Boyle v J & J Aria Limited t/a JJ Motors - Reference No. MVD 138/12 (Auckland) [2012] NZMVDT 96 (4 October 2012)

Last Updated: 21 October 2012

Decision No:AK 78/2012
Reference No. MVD 138/12

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN KAY MAREE BOYLE

Purchaser

AND J & J ARIA LIMITED T/A JJ MOTORS

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 1 October 2012

APPEARANCES

Mrs K M Boyle, the purchaser

Mr N Scott, witness for the purchaser
Mr M Irfani, director for the trader

DECISION

Background

[1] On 8 July 2012 Mrs Boyle (“the purchaser”) purchased a 2002 BMW 316i registration DBM542 (“the vehicle”) from J & J Aria Limited trading as J J Motors (“the trader”) for $5,300. The purchaser has rejected the vehicle because she says it is not of acceptable quality and the trader has refused to remedy the vehicle’s faults. She seeks the Tribunal’s order upholding her rejection and ordering the trader to refund the purchase price and costs.

[2] The trader says first, that the purchaser bought a second hand vehicle knowing that it had engine oil leaks and its radiator needed a change of coolant. The trader says the purchaser was careless in driving the vehicle in that condition and she has caused the damage of which she now complains.
[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr Middleton as expert assessor to assist in the determination of the complaint. Mr Middleton took the oath required by (2) of Schedule 1 to that Act. As an assessor Mr Middleton assisted the adjudicator but the application was determined by the adjudicator alone.

Facts

[4] The purchaser gave evidence that the trader had advertised the vehicle on TradeMe as having an odometer reading of 156,000km. Its advertisement described the vehicle as:
“Well maintained, Good condition a few small dents but nothing major
Good tyres, new rear brakes. Handles well.
Great car on gas with its BMW N42 engine that also offers excellent performance in a car like this
Car is in great condition and drives beautifully
JJ Motors
70D Stoddard Road
Mount Roskill
Auckland”

[5] The purchaser says she wanted to buy a reliable vehicle from a motor vehicle trader for use by her 18 year old daughter. She contacted the trader and test drove the vehicle for about 8 minutes on 7 July 2012 after which she agreed to purchase it subject to a VTNZ inspection.

[6] On 8 July the vehicle was inspected by VTNZ. It’s odometer was recorded by VTNZ on that date as 156,866kms. The VTNZ report, a copy of which was produced by the purchaser to the Tribunal, shows the VTNZ inspector considered it to be in satisfactory condition for its age. However the report also records the vehicle had engine oil leaks and the radiator needed to be flushed because the condition of the corrosion inhibitor was described as being in “poor condition” as was the engine oil. The vehicle needed a service. There was no service sticker on the windscreen and the vehicle registration was due to expire on 27 July 2012. The last warrant of fitness was issued on 19 May 2012.

[7] The purchaser decided to buy the vehicle from the trader for $5,300. The purchaser says there was no Consumer Information Notice (“CIN”) displayed with the vehicle, nor was a CIN signed by the trader provided to her in accordance with The Consumer Information Standards (Used Motor Vehicles) Regulations 2008. The trader admitted he was unable to provide the Tribunal with a signed copy of the CIN. The trader did not complete a vehicle offer and sale agreement with the purchaser but instead it handed her a piece of paper dated 8 July 2012 with the trader’s name and address at the top which reads:
“Date: 08/07/2012
WE have sold make: BMW Model: 316ti REG DBM542
For $5300 as full and final payment, we guarantee that the car has a clear title and sold on as is where is basis.”
The details of the date, vehicle’s make, model, registration and price were hand written into what appears to the Tribunal to be a standard document used by the trader.

[8] The purchaser says that two days and 147kms after buying the vehicle she took it to BM Workshop for an oil service and safety check. She produces a tax invoice from BM Workshop which shows that the vehicle was serviced, the oil was changed and its wiper blades, fuel filter, microfilter, main belt tensioner, main belt and oil filter housing gaskets were replaced by BM Workshop on 10 July at a total cost of $1,434.20. BM Workshop’s invoice also records as follows:
“May still have engine oil leak. Please return in 1000kms approx for further checking.
Coolant system requires attention.
Top hose, rear coolant plate, lower coolant hose and return coolant hose should be replaced. Cost approx. $700 +GST
Front suspension castor bushes starting to crack.”
The purchaser did not have the additional work recommended by BM Workshop carried out.

[9] The purchaser’s daughter drove the vehicle for about one month. The vehicle began to overheat and its engine started smoking. The purchaser took the vehicle back to BM Workshop on 7 August 2012. She produces their report and quotation which states the vehicle’s expansion tank was full of pink fluid consistent with transmission cooler failure leading to contamination of the cooling system. The vehicle was also using excessive quantities of oil and blowing smoke from the exhaust which BM Workshop state is consistent with valve stem oil seal failure and/or cylinder head gasket failure. There was also a slight oil leak from the engine’s sump. BM Workshop recommended the replacement of the transmission cooler, flushing the cooling system and a transmission service costing $1200 + GST and noted that the transmission may have been damaged due to oil contamination. BM Workshop state that until the transmission cooler has been replaced to allow correct testing of the cooling system they are unable to rule out completely a possible head gasket issue. Various coolant hoses are either swollen through oil contamination or discoloured with age and the cost to replace them is $700 + GST. The replacement of valve stem oil seals without removing the cylinder head is estimated by BM Workshop as costing approximately $1600 + GST. The cost of repairing the sump oil leak is $550 + GST.

[10] On 8 August the purchaser and her son went to the trader and took a copy of the report and quotation prepared by BM Workshop dated 7 August. She says her purpose in doing so was to ask the trader what it was willing to do about the issues, not to ask for a refund of her purchase price. The purchaser says the trader’s director Mr Irfani laughed at her when she told him about the vehicle overheating and blowing smoke and refused to discuss the issues with her or even to read the report written on the vehicle by BM Workshop. Mr Irfani told her that because the vehicle had been sold to her on an “as is where is” basis she had no rights and the trader was not required to repair it.

[11] The purchaser sought advice from friends and her solicitors. Armstrong Murray, Solicitors wrote to the trader on 9 August informing it that the purchaser had been advised the vehicle’s faults would cost at least $4,000 plus GST to repair. After being told by the trader that “nothing could be done” the purchaser exercised her right under s18(2)(b)(ii) of the Consumer Guarantees Act (“the Act”) to reject the vehicle. The letter also pointed out (correctly) to the trader that it was not possible to contract out of the terms of the Act and therefore its purported invoice that the vehicle was sold on an “as is where is” basis was invalid. The solicitor’s letter demanded a full refund of $5,300 and requested a reply from the trader within five working days or the matter would be referred to the Tribunal. The trader did not respond.

[12] The purchaser told the Tribunal that since filing her application on 22 August 2012 she has had no contact whatsoever from the trader.

[13] Mr Irfani for the trader says that the purchaser bought a second hand vehicle. He says the VTNZ report shows that the vehicle’s engine had oil leaks and its radiator needed a coolant flush yet the purchaser chose to buy the vehicle and drove it. He says the purchaser, by driving the vehicle in that condition, caused the damage. In reply to a question from the Assessor Mr Irfani says he agrees that the problem with the vehicle has been caused by its transmission oil being contaminated by coolant. Mr Irfani told the Tribunal that he had driven the vehicle once for about 8 minutes and it went alright. Mr Irfani denies that he laughed at the purchaser when she came to see him on 8 August but does not deny that he refused to have anything further to do with the vehicle and did not agree to have it repaired. He says the CIN may have been in the car although the purchaser says it was not. He acknowledges that he does not have a signed copy of the CIN and did not appear to be aware he is required by law to keep a signed copy for six years from the date of sale.

The issues

[14] Having considered the facts, the Tribunal concludes that the following issues require consideration:
[a] Whether the vehicle sold to the purchaser was of acceptable quality at the time of sale?
[b] If not whether the purchaser required the trader to remedy the faults and whether the trader did so within a reasonable time?
[c] If not, whether the purchaser is entitled to reject the vehicle?

Legal Principles

[15] In terms of s.89 of the Motor Vehicle Sales Act 2003 the Tribunal has jurisdiction to inquire into and determine applications or claims between a Motor Vehicle Trader and the purchaser of a motor vehicle. In doing so, it 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. In this application the Consumer Guarantees Act is applicable.

Issue [a]: whether the vehicle sold to the purchaser was of acceptable quality at the time of sale?

[16] 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.”

[17] The expression "acceptable quality" is defined in s 7 of the Act 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.”

[18] 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.

[19] The vehicle sold to the purchaser is a 10 year old Japanese imported BMW 316i which had travelled 156,866kms at the time it was supplied to the purchaser on 8 July 2012 for $5,300. When it was sold to the purchaser the vehicle had not been recently serviced because it had no service sticker on the windscreen, it had an engine oil leak, its engine oil was low and the oil and corrosion inhibitor were described by the VTNZ inspector as in “poor condition”. The purchaser, wisely, had the vehicle checked and serviced by BM Workshop within 3 days and 147kms of buying it at a cost of $1,434.20. Although BM Workshop recommended the purchaser have the cooling system hoses replaced at a cost of $700 + GST at that time, the purchaser elected not to do so.

[20] Within a month of being supplied to the purchaser the vehicle sustained serious damage when its transmission oil and engine coolant fluids became cross contaminated by a failure of the transmission cooler. The Tribunal’s Assessor considers it highly likely that the transmission was also damaged due to coolant contamination from the transmission cooler failure. This damage requires repairs estimated by BM Workshop at $4,050 plus GST. The trader claimed that the damage was due to the purchaser’s mis-use of the vehicle or her failure to have it serviced but the Tribunal found no evidence to support that. On the advice of its Assessor, the Tribunal finds that although the vehicle needed servicing and there was an engine oil leak at the time of purchase- both issues which a prudent consumer would have had the trader rectify before agreeing to buy the vehicle- the contamination of the transmission fluid occurred because the vehicle was not as durable as a reasonable consumer would regard as acceptable. This is because no reasonable consumer would expect to have a major faults costing $4,050 + GST occur within a month of buying a 10 year old 157,000km BMW for $5,300. The Tribunal therefore finds the vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because it was not durable.

Issue [b]: Did the purchaser require the trader to remedy the vehicle’s faults and did the trader do so within a reasonable time?

[21] 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."

[22] The purchaser contacted the trader on 8 August and required it to remedy the faults which the vehicle then had; overheating and blowing excessive smoke. She took a copy of the BM Workshop report dated 7 August to show the trader. The trader was neither interested nor willing to assist in having the vehicle repaired. Mr Irfani, the Tribunal finds, as the trader’s director refused to assist the purchaser. The purchaser immediately became entitled to reject the vehicle which her solicitors did in their letter dated 9 August 2012 to the trader.

[23] 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) of the Act. Section 21 of the Act 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."

[24] The Tribunal is satisfied, on the basis of the BM Workshop report dated 7 August 2012 that the condition of the vehicle is such that it would not have been acquired by a reasonable consumer fully aware of the nature and extent of the failures costing approximately 80% of the cost price of the vehicle to remedy. Therefore the Tribunal finds the failure is one of substantial character as defined in s 21(a) of the Act.

Issue [c]: Whether the purchaser is entitled to reject the vehicle?

[25] The purchaser, through her solicitors letter dated 9 August 2012 unequivocally rejected the vehicle and gave the trader the purchaser’s reasons for doing so, namely its refusal to remedy the vehicle’s faults. Rejection took place within a month and a day of the supply of the vehicle to the purchaser which the Tribunal finds is well within a reasonable period of the time of supply in terms of s20 of the Act.

Costs

[26] 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.”

[27] The Tribunal accepts the purchaser’s evidence, which was not disputed by Mr Irfani for the trader, that the trader 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 the trader the purchaser’s application. The Tribunal also considers the trader had no real defence to the claim and on receiving the letter from the purchaser’s solicitors it should have taken competent legal advice and settled the matter with the purchaser. The trader will therefore be ordered to pay the purchaser’s solicitors costs of $615.00 which the Tribunal finds are reasonable.

[28] The vehicle cannot be safely returned to the trader without having it transported at some significant cost to the purchaser. The Tribunal will therefore order the trader to collect the vehicle from BM Workshop after it has given the purchaser a Bank Cheque for the full purchase price of $5,300 and costs of $615; a total of $5,915.

[29] The trader’s action in first, failing to display and supply the purchaser with a CIN signed by the trader and secondly, in attempting to contract out of the statutory guarantees in the Act appear to the Tribunal to be conduct which breaches the provisions of ss 28(1) and 13(i) of the Fair Trading Act 1986. The Tribunal will forward a copy of this decision to the Fair Trading Unit of the Commerce Commission for investigation.

Orders

1. The purchaser’s rejection of the vehicle on 9 August 2012 is upheld.

2. The trader shall pay the purchaser $5,915.00 by Bank Cheque immediately.

3. As soon as the trader has paid the purchaser the sum of $5,915 the trader shall collect the vehicle at its expense from BM Workshop 315 Great North Road Grey Lynn.

DATED at AUCKLAND this 4 October 2012

C.H Cornwell
Adjudicator