Prinsep v Ezy Buy Car Auctions Limited - Reference No. MVD 77/11 (Auckland) [2011] NZMVDT 75 (10 June 2011)

Last Updated: 16 July 2011

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Decision No. AK 63 /2011 (See AK59/2011)

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

DECISION

Background

[1] Following a hearing on 10 May 2011 the Tribunal found first, that it was satisfied that the 2001 BMW 540i registration number CSN999 (‘the vehicle”) sold to Mr Prinsep (“the purchaser”) by Ezy Buy Car Auctions Limited (“the trader”) on 22 March 2011 had not been sold by competitive tender and that the provisions of the Consumer Guarantees Act 1993 (“the Act”) therefore applied to the sale. 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 refused to do so. The Tribunal therefore concluded that the purchaser, as he had elected, was entitled to have the vehicle repaired elsewhere and recover from the trader his reasonable costs in doing so. However the Tribunal required better evidence as to the exact nature of the vehicle’s fault(s) and the cost to remedy them before making any order against the trader. That evidence the Tribunal directed was to be obtained by the purchaser at his cost and presented to the Tribunal.

[2] The Tribunal then made the following 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.

Facts

(a) The BMW Service Centre letter of 16 May 2011
[3] The purchaser arranged for Mr Newman to send the Tribunal an email dated 16 May 2011 from Mr M Mitchell the Proprietor of B.M.W. Service Centre of Christchurch to Mr Newman in which Mr Mitchell reports that he dismantled the vehicle’s engine at 116,000kms to diagnose a suspected cylinder head gasket fault and quote for its repair. Mr Mitchell’s letter confirms that the gasket on the left bank of the engine was found to have blown and he attached a photograph to his report showing discolouration of the valves on the left cylinder head. Mr Mitchell also reported finding water in number one cylinder and the engine was hydraulicing on start-up which he says probably caused the pitting and scoring which is evident on both the pistons and ceramic cylinder bores. The report also states the pistons on the engine block have scoring and the engine has at some time been overheated to cause some plastic components to melt. A hardness test undertaken on the cylinder head showed readings of 88% which in Mr Mitchell’s opinion was too low for a reliable repair. Mr Mitchell concluded that the engine was beyond economic repair. His letter states the last engine of the type in the vehicle cost $5500 plus GST and labour of 24 hours to remove the old and fit the replacement engine. Mr Mitchell’s labour rate is $60 per hour plus GST.

(b)BMW Parts- cost of replacement engine
[4] Mr Newman also sent the Tribunal copies of an exchange of emails he had with BMW Parts who on 16 May 2011 quoted $4,500 plus GST for a bare M62 engine and in an email dated 18 May recommended that Mr Newman ensured that the cooling system was in perfect condition, the water pump and thermostat were replaced as part of the warranty and informed Mr Newman of the cost of these items and freight to Christchurch of $260.

(c) BMW Service Centre letter dated 20 May 2011 to the Tribunal
[5] The Tribunal after considering Mr Mitchell’s letter of 16 May 2011 sent 10 further questions to Mr Mitchell each of which he answered in a letter sent to the Tribunal dated 20 May 2011. Mr Mitchell sent a further photograph of the cylinder head gasket marking where the gasket had blown in two places. Mr Mitchell also advised in his letter of 20 May that there was oil in the cooling system but no water in the sump, that the right hand cylinder head bolts are loose, and that in his opinion the problem has existed for several months; probably between 3 and 6 months. Mr Mitchell also gave his reasons as to why he considered the refurbishment of the engine was not economic; first, because the engine’s construction is aluminium and has severe cylinder head damage, second at least one of the cylinder heads is too soft to ensure a reliable repair, third at least two cylinder bores are scored and they have nikasil liners in the bores which would require re-sleeving of the nikasil liners and fourth, because the engine would require extensive work which Mr Mitchell could not guarantee would result in a reliable engine.

[6] The Tribunal sent copies of Mr Mitchell’s letters of 16 and 20 May to the trader together with the quotation from BMW Parts and gave the trader 10 business days in which to forward any comments on the documents to the Tribunal. The Tribunal has not received any response from the trader other than a verbal indication that it proposes to appeal against the Tribunal’s decision.

The Tribunal’s Findings
[7] The Tribunal, on the advice of its Assessor and after considering the contents of Mr Mitchell’s letters finds that the vehicle’s head gasket(s) were most probably weeping or leaking coolant at the time of sale of the vehicle by the trader to the purchaser. The Tribunal’s reasons are as follows: first, on the basis of Mr Newman’s evidence that the “check coolant” light came on and he had to fill the radiator with about 1 litre of water in Wellington after driving the vehicle from Auckland on the delivery trip to Christchurch on 28 March 2011 and also his evidence that the “check coolant” light came on the next day in Christchurch and the vehicle needed one half to a litre of water. Second, on the basis of Mr Mitchell’s letter of 20 May (item 8) in which he states “As this vehicle has never over-heated with the present owner, it is my estimate that this problem [with the head gasket] existed in the vehicle for several months probably between 3 and 6 months.” Third, because there is evidence of engine oil contamination within the engine’s cooling system reservoir according to both the Jeff Gray tax invoice dated 31 March 2011 and also Mr Mitchell’s letter of 20 May (item 3) indicating that engine oil (most probably from the oil galleries around the cylinder head) is entering the vehicle’s cooling system.

What remedy is appropriate?
[8] The purchaser, upon the trader’s refusal to repair the engine had an option under s 18(2)(b) of the Act to either have the vehicle repaired elsewhere and obtain from the supplier all reasonable cost incurred in having the failure remedied or, subject to s 20 of the Act, to reject the vehicle. He chose to have the vehicle repaired and has submitted a claim for $9,248.74 as being the reasonable costs of having the vehicle repaired.

[9] The Tribunal agrees with Mr Mitchell’s opinion that the most economical method of repairing the vehicle’s engine is to replace the entire engine with a second hand engine and on that premise considers that the reasonable costs of having the engine replaced are as follows:
(a) Replacement engine $4,500 plus GST as quoted $5175.00
(b) Freighting engine from Auckland to Christchurch $ 299.00
(c) Labour to remove engine and refit replacement
(24 hours at $60 per hour plus GST) $1656.00
(d) Miscellaneous costs oil, coolant $ 500.00
Total $7,630.00

[10] The Tribunal accepts that the purchaser will incur additional costs in replacing the radiator, water pump, thermostat, gaskets and O rings but considers that these will result in betterment of the cooling system the cost of which the trader should not be responsible for because there is no evidence that any fault(s) existed within the cooling system which contributed to the failure of the cylinder head gaskets.

[11] The Tribunal also considers that the purchaser is entitled to consequential costs of $448.50 for the removal of the cylinder head, harness test assessment and report by Mr Mitchell of B.M.W. Service Centre and $141.28 for the assessment by Jeff Gray; a total of $589.78. There is no basis for the Tribunal to award Mr Newman his costs of travelling from Christchurch to Auckland to give evidence at the hearing so his claim for $255 for travel costs is dismissed.

Order
The trader shall pay the purchaser the sum of $8,219.78.

DATED at AUCKLAND this 10th June 2011

C.H Cornwell
Adjudicator