Sweatman v Ezy Buy Car Auctions Limited - Reference No.168/12 MVD (Auckland) [2012] NZMVDT 140 (20 December 2012)

Last Updated: 1 March 2013

Decision No. AK 113/2012

Reference No. MVD 168/12

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN KAREN MARIA SWEATMAN

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

HEARINGS at AUCKLAND on 26 November and 17 December 2012

APPEARANCES

Mrs K M Sweatman, purchaser

Mr P Sweatman, purchaser’s husband and witness
Mr D Rogers, general manager for the trader

DECISION

Background

[1] On 8 September 2012 Mrs Sweatman bought a 2001 Toyota Estima from Ezy Buy Car Auctions Limited for $7,760. One week later the vehicle’s engine failed. Mrs Sweatman asked Ezy buy to repair the engine but it has refused to do so. Mrs Sweatman has rejected the vehicle and seeks the Tribunal’s order upholding her rejection and ordering the trader to refund her full purchase price and consequential losses.

[2] Ezy Buy says first, that the vehicle was supplied to Mrs Sweatman by competitive tender and accordingly the Consumer Guarantees Act 1993 (“the Act”) does not apply to the sale to Mrs Sweatman. Second, that Mr or Mrs Sweatman damaged the vehicle’s radiator cap which caused the engine failure.

[3] Before it started to hear the application the Tribunal appointed Mr Middleton as the assessor. Mr Middleton 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.

The Issues

[4] The issues raised by this application are:
[a] Whether the vehicle was supplied to Mrs Sweatman by competitive tender?
[b] If not, whether the vehicle was of acceptable quality within the meaning of s 6 of the Act?
[c] If the vehicle was not of acceptable quality, is the failure one of substantial character entitling Mrs Sweatman to reject it?

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

[5] 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.”

[6] 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”

[7] 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”

[8] Mrs Sweatman saw the vehicle advertised on Trademe by Ezy Buy. A copy of the advertisement was produced by Mr Rogers and shows the vehicle’s estimated selling price was $8,500.

[9] Mrs Sweatman made two visits to Ezy Buy’s premises to inspect the vehicle before making an offer to buy it for $7,500 by completing an online “tender form” on Ezy Buy’s website at 1-54pm on 7 September 2012. Her offer was subject to a satisfactory independent mechanical inspection to be obtained at her cost.

[10] Ezy Buy sent Mrs Sweatman an email at 2-09pm on 7 September telling her that her “tender had been submitted”. In the same email Ezy Buy also informed Mrs Sweatman that:
“Tenders close at 5pm and you will be notified of the outcome shortly after closing.”

[11] Ezy Buy produced an e-mail at the hearing on 17 December which it claims is an offer it received at 7-12pm on Thursday 6 September 2012 of $100 for the vehicle from “Vinel V Kumar of 12A Thomas Ave Te Atatu Penisula (sic).”

[12] On 8 September at 11-13am Ezy Buy contacted Mrs Sweatman and took a deposit of $410 from her by credit card. Also on 8 September 2012 a mechanic identified only as “Ken” of A-Grade Vehicle Inspections apparently did a pre-purchase inspection on the vehicle and a copy of the report was emailed to Mrs Sweatman that day. The report shows the vehicle’s cooling system passed inspection and the vehicle was in average condition “with some defects, but in keeping with age and mileage.” The Ezy Buy tax invoice which Mrs Sweatman signed on 9 September records the sale date as 08/09/2012 despite Ezy Buy’s email of 7 September informing her that “tenders close at 5pm” from which it appears to the Tribunal that the sale date should have been 7 September.

[13] On 9 September Mr & Mrs Sweatman collected the vehicle and paid the balance of the purchase price and a $260 fee to Ezy Buy, signed a Consumer Information Notice recording the vehicle’s odometer reading as 177,477km and drove the vehicle to their home at Ararimu. Before she collected and paid for the vehicle Mrs Sweatman says she asked the salesman at Ezy Buy with whom she had been dealing whom she says she thinks was named Hugo, if any other offers had been received for the vehicle. She says that the salesman told that no other offers had been received for the vehicle.

[14] On 9 September when the Sweatmans returned to their home with the vehicle they washed it and vacuumed its interior. Mr Sweatman says he also checked the engine oil level and the water level in the vehicle’s radiator. Both were satisfactory. To check the coolant level Mr Sweatman says he took the cap off the radiator and after seeing the level of coolant in the radiator was full he replaced the radiator cap. Mr Sweatman also observed that there was adequate fluid within the cooling systems expansion tank which was at the correct level at approximately half full however in his opinion there was little or no inhibitor evident.

[15] Mrs Sweatman drove the vehicle twice in the week commencing 10 September; once from Ararimu to Penrose return and once from Ararimu to Pukekohe return. Mrs Sweatman’s mother also drove the vehicle to Ararimu School on two occasions and Mr Sweatman drove it to Drury and back on 15 September. In all Mrs Sweatman says the vehicle was driven about 335kms during the period from 9 September to 15 September.

[16] The vehicle drove well with no signs of overheating or loss of power during the first week that Mrs Sweatman owned it. However on Saturday 15 September Mr Sweatman drove it to Drury and when he came to restart the vehicle to drive it home it would not restart. Mr Sweatman called Mrs Sweatman to bring a starter pack to Drury. Using the starter pack Mr Sweatman jump-started the engine. He says he thought the vehicle’s battery might be faulty. The vehicle’s engine cut out on the way home but Mr Sweatman was able to restart it. However the engine stopped as Mr Sweatman was about to drive into the Sweatman’s property on the evening of 15 September. The engine could not be restarted.

[17] On 16 September Mrs Sweatman called the AA to come and try and start the vehicle. Mr Sweatman gave evidence that the AA service man was unable to start the engine and that the service man then lifted the bonnet and removed the radiator cap to inspect the inside of the radiator. The radiator cap spring fell to the ground and Mr Sweatman says he kicked it in trying to pick it up and it went into a neighbour’s paddock. He says he has been unable to find it. The ball at the end of the radiator cap also fell off the cap and lodged in the radiator. The AA service man found there was still water present in the radiator and it made a rushing sound when the engine was turned over. The AA service man diagnosed the fault as either a fault with the cylinder head or a blown cylinder head gasket. He advised Mr Sweatman the engine would cost $2,000 to $3,000 to repair.

[18] On 17 September the vehicle was towed from Ararimu to Autocare Pukekohe Ltd. Autocare told Mrs Sweatman the engine had either a blown head gasket or a cracked cylinder head and was damaged beyond economic repair. It gave her a written estimate dated 18 September for supplying and fitting a replacement second hand engine of $5,804.00. Mrs Sweatman sent the estimate to Ezy Buy on 18 September with an email asking it to either repair the vehicle and provide a warranty on the repair, replace the engine as quoted by Autocare or take the vehicle back and refund the purchase price. She also asked Ezy Buy to advise her before the close of business on 18 September what its intentions were. When Mrs Sweatman did not receive a response, Mr Sweatman went to see Ezy Buy on 19 September but he says he received no satisfaction from speaking to staff at Ezy Buy.

[19] On 19 September Ezy Buy asked Mrs Sweatman to arrange to have the vehicle towed to their premises in Otahuhu which she did on the morning of 20 September.

[20] On 20 September at 1-23pm Mr Rogers, in the first of a series of six emails between the parties that day, sent Mrs Sweatman an email saying that Ezy Buy would pay out her costs. The email said that he would expect that Ezy Buy would receive a declaration from Mrs Sweatman that on receipt of this payment she would have no other claims against Ezy Buy and the settlement would be confidential to the parties and full and final. Mrs Sweatman replied at 2-29pm asking Mr Rogers to deposit $8,387.50 as per a statement to her nominated bank account and on receipt of that she would provide Ezy Buy with the declaration as requested. Mr Rogers replied at 2-49pm that he would not be releasing any funds until he had the declaration. Mrs Sweatman then sent a declaration to Mr Rogers by email at 2-58pm. The contents of that email were not acceptable to Mr Rogers who, in an email at 4-05pm said “sorry our Lawyer has asked for the exact words we sent to you, not this correspondence.” Mrs Sweatman then sent Ezy Buy an email at 4-08pm saying “I confirm that on receipt of this payment I will have no other claims against Ezy Buy Car Auctions & this will be confidential between both parties and be full and final settlement.”

[21] However by 9-48am on 21 September Ezy Buy had reneged on its settlement contract. In an email to Mrs Sweatman that morning Mr Rogers said that the radiator cap had been damaged after the vehicle had been delivered to her and that Autocare’s charge for an engine was absolutely ridiculous.

[22] Mrs Sweatman filed her application with the Tribunal on 3 October 2012. She says that she had a telephone call from Mr Michael Clarke of Ezy Buy on 12 October in which Mr Clarke asked her what had happened and the sequence of events. He then said he would discuss the matter with Mr Rogers and get back to her. She says he did not do so and that there has been no other attempt by Ezy Buy to mediate the claim.

[23] Mr Rogers produced a statement and attachments which he read to the Tribunal. Essentially Ezy Buys’ position is that it sold the vehicle to Mrs Sweatman on 8 September 2012 by competitive tender, first, because Mrs Sweatman made an offer of $7,500 at 1-54pm on 7 September on a form which refers to it as a tender offer and which Ezy Buy characterizes as a tender. Second, because another offer or tender of $100 was made to Ezy Buy by email at 7-12pm on Thursday 6 September by a Vinel V Kumar.

[24] The words “competitive tender” are not defined in the Act. The Tribunal takes the view, which it has previously given in a number of decisions involving Ezy Buy that to be a supply by competitive tender there must be evidence of rivalrous behavior by tendering parties. The Tribunal does not consider that merely advertising goods for sale on a website and inviting interested purchasers to submit tender offers meets the requirement of a sale by competitive tender. To be a sale by competitive tender the Tribunal thinks that interested purchasers must have to lodge binding tender offers and must be informed, prior to submitting a tender offer 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). No such process occurred in this case. The only factor which is unique to this application and which has not been present in previous claims against Ezy Buy is that Ezy Buy say they received an on-line offer of $100 for the vehicle from a person named V V Kumar.

[25] The Tribunal does not think that Kumar’s offer of $100 for a vehicle advertised by Ezy Buy to have an estimated selling price of $8,500 can be considered to be a genuine offer. Clearly, Ezy Buy did not regard it as a genuine offer because their salesman told Mrs Sweatman that no other offer had been received for the vehicle. If the offer had been considered by Ezy Buy to be a genuine one the Tribunal is surprised that Ezy Buy, as they could have done, did not arrange to have Kumar come to the Tribunal to give evidence to show that the offer was genuine.

[26] The Tribunal, on the facts of this application, is not convinced that Mrs Sweatman bought the vehicle by competitive tender within the meaning of s41 off the Act. Accordingly, the Tribunal finds that the statutory guarantees in the Act have not been excluded.
Issue (b): Whether the vehicle was of acceptable quality within the meaning of s6 of the Act?

[27] Section 6 of the Act imposes on a supplier (in this case Ezy Buy) "a guarantee that the goods are of acceptable quality." Section 2 of the Act defines "goods" as including “vehicles.”

[28] 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.”

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

[30] The guarantee of acceptable quality is in three parts. A set of quality elements set out in s7(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 s7(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.
[31] The vehicle sold to Mrs Sweatman is an 11 year old Japanese imported Toyota Estima which, at the date of sale, had travelled 177,466kms. It was sold for $7,760. Mr Sweatman says the vehicle drove like a “brand new car.” It’s engine failed after only seven days use driving 335kms. Its engine was diagnosed on 16 September by the AA service man and on 17 September by Autocare Pukekohe Ltd as having either a cracked cylinder head or a blown head gasket. Ezy Buy do not dispute that the vehicle now has a badly damaged engine.

[32] Ezy Buy says that at some time after the vehicle was supplied to Mrs Sweatman on 9 September its radiator cap was damaged, that the damage was not present when the vehicle was sold to Mrs Sweatman because it was not reported as being defective by the mechanic, Ken, of A-Grade Vehicle Inspections on 8 September when he did the pre purchase inspection. Mr Rogers says that the report Ezy Buy obtained from Mr Pope the manager of AA’s roadservice dated 23 October says “the service provider has made it clear in his statement that when he took the cap off the radiator it (the cap) was in bits.” Mr Pope’s report is heresay and it is not clear what the service provider said in his report. It maybe that Mr Pope is referring to the brief handwritten report Mrs Sweatman obtained from the AA service man who attended the vehicle when it broke down in which he says he took the radiator cap off. His statement then goes on to state “The centre of the cap had fallen to bits the cap off I got the member to start the vehicle. It started, running very roughly and water blew out of the radiator. We turned it off and I advised the member of the problem. He later arranged a tow.” Unfortunately Mrs Sweatman did not arrange for the AA service man who inspected the vehicle to come to the Tribunal to give first hand evidence of what he found and his statement is unsigned, undated, does not identify the vehicle said to have been inspected, and thus it has limited probative value.

[33] The Tribunal prefers the sworn evidence of Mr Sweatman who told the Tribunal first, that he did not damage the radiator cap when he removed it on 9 September to check the radiator coolant level. Second, that it was undamaged when he replaced the cap on the radiator. Third, he says the radiator cap did fall to bits but that occurred when the AA service man removed it on 16 September after the vehicle failed to start.

[34] The Tribunal does not think the radiator cap had been previously damaged as Ezy Buy suggest for the following reasons:
First, because Mr Sweatman is experienced in checking the basic fluid levels of motor vehicles and jump starting flat batteries on other lifestyle farm machinery and it would be highly unlikely that such a person would reinstall an obviously faulty critical component such as a radiator cap onto his newly acquired family vehicle.
Second, the vehicle was driven approximately 335km during the previous week by three different drivers none of whom reported any issues with the performance of the vehicle or symptoms commonly associated with significant water loss caused by a partially disassembled radiator cap including physical evidence of water loss, a change in the temperature gauge, steam and/or unusual odors.
Third, the AA service man and Mr Sweatman both observed that there was still sufficient water present in the vehicles radiator when it was checked on 16 September which indicates that the radiator cap was most likely not the cause of any significant water loss during the previous weeks motoring.
Fourth, the symptoms of a leaking/weeping head gasket (or cracked head) are generally masked by a cooling system which is correctly holding pressure because the water loss is significantly less than other common cooling system failures. The symptoms of this scenario are strongly supported by the initial diagnosis of a leaking/failed head gasket or cracked head by both the AA service man and Autocare Pukekoke.

[35] The Tribunal asked Mrs Sweatman to contact the mechanic Ken at A Grade Vehicle Inspections and ask him to attend the hearing to give evidence regarding the report he had prepared on the vehicle. The mechanic told Mrs Sweatman he could not do so because he was going sailing for three weeks. The Tribunal made several attempts to contact Ken of A Grade Vehicle Inspections by telephone conference call during the hearing. The Tribunal considers the A Grade Vehicle Inspections pre purchase report contains some gaps and is unwilling, under the circumstances to place much reliance on it to prove the condition of the radiator cap at the time of sale. Therefore the Tribunal is not satisfied that Ezy Buy proved that Mr or Mrs Sweatman damaged the radiator cap or that the vehicle was used in a manner or to an extent inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the vehicle, so as to satisfy the test in s7(4) of the Act.

[36] The facts show that the vehicle lasted only one week and 335kms before its engine was found to be seriously damaged. The Tribunal therefore finds the vehicle was not as durable as a reasonable consumer paying $7,760 would regard as acceptable for a vehicle of this age and mileage The Tribunal therefore concludes that the vehicle supplied to Mrs Sweatman by Ezy Buy did not comply with the guarantee of acceptable quality in s6 of the Act.

Issue(c): Is the failure one of substantial character entitling Mrs Sweatman to reject the vehicle?

[37] 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 s18(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."

[38] The evidence on which Mrs Sweatman relied to prove that the failure was of substantial character was the quotation she had been given by Autocare Pukekohe of the cost to supply and fit a second hand engine to the vehicle of $5,804.00. Ezy Buy did not attempt to argue that the fault was not a failure of substantial character and in answer to the Assessor Mr Rogers agreed that the vehicle had “at least” a blown head gasket. The Tribunal therefore considers first, that the vehicle would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure. Second, that the vehicle is substantially unfit for the purpose for which vehicles are commonly supplied. The failure is thus one of substantial character in terms of both s 21(a) and (c) of the Act.

[39] The purchaser exercised her right under the Act to reject the vehicle by written notice to the trader on 21 September 2012. She notified Ezy Buy of her grounds for rejection as required by s 22 of the Act and did so within 12 days of the date of supply,- well within a reasonable period of the time of supply as required by s20 of the Act. The Tribunal will therefore uphold Mrs Sweatman’s rejection and order the trader to refund her full purchase price of $7,954 (to include both Ezy Buy’s fee of $260 and the charges it imposed for the use of a credit card to pay the purchase price). Ezy Buy shall also pay the consequential losses Mrs Sweatman incurred of $290 for towage fees; a total of $8,244.00. The fee of $143.50 Mrs Sweatman paid for the A Grade Inspection pre-purchase report is probably not an item of loss resulting from the failure and so the Tribunal is unable to order Ezy Buy to pay it under s18(4) of the Act.

Costs

[40] The Tribunal has power to award costs in limited situations only covered by clause 14 of Schedule 1 to the Motor Vehicle Sales Act 2003. The relevant provision is as follows:
“14 Disputes Tribunal may award costs in certain circumstances
(1)The Disputes Tribunal may award costs to or against a party to any proceedings before it only if,-
(a) in the opinion of the Disputes Tribunal,-
(i) the proceedings are frivolous or vexatious or ought not to have been brought:
(ii) the matter ought reasonably to have been settled before proceeding to a hearing but that the party against whom an award of costs is to be made refused, without reasonable excuse, to take part in the discussions referred to in clause 5(1)(b) or acted in a contemptuous or improper manner during those discussions; or
(b) any party after receiving notice of a hearing, fails to attend the hearing without good cause.

(2) In any case to which subclause (1) applies, the Disputes Tribunal may order a party to pay---
(a) to the Crown all, or any part of either or both of the following:

(i) the reasonable costs of the Disputes Tribunal hearing:
(ii) the fees and expenses of any witness that have been paid or are payable by the Crown; or

(b) to another party all, or any part of the reasonable costs of that other party in connection with the proceedings.”

[41] The Tribunal accepts the purchaser’s evidence, which was not disputed by Mr Rogers that apart from Mr Clarke’s phone call to Mrs Sweatman on 12 October to ask her about her claim in which Mr Clarke promised to contact her but failed to do so, Ezy Buy made no attempt to mediate this application. The Tribunal considers this matter ought reasonably to have been settled but that Ezy Buy made no effort to attempt to take part in the mediation discussions referred to in clause 5(1)(b) of the Schedule to the Motor Vehicle Sales Act 2003, despite being requested in writing to do so by the Tribunal when it sent it a copy of the application. The Tribunal considers that the matter ought reasonably to have been settled before proceeding to a hearing. Ezy Buy will therefore be ordered to pay the Tribunal’s reasonable hearing costs of $500.

Orders

1. Mrs Sweatman’s rejection of the vehicle is upheld.

2. Ezy Buy Car Auctions Limited shall pay Karen Sweatman $8,244 immediately by Bank Cheque.

3. Ezy Buy Car Auctions Limited shall within 14 days of the date of this decision pay to the Crown the costs of the hearing of $500 by payment to the Auckland District Court, Private Bag 92020, Auckland.

DATED at AUCKLAND this 20th December 2012

C.H Cornwell
Adjudicator