premium of $260; a total of $9,860 and the following clause:-
“I/We confirm that we are aware that this vehicle is being sold by tender and is accepted in an “as is, where is” condition and as such carries no warranty. I also confirm that I have read and understand the Ezybuy Car Auctions Limited Rules of Auction Tender.
I agree to purchase this vehicle subject to the following conditions:
The vehicle receives a satisfactory mechanical inspection””

[7] On the reverse side of the Tender Form under the heading “Ezybuy Car Auctions Tenders Rules of Auction Tender” are sixteen conditions which the purchaser also signed and dated. The purchaser says he read the Tender Form and the “Rules of Auction Tender” before he signed each.

[8] The purchaser then paid the trader $400 as a deposit and a further $140 for a pre purchase inspection to be carried out by an inspector to be arranged by the trader.
[9] The vehicle was inspected by A Grade Vehicle Inspection a copy of whose report was faxed to Mr Newman on 18 March. The purchaser was buying the vehicle for Mr Newman who is the purchaser’s brother in law. Mr Newman is registered as a joint owner of the vehicle. Mr Newman gave evidence of receiving a copy of the A Grade Vehicle Inspection report about 5pm on 18 March and of having some concerns about its content. He spoke to Ken, the person who had written the report, and questioned him as to how he could describe the front tyres on the vehicle as being “100%” when the purchaser had told Mr Newman they were in a worn condition. The pixels in the instrument panel were also faulty yet were marked by A Grade Vehicle Inspection as satisfactory. Mr Newman says he had concerns as to whether he could trust the accuracy of the A Grade Vehicle Inspection report. As a consequence he telephoned the trader on 21 March and spoke to Mr Clarke. Mr Newman says he told Mr Clarke he had some misgivings about the pre-purchase inspection report and asked the trader if it would allow him, at his cost, to have the vehicle inspected offsite by BM Workshop, or talk to the previous owner of the vehicle to see if there was anything wrong with the vehicle. Mr Clarke would not agree to either proposal but Mr Newman says Mr Clarke then said the vehicle was “crisp” and “clean” and there was “no engine blowby or transmission issues”. Mr Newman says he then agreed to pay the balance of the purchase price on 21 March and arranged for the purchaser to collect the vehicle on 22 or 23 March.

[10] Mr Newman spoke to BM Workshop who obtained the previous owner’s permission to disclose the faults found (but apparently not repaired) with the vehicle on a previous inspection by BM Workshop. These faults and the estimated cost of repairing them were :
“Replace cam cover gaskets and top timing cover gaskets $750 plus GST
Replace high pressure power steering hose $650 plus GST
Brake fluid $ 80 plus GST
Sway bar links rear $250 plus GST
Both lower ball joints rear $480 plus GST
Mr Newman says he had all those faults, and other service items repaired on 25 March by Bellars Motor Works (2005) Ltd (“Bellars”) for $2,480.75, comprising $2,037.17 for parts and only $120 for labour although the Tribunal understands that payment of an additional sum for labour was lodged to another account at the direction of Mr Ken Full the owner of Bellars.

[11] Mr Newman says he collected the vehicle at Auckland Airport on 27 March and drove it back to Christchurch stopping overnight in Wellington. He says that on the morning of 28 March when he started the vehicle the “check coolant” warning light came on and he filled the radiator with about 1 litre of water and noticed the vanes in the top of the radiator were not covered with coolant. The next day in Christchurch the “check coolant” light came on and once again Mr Newman says he had to fill the radiator with between one half a litre to a litre of water.

[12] On 31 March Mr Newman took the vehicle to Jeff Gray BMW in Christchurch who found no external leaks under a pressure test but found that the cooling system appears to have engine oil mixed with coolant in the reservoir tank leading them to suspect there is a problem with either the cylinder head/s or cylinder head gasket and that repair costs will be $2,000 upwards depending on what faults are found to exist when the cylinder heads are removed. Jeff Gray BMW also note that the instrument cluster is not displaying messages, odometer or trip meter and requires a control panel repair of about $550 and a bulb of $40 both inclusive of GST. Mr Newman says he does not expect the trader to pay for two other faults with the front cup holder and mirror.

[13] Mr Newman purchased an Autosure mechanical breakdown insurance policy through South Auckland Motors but says he understands that the policy will not cover faults present at the time of sale which he believes the fault with the coolant loss to be.

[14] In reply to the Tribunal Mr Newman says he understood the trader’s claim that the vehicle was “crisp” meant it was “clean and tidy”. He says the vehicle did not consume oil and he checked the oil level just outside Hamilton on his way to Christchurch. The vehicle has not overheated since he has owned it.

[15] Mr Clarke for the trader says the trader sourced the vehicle from another car dealer who had accepted it as a trade-in. It was listed for sale on TradeMe on 13 March 2011 and he says (without producing a copy) that the text of the advertisement contained the following statement:
“This vehicle is available for tender today and the asking price shown above is only an estimated selling price, the actual price being determined by a competitive tender process. A (sic) additional Buyers fee is payable by the successful tenderer to cover administration costs, change of ownership and gives you guaranteed title to this vehicle. If you are unable to come in for a test drive you can request an independent vehicle inspection at your own cost. You can submit an online tender for this vehicle by clicking the link to our website below where you can find this vehicle and complete the tender form. The tender form also allows you to submit your tender subject to obtaining finance for the vehicle.”

[16] Mr Clarke admits that he may have used the word “crisp” to describe the vehicle to Mr Newman.

[17] Mr Clarke says the trader received two other tenders for the vehicle on 18 March; one from Drivetown Panmure of $9,200 and one dated 17 March from M G Motors Ltd also for $9,200. The trader had not arranged for either of the parties who made those tender offers to attend the hearing as the Tribunal had requested the trader to do.

[18] Mr Clarke says that Mr Newman telephoned him on the afternoon of 18 March to discuss the A Grade Car Inspection report which he had received. Mr Newman asked if the vehicle could be taken to a BMW Workshop on the North Shore for a further inspection and Mr Clarke says he told Mr Newman he was welcome to have a further inspection done but it had to be carried out at the trader’s premises. He says he told Mr Newman he could withdraw from the sale if he was not satisfied with the inspection but Mr Newman declined that offer and said he was quite happy to spend a few thousand dollars on the vehicle to bring it up to his standard because he thought he was still getting the vehicle cheaper than similar advertised models. Mr Newman telephoned Mr Clarke on 26 March and asked for a refund of the A Grade Vehicle Inspection fee but Mr Clarke says he told him he would need to take that up with A Grade Vehicle Inspection directly.

[19] Mr Clarke says he next heard from Mr Newman on 31 March after he had been told the vehicle was leaking coolant. Mr Clarke says he told Mr Newman that the trader was not prepared to pay for the vehicle to be repaired and that he should claim on his mechanical breakdown policy. He says he also offered Mr Newman a refund of the full purchase price of the vehicle if he returned it to the trader in Auckland but Mr Newman declined that offer.

[20] Mr Clarke says the trader understands Mr Newman is seeking the full cost of repairing the suspected head gasket or cracked cylinder head fault but that fault was not diagnosed by BM Workshop, A Grade Vehicle Inspection or Bellars Motor Works who gave the vehicle a full check on 25 March. It was not until Mr Newman drove the vehicle to Wellington that any coolant loss became apparent. The trader says the defect was not in existence at the time of sale and should therefore be covered by Mr Newman’s Autosure mechanical breakdown policy yet Mr Newman has not claimed under that policy.

[21] Mr Clarke says that after receiving the purchaser’s application from the Tribunal he contacted Mr Newman and told him if he returned the vehicle to the trader’s premise the trader would refund him his purchase price and the buyer’s premium; an offer which still stands. This was rejected by Mr Newman.

The issues before the Tribunal

[22] Having considered the facts, the Tribunal concludes that the following issues require consideration:
[a] Whether the vehicle was supplied to the purchaser by competitive tender?
[b] If not, whether the vehicle is of acceptable quality within the meaning of s 6 of the Act ?
[c] Did the purchaser require the trader to remedy the vehicle’s faults and if so did the trader do so within a reasonable time?
[d] If not, what sum is reasonable to repair the vehicle’s faults.

Issue (a): Whether the vehicle was supplied to the purchaser by competitive tender?

[23] Section 43 of the Act provides as follows:

“43 No contracting out except for business transactions

(1) Subject to this section and to sections 40, 41 and 43A, the provisions of this Act shall have effect notwithstanding any provision to the contrary in any agreement.”

[24] Section 41 contains certain exceptions and the relevant subsection provides:

“(3) Nothing in this Act shall apply in cases where goods are supplied—

(a) by auction; or
(b) by competitive tender”

[25] The word “supply” is defined in section 2 of the Act as follows:

“supply,--

(a) in relation to goods , means supply (or resupply) by way of gift, sale, exchange, lease, hire, or hire purchase; and
(b) in relation to services, means provide, grant, or confer”

[26] The words “competitive tender” are not defined in the Act. The Tribunal takes the view that to be a supply by competitive tender there must be some evidence that people proposing to lodge tenders are informed that unconditional written offers to purchase a vehicle will all be considered on a given date and time and that the highest tender will then be accepted (unless the trader reserves the right in its advertisement calling for tenders to refuse to accept the highest or any tender). The trader appears to the Tribunal to be operating in a manner no different from that of any other motor vehicle trader. It receives offers, some of which may be by email or as in this case, oral, and which may be conditional on a satisfactory pre-purchase inspection or the obtaining of finance by the offeror, and the trader decides at some unstipulated time to accept the highest offer. The trader’s technique of getting the best price for a vehicle by, as occurred in this case, telling the purchaser than his offer of $9,000 was lower than other offers it had received and that the price offered by the purchaser needed to be higher, is indistinguishable from the modus operandi of other motor vehicle dealers who attempt to negotiate buyers into making higher offers.

[27] The Tribunal is therefore satisfied that the supply of the vehicle to the purchaser did not take place by competitive tender and therefore the provisions of the Act apply to this transaction because the exemption in s 41(3)(b) of the Act was not satisfied. The Tender Form by which the purchaser appeared to purchase the vehicle by tender and on an “as is where is” basis was a sham document intended to create the false impression in the purchaser’s mind that he had contracted out of the Act and had no recourse against the trader for the condition of the vehicle. The Tribunal considers the trader in having the purchaser sign the Tender Form which purported to exclude all warranties breached s 43(4) of the Act which provides:
“(4) Every supplier and every manufacturer commits an offence against section 13(i) of the Fair Trading Act 1986 who purports to contract out of any provision of this Act other than in accordance with subsection (2) or section 43A.”
Issue (b): whether the vehicle was of acceptable quality?

[28] 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.”

[29] 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.”

[30] 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 right to reject the vehicle within a reasonable time.

[31] 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.
[32] The vehicle sold to the purchaser was a 10 year old Japanese imported BMW 540i which had travelled 113,327kms. It was sold for-a total of $9,860 and was represented by the trader as “crisp” and “clean”. The vehicle’s engine started leaking coolant after it was driven to Wellington within a week of being supplied to the purchaser and a few days later Jeff Gray BMW in Christchurch diagnosed the coolant loss and noted first that there were no external leaks found under a pressure test. Second, that engine oil had mixed with coolant in the radiator reservoir tank indicating that there is probably a leak in the vehicle’s cylinder head gasket/s or a fault with the cylinder heads or even the engine block. The Tribunal does not consider on that evidence that the vehicle was either free of minor defects or as durable as a reasonable consumer would regard as acceptable for a vehicle which they had just paid $9,860 to purchase. The Tribunal does not therefore consider that the vehicle complied with the guarantee of acceptable quality in s 6 of the Act.

Issue (c): Did the purchaser require the trader to remedy the vehicle’s fault and if so did the trader do so within a reasonable time?

[33] Mr Newman gave evidence that as soon as he received advice on 31 March 2011 from Jeff Gray BMW regarding the coolant loss from the vehicle’s engine he telephoned the trader and spoke to Mr Clarke. He says he asked Mr Clarke if the trader was willing to pay to have the vehicle repaired. Mr Clarke, told the Tribunal that he had refused on the trader’s behalf to repair the vehicle. Accordingly, the purchaser became entitled by s 18(2)(b)(i) of the Act to have the failure remedied and obtain from the trader all reasonable costs incurred in doing so.

Issue (d): What sum is reasonable to repair the vehicle’s faults?
.
[34] The purchaser was unable to tell the Tribunal what it would cost to repair the vehicle and the Tribunal is unable to make an order requiring the trader to pay the cost of repairing the vehicle until the purchaser obtains detailed written quotations from one or more repairers.

Conclusion

[35] The Tribunal concludes: first, that it is satisfied that the vehicle was not sold by competitive tender and that the provisions of the Act therefore apply. Second, that at the time of sale the vehicle was not of acceptable quality within the meaning of s 6 of the Act. Third, that the purchaser required the trader to remedy the vehicle’s fault but the trader has refused to do so. The purchaser is thus now entitled to have the vehicle repaired elsewhere and recover from the trader his reasonable costs in doing so. However the Tribunal requires better evidence as to the exact nature of the vehicle’s fault(s) and the cost to remedy them before it proceeds to make any order against the trader. That evidence must be obtained by the purchaser at his cost and presented to the Tribunal.

Orders

1. The purchaser shall at his cost have the vehicle’s cylinder head/s removed and the cause of the coolant loss assessed and a written report prepared by an experienced BMW repairer setting out the following information:
a) what fault(s) exist with the vehicle’s engine cooling system and a detailed written record of their diagnosis including the process followed, any specialist diagnostic tool readings (ie gas analyzer results, compression and/or cylinder leakage test results), opinions from any sublet providers (ie engine machining/crack test specialists) and photographs of any failed parts;
b) the probable cause of such fault(s);
c) the cost of parts and labour to rectify the fault(s).

2. The purchaser is to obtain the report referred to in Order 1 (above) as soon as possible and send it to the Tribunal who will immediately provide a copy to the trader. The trader may make any written submissions on the report to the Tribunal within 10 working days of receiving it, following which the Tribunal will make further orders.

DATED at AUCKLAND this 19th May 2011

C.H Cornwell
Adjudicator