Lawley v Julkernine Khadem t/a Omis Auto Trade - Reference No. MVD (Auckland) [2012] NZMVDT 10 (21 February 2012)

Last Updated: 21 March 2012

Decision No. AK 10 /2012

Reference No. MVD 6/2012

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN WENDY MONICA LAWLEY

Purchaser

AND JULKERNINE KHADEM T/A OMIS AUTO TRADE

Trader

BEFORE THE AUCKLAND MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr D Clough, Assessor

HEARING at Tauranga on 20 February 2012

APPEARANCES
Mrs W M Lawley, the purchaser
Mr B Lawley, support person for purchaser
Miss J Lawley, support person for purchaser
There was no appearance by the trader.

DECISION

Background

[1] On 8 December 2011 Mrs Lawley (“the purchaser”) purchased a 1994 Daihatsu Charade registration number AHE819 (“the vehicle”) for $1,400 from Julkernine Khadem trading as Omis Auto Trade (“the trader”). The purchaser has applied for an order from the Tribunal that the trader is to pay the costs of repairing the vehicle because she claims the vehicle supplied to her by the trader failed to comply with the guarantee of acceptable quality in the Consumer Guarantees Act 1993 (“the Act”).

[2] The trader did not attend the hearing after being sent a copy of the application and notice of the hearing by the Tribunal.

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

Facts

[4] The purchaser says that she bought the vehicle after seeing it listed for sale on TradeMe. The purchaser bought the vehicle by negotiation with the trader. The purchaser took the vehicle for a 10 minute test drive before purchasing it but did not have it inspected by a mechanic. The vehicle’s odometer was 206,410kms at the time of sale. The vehicle was sold with a new VTNZ warrant of fitness issued on 6 December 2011 when the odometer was 206,249kms. The warrant of fitness check sheet noted that there was wear on the right front tyre and the vehicle leaked oil.

[5] The Agreement for Sale and Purchase of the vehicle which the purchaser signed contains a clause which states:
“Warranty Purchased: YES/NO
No warranty is given with the sale unless a warranty is purchased.”
The word “YES has been deleted.

[6] Later in the Agreement for Sale and Purchase the following clause appears:
“General Condition Relating to All Warranties
In certain circumstances a vehicle may be sold with a “Vendor Warranty”. The terms of warranty shall be as appear in this agreement at the time of purchase. Otherwise it means no vendor warranty is given.
[i] Sale comes with no warranty unless a warranty is purchased.
[ii] All parts and accessories with the vehicle on an as is where is basis and no warranties are given as to merchantability or fitness for purpose or quality or condition or otherwise howsoever.
[iii] The vendor shall not under any circumstances be liable for any consequential loss or damage, cost or expenses incurred on the vehicle by the purchaser and the purchaser’s only rights shall be those expressly given to them by the title and description warranty.”

[7] On 11 December 2011 three days after purchasing the vehicle it would not start but the purchaser managed to get the vehicle started with jumper leads. On 15 December the vehicle failed to start and again the purchaser used jumper leads to start it. On 20 December 2011 the vehicle could not be started.
And so the purchaser’s husband telephoned the trader and asked the trader to get the vehicle fixed or to refund the purchase price. The trader refused both requests. Later the same day the purchaser telephoned the trader and asked him to fix the vehicle but the trader repeatedly told the purchaser that he had no obligation to do so. The purchaser says the trader informed her that because it was only a $1,400 car he did not have to remedy the problem or refund the purchase price.
[8] On 21 December the purchaser took the vehicle to Superior Automotive & Tyre who checked the starting and charging systems and checked for battery current draw. They found the battery to be faulty and replaced it at a cost of $176.23. The repair invoice from Superior Automotive notes that there was an oil leak from the front of the engine which required further investigation.

[9] On 22 December the purchaser sent the trader a letter in which she claimed that the vehicle was not of acceptable quality and she requested the trader to either pay the bill from Superior Automotive including the cost of repairing the oil leak or refund the purchaser the purchase price as well as paying the Superior Automotive bill. She requested a response by 3 January 2012.

[10] On 7 January 2012 the trader sent the purchaser a text message saying he had received her couriered letter and that he would get back to her in a couple of days. The purchaser sent the trader a text message saying she would wait for the trader to get back to her but a week later he had not done so. The purchaser sent the trader a further text message on 14 January saying if she did not hear from him by Monday 16 January she would file an application with the Tribunal which she did on 19 January 2012.

[11] On 24 January the Tribunal issued a direction requiring the purchaser to obtain a written report from an MTA repairer preferably a Daihatsu franchise garage as to what is wrong with the vehicle and what it will cost in parts and labour to repair. The purchaser did not do so. Instead she took the vehicle back to Superior Automotive Services whose proprietor Mr Russell Donovan in a letter to the purchaser dated 27 January listed the various worn items on the vehicle and gave his opinion as to the vehicle’s condition as follows:
“Rear brake shoes low
Right front tyre separated
Right front cv joint shot
Left front sill damaged/holed (wof requirement)
Major oil leaks from engine sump and front engine seals
Front brake pads low
Handbrake out of adjustment
Drivers dash not secure
Paint on drivers and passengers seat belts
Cambelt due
Air filter hitting the bonnet
No battery clamp
Left hand wiper not fitted correctly
Engine service long overdue
Body paint and body condition poor”
We find the vehicle in poor condition and we would not recommend purchasing”. Mr Donovan did not assess the cost of repairing the vehicle. Once again the Tribunal asked the purchaser to get a written report and assessment of cost to repair the vehicle from an MTA garage.

[12] On 31 January 2012 after the purchaser had driven 454kms the purchaser took the vehicle to VTNZ for a warrant of fitness. The vehicle’s odometer was then 206,864kms. The vehicle failed a VTNZ warrant of fitness because there was a bulge in the right front tyre. The VTNZ warrant of fitness inspection did not fail the vehicle for faulty brakes or for any of the faults identified by Superior Automotive Services four days previously and listed in the report reproduced in the previous paragraph.

[13] On 7 February 2012 the purchaser took the vehicle back to Superior Automotive who did a warrant of fitness test and failed the vehicle for four faults; its front brake pads were worn, the hand brake was not holding, the right front tyre was out of shape and there was a hole in the left hand side of the chassis sill. The odometer was then 206,898kms showing the vehicle had been driven 488kms in the two months the purchaser had owned it.

[14] The purchaser obtained a written estimate from Superior Automotive of $882.79 to replace the front disc pads, clean and adjust the handbrake, replace the cam belt, and seals, including freight, labour and GST. The estimate records that due to the age of the vehicle oil leaks may reappear from other areas in the future.

[15] The purchaser obtained a quotation of $89 from Tyremaster (Otumoetai) Ltd to replace the tyre and an estimate of $552 from Colin Davis Panelbeaters Ltd to repair and refinish a hole in the left hand sill.

Issues
[16] The facts raise the following issues:
[a] Whether the vehicle was of “acceptable quality” within the meaning of s 7 of the Act at the time of sale?
[b] If it was not, has the purchaser required the trader to remedy the defect(s)?
[c] What is the reasonable cost of remedying the vehicle’s fault(s)?

Issue (a): Was the vehicle of “acceptable quality” within the meaning of s7 of the Consumer Guarantees Act 1993 (“the Act”)?
[17] 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.”

[18] 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.”

[19] 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.
[20] The vehicle supplied to the purchaser by the trader on 8 December 2011 was a 17 year old imported Daihatsu Charade which had travelled over 206,000kms and was sold for only $1,400. The vehicle was thus an old tired cheap car which according to Mr Donovan’s report had been poorly maintained. The vehicle was near the end of its economic life. No reasonable purchaser of such a vehicle would expect much durability or reliability from it. However the Tribunal notes that the vehicle had a new warrant of fitness issued by VTNZ so it finds that in all probability the vehicle was mechanically safe to be on the road at the time of sale.

[21] The vehicle’s battery was probably in poor condition when the vehicle was sold to the purchaser because within three days of purchasing the vehicle the purchaser had trouble starting it and by 20 December the battery would not start the vehicle at all. The Tribunal thinks that for $1,400 the purchaser was entitled to expect the vehicle to start for 2 weeks after sale. After two months and 448kms of use the vehicle when tested by Superior Automotive failed to pass a warrant of fitness with faulty brakes, a worn tyre and a hole in the left hand sill yet surprisingly none of those faults was identified by the VTNZ warrant of fitness inspection on 6 December and the only fault found by VTNZ to prevent the vehicle passing a warrant of fitness on 31 January 2012 was the right front tyre which the previous VTNZ warrant had already identified as worn.

[22] The Tribunal considers, on the basis of the issue by VTNZ of a warrant of fitness for the vehicle on 6 December 2011 that it was of acceptable quality at the time it was supplied. The Tribunal thinks that the faulty tyre found to have a bulge in it at the end of January 2012 was simply worn beyond WOF standards after the purchaser had driven a further 454kms in the vehicle. The only evidence the Tribunal had produced to it that the vehicle required work on its brakes and bodywork was from Superior Automotive and that was not identified until 27 January 2012 almost two months after the vehicle was sold to the purchaser. Even if the vehicle’s brakes and bodywork do not meet warrant of fitness standards, which the Tribunal doubts because those faults were not identified by VTNZ when it re-inspected the vehicle for a WOF on 31 January 2012, the Tribunal considers that a reasonable purchaser of an old cheap high mileage vehicle such as this might well expect such faults to appear within two months of use.

[23] In summary: the Tribunal is not satisfied, because the vehicle passed a VTNZ warrant of fitness at the time it was supplied to the purchaser, that the purchaser succeeded in proving that, at the time of sale, the vehicle’s brakes and sill required repairs nor was the right hand front tyre unsafe at that time. The Tribunal is however satisfied that the battery was in such poor condition at the time of sale that it would not start the vehicle after only three days use. The Tribunal therefore finds that the vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act in respect of the battery only because the vehicle’s battery was not as durable as a reasonable purchaser would regard as acceptable even for an old, cheap high mileage vehicle such as this. The Tribunal is unable to make any such finding in respect of the vehicle’s brakes, right hand front tyre and the hole in the left hand side sill because the vehicle did not fail a VTNZ warrant of fitness on those grounds at the time of or very soon after the vehicle was supplied to the purchaser.

[24] The trader’s attempt in the Agreement for Sale and Purchase to exclude, by agreement with the purchaser, any warranty from applying to the sale of the vehicle unless a warranty was purchased is, in the Tribunal’s view, unlawful as is the wording of its general condition relating to warranties. This is because s43 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.
(2) Nothing in subsection (1) shall apply to an agreement made between the supplier and a consumer who acquires, or holds himself or herself out as acquiring, under the agreement, goods or services for the purposes of a business provided either—
(a) that the agreement is in writing; or
(b) where it is not possible to conclude an agreement in writing because the supplier is unaware of the acceptance by the consumer of the supplier’s offer at the time of acceptance, that the supplier has clearly displayed the terms and conditions of the service at every place of the supplier’s business.”
(3)...
(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.”

[25] The sale was not a business transaction falling within s 43(2) of the Act. The Tribunal will refer the Agreement for Sale and Purchase to the Fair Trading Unit of the Commerce Commission who is the body responsible for prosecutions under s 13 of the Fair Trading Act 1986.

Issue (b): Did the purchaser require the trader to remedy the defects?

[26] 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."

[27] In this application the purchaser gave evidence, which the Tribunal accepts, that both she and her husband required the trader to remedy the vehicle’s starting fault in their telephone calls to the trader on 20 December 2011 and the Tribunal is satisfied that the trader refused to do so.

Issue (c): What is the reasonable cost of remedying the vehicle’s faulty battery?

[28] The purchaser proved that the cost of replacing the battery was $176.23 and the Tribunal will order the trader to reimburse the purchaser with that sum. Unfortunately for the purchaser for the reasons given, the purchaser’s other claims for repair costs, inspection fees and filing fee must be dismissed.

Order

The trader shall pay the purchaser $176.23.

DATED at Auckland this 21st February 2012

C.H.Cornwell
Adjudicator