Bennett v LRC Limited - Reference No. MVD 128/13 (Auckland) [2013] NZMVDT 111 (14 October 2013)

Last Updated: 18 November 2013

Decision No. AK 93 /2013

Reference No. MVD 128/13

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN MELISSA BENNETT

Purchaser

AND LRC LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Rotorua on 10 October 2013

APPEARANCES

Miss M Bennett, the purchaser

Mr E Bruintjes, witness for the purchaser
Mr R Lui, director for the trader

DECISION

Background

[1] On 26 April 2013 Miss Bennett (“the purchaser”) bought a 2006 Toyota Vitz registration FJG206 (“the vehicle”) from LRC Limited (“the trader”) for $8,000. The purchaser has rejected the vehicle because she says it has a faulty transmission. The purchaser seeks the Tribunal’s order upholding her rejection and ordering the trader to refund the purchase price.

[2] The trader says that it sold the vehicle privately on behalf of the previous owner, Suzie Chen. The trader denies that the transmission oil in the vehicle has ever been changed and doubts that the transmission in the vehicle, with the relatively low mileage this vehicle has travelled, would have failed as the purchaser claims.

[3] Prior to the commencement of the hearing the Tribunal appointed Mr Clough as the Tribunal’s assessor and he 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.

The Issues
[4] The issues raised by this application are:
[a] Whether the vehicle was supplied by the trader or by a private seller?
[b] If the vehicle was supplied by the trader whether it was of acceptable quality when it was sold to the purchaser?

Issue [a]: Whether the vehicle was supplied by the trader or by a private seller?

Relevant Law

[5] Section 90 of the Motor Vehicle Sales Act 2003 (“MVSA”) provides that the Tribunal has jurisdiction only if one party to the application or claim is a “motor vehicle trader”. The definition of motor vehicle trader is contained in s7 of the MVSA as follows:
“7 Meaning of motor vehicle trader-
In this Act, motor vehicle trader-
(a) means any person who carries on the business of motor vehicle trading (whether or not that person carries on any other business); and
(b) includes-
(i) [repealed]
(ii) an importer
(iii) a wholesaler
(iv) a car auctioneer
(v) a car consultant”

[6] Section 89 of the MVSA gives the Tribunal jurisdiction to inquire into and determine any application or claim under the Sale of Goods Act 1908, the Fair Trading Act 1986, the Consumer Guarantees act 1993, and the Contractual Remedies Act 1979. In this application the purchaser claims the trader has breached the Consumer Guarantees Act 1993 (“the Act”) and seeks the remedy of rejection under the Act.

[7] The Act only applies to sales of goods or services by a “supplier” as defined in s 2 of the Act.

[8] The definition of “supplier” in the Act is as follows:
“supplier—
(a) means a person who, in trade,—
(i) supplies goods to a consumer by—

(A) transferring the ownership or the possession of the goods under a contract of sale, exchange, lease, hire, or hire purchase to which that person is a party; or

(B) transferring the ownership of the goods as the result of a gift from that person; or

(C) transferring the ownership or possession of the goods as directed by an insurer; or
(ii) supplies services to an individual consumer or a group of consumers (whether or not the consumer is a party, or the consumers are parties, to a contract with the person); and
(b) includes,—
(i) where the rights of the supplier have been transferred by assignment or by operation of law, the person for the time being entitled to those rights:
(ii) a creditor within the meaning of the Credit Contracts and Consumer Finance Act 2003, who has lent money on the security of goods supplied to a consumer, if the whole or part of the price of the goods is to be paid out of the proceeds of the loan and if the loan was arranged by a person who, in trade, supplied the goods:
(iii) a person who, in trade, assigns or procures the assignment of goods to a creditor within the meaning of the Credit Contracts and Consumer Finance Act 2003 to enable the creditor to supply those goods, or goods of that kind, to the consumer:
(iv) a person who, in trade, is acting as an agent for another, whether or not that other is supplying in trade; and
(c) for the avoidance of doubt in the following circumstances, means only,—

(i) in the case of a supply of electricity as a good, the retailer of the electricity with whom the consumer has a contract; and

(ii) in the case of a supply of electricity line function services, the distributor who owns or operates the line that is connected to the consumer's premises; and

(iii) in the case of other services relating to electricity, the person who provides that service to the consumer”

Application of law to facts

[9] The trader is a registered motor vehicle trader number M189591 and has been registered as a motor vehicle trader since 11 May 2010. The purchaser gave evidence that she went to the trader’s premises to inspect the vehicle. She was met and the vehicle was demonstrated to her by the trader’s director Mr Liu. The purchaser says that Mr Liu told her that he was selling the vehicle on behalf of a friend but she denies that Mr Liu told her that the sale was a private sale by someone other than the trader. The purchaser says that she paid the full purchase price of $8,000 for the vehicle to the trader of which $2,500 was paid by Eftpos directly into the trader’s bank and the balance of $5,500 was paid to Mr Liu in cash. Unfortunately the purchaser failed to obtain a receipt for the purchase price from the trader. No vehicle offer and sale agreement was completed between the parties and the purchaser was not supplied with a consumer information notice. The purchaser says that at the time of sale Mr Liu promised to repair any faults that developed with the vehicle free of any charge for labour if the purchaser paid for any parts necessary.

[10] The vehicle was transferred to the purchaser and its odometer at that time was, according to the Certificate of Registration, 52,541kms. The vehicle had been first registered in Japan in 2006.

[11] The trader was represented at the hearing by Mr Liu. Mr Liu told the Tribunal that the vehicle was sold on behalf of Miss Chen who had returned to China. He says that the vehicle was sold with a new warrant of fitness issued by AA Auto Service & Repair on 26 April 2013 when its odometer was recorded as 52,541kms.

[12] The Tribunal is satisfied, on the basis of the evidence given by the purchaser, who appeared to be a reliable and credible witness, that the purchaser was supplied with the vehicle by the trader. The Tribunal accepts that the trader was probably acting as an agent for the previous owner of the vehicle, Ms Chen and was selling the vehicle on her behalf. However the supply of the vehicle by the trader was a sale made in trade and even if the trader was acting as agent for another person the trader is still the “supplier” and falls within the extended definition of “supplier” in s2 of the Act.

Conclusion on issue [a]

[13] The vehicle was supplied in trade to the purchaser by the trader and is thus subject to the provisions of the Act.

Issue [b]: Whether the vehicle was of acceptable quality when it was sold to the purchaser?

[14] The Act imposes on a supplier "a guarantee that the goods are of acceptable quality." Section 2 of the Act defines "goods" as including "vehicles.”

[15] The expression "acceptable quality" is defined in s7(1) 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.

Application of law to facts

[16] The purchaser was the main driver of the vehicle. She says she used it to drive to her work each day, a round trip of about 60kms. When she first viewed the vehicle Mr Liu told her and her partner that if she bought the vehicle he would obtain a new AA warrant of fitness for it. On the 26 April after the purchaser and her partner had inspected the vehicle Mr Liu telephoned to tell them the vehicle had passed an AA warrant of fitness and that he had replaced the spark plugs in the vehicle. Mr Liu told the Tribunal that the spark plugs he had fitted to the vehicle were BTR16 plugs which he says improved the vehicle’s performance.

[17] At about 2-30pm on 26 April 2013 the purchaser returned to the trader’s premises and agreed to buy the vehicle for $8,000 and paid the trader $2,500 by Eftpos and $5,500 in cash. She was not given a receipt, a CIN or a VOSA. Mr Liu promised the purchaser that he would undertake any repairs to the vehicle free of labour charge for the first three months.

[18] Approximately three weeks after she purchased the vehicle the purchaser says its transmission started to jolt intermittently when she drove the vehicle at 60-70kph. Surprisingly in view of the trader’s offer to carry out any repairs during the three months following sale, the purchaser did not take the vehicle back to the trader and have it assess the vehicle’s transmission. The purchaser continued to drive the vehicle until 1 July 2013 when her partner took the vehicle to Lees Autoservice Ltd in Kawerau who removed and checked the spark plugs and reported that they were not the correct type for the engine; that it needed a special type with a longer thread. Lees also scanned the vehicle’s computer for faults, noted a number of throttle position sensor fault codes were stored in the computer which they cleared and then test drove the vehicle. Their invoice notes “on test drive engine rev’ed very high suspect transmission fault.”

[19] On 4 July the purchaser’s partner took the vehicle back to Lees Autoservice Ltd who reported :
“The transmission is reving up with no increase in speed.
Sampled transmission fluid and it appears to have an incorrect oil for type of transmission
ATF oil in a CVT transmission.”
Lees Autoservice gave the purchaser an estimate dated 26 July of $2,387.93 to replace the vehicle’s transmission with a second hand unit.

[20] On 19 July 2013 the purchaser’s mother and the purchaser’s partner Mr Bruintjes went to the trader’s premises to discuss the matter with Mr Liu. Unfortunately Mr Liu was unavailable and so they left a letter for Mr Liu, and a copy of the report from Lees Autoservice Ltd regarding the transmission. The letter, a copy of which the purchaser also emailed to the trader on 19 July 2013 at 9-13am referred to the vehicle having not performed as it should and that a transmission problem and other problems due to incorrect spark plugs had been identified. The letter stated that the vehicle could not be driven and the purchaser was “offering [the trader] the opportunity to rectify the problem”. The purchaser also stated in the letter that she had sought advice and the issue fell under the Consumer Guarantees Act. Unfortunately the trader did not respond to the purchaser’s request that it rectify the problem. The purchaser’s father, Mr Jeff Bennett then telephoned the trader on 23 July and sought to find out why it had not responded to the purchaser’s letter of 19 July. The Tribunal suspects that Mr Bennett may have inflamed the situation by claiming the trader had put the wrong fluid in the transmission which Mr Liu strongly denied.

[21] On 30 July Mr Bruintjes spoke to Mr Myles Herbert, the managing director of Driveline Automotive Ltd who are transmission specialists in Rotorua. Mr Bruintjes says he told Mr Herbert that the wrong type of oil had been put in the purchaser’s vehicle and asked Mr Herbert to quote for a new replacement automatic transmission. Mr Herbert told Mr Bruintjes that Mr Liu had already spoken to him regarding the vehicle. Mr Bruintjes apparently agreed to take the vehicle to Driveline Automotive Ltd so that a sample of the transmission oil could be taken for analysis. Mr Bruintjes says that he later decided not to take the vehicle to Driveline because Mr Herbert had declined to provide a quote for the transmission without knowing he was going to be paid for the work involved and that he was also unwilling to quote for a new transmission.

[22] On 19 August 2013 the purchaser filed an application with the Tribunal which did not specify what remedy she sought. A copy was sent to the trader immediately. On 29 August the Tribunal received an email from Mr Liu claiming the vehicle was sold on behalf of “Suzie Chan” and saying the vehicle had been owned and used by the purchaser for about three months and driven over 4,000kms without issue. The email states that “on 19 July contact was made stating that the transmission had a fault due to me putting the wrong oil in, which is certainly not the case (service sticker states 15w/40 oil which was put in the engine during a routine service). The transmission oil has to my knowledge never been changed since new which is normal practice with modern automatic transmissions.” Mr Liu also stated in the email that he had asked for an oil analysis by a third party because that was the only way to tell what problems have occurred within the transmission and why.

[23] The purchaser sent the trader an email rejecting the vehicle on 13 September 2013.

[24] The Tribunal in deciding the issue as to whether the vehicle complied with the guarantee in s6 of the Act has had regard to the fact that the vehicle is a 2006 Japanese imported Toyota Vitz with 52,541kms on its odometer at the time it was sold to the purchaser by the trader on 26 April 2013 for $8,000. The Tribunal notes that the vehicle was apparently free of any mechanical faults at the time of sale because it passed a warrant of fitness inspection by AA Auto Service & Repair on the date of sale to the purchaser.

[25] The purchaser claims the vehicle started to “jolt” intermittently three weeks after she bought it but she did not have it inspected for a little more than a further six weeks during which she drove it 60kms each day to work and back. On 1 July 2013 after she had driven 3,851kms in the vehicle Lees Autoservice Ltd inspected and test drove the vehicle and say they suspect a transmission fault and that the transmission appears to have the wrong type of transmission oil. However the vehicle has not been inspected by a transmission specialist who has confirmed the existence of the transmission fault and the likely cause of it and the cost to rectify it. The Tribunal thinks that Lees Autoservice Ltd has identified what they believe is a transmission fault and have quoted for a replacement second hand transmission. However, the Tribunal is not satisfied, to the extent it considers it must be, that the purchaser has proved, to the civil standard of proof (a balance of probabilities or more likely than not), that the vehicle has in fact got a transmission fault. In coming to this decision the Tribunal is mindful first, that the vehicle is fitted with a CVT automatic transmission a characteristic of which is that the transmission jolts slightly when changing gear. Second, that the vehicle has only travelled 56,759kms and ought not to have transmission problems at that relatively low distance travelled. Third, because of the vehicle’s low mileage it is very unlikely that the vehicle’s transmission oil has needed to be changed or topped up. Fourth that if the transmission oil was incorrect the vehicle’s transmission would most probably not have lasted for the 3,851kms the purchaser has used it over the period she has owned it.

[26] The Tribunal has therefore decided that the purchaser should, as soon as possible, arrange for the vehicle to be transported to an independent transmission specialist who should be asked to prepare a written report for the Tribunal stating whether or not there is a fault with the vehicle’s transmission, what that fault is most likely to be and what it will cost to rectify it. The Tribunal does not consider that the transmission oil in the vehicle needs to be scientifically analyzed because the Tribunal in order to make a decision on the purchaser’s application to reject the vehicle does not require that information. A copy of the transmission specialist’s report is to be sent to the Tribunal as soon as it is received by the purchaser with invoices for the cost of transporting the vehicle to the transmission specialist and the cost of the transmission specialist’s report. The Tribunal will then forward a copy of the report to the trader who will have ten working days to make written submissions on its contents following which the Tribunal will either arrange for a further hearing or shortly thereafter issue its reserved decision on the purchaser’s application.

Orders

1. The Tribunal declares that the trader supplied the vehicle in trade to the purchaser.

2. In order to determine whether the vehicle is of acceptable quality in terms of the guarantee in s6 of the Consumer Guarantees Act 1993 the Tribunal requires the purchaser to arrange for the vehicle to be transported to an independent transmission specialist who should be asked to prepare a written report for the Tribunal stating whether or not there is a fault(s) with the vehicle’s transmission, what that fault(s) is most likely to be, and what the fault(s) will likely cost to rectify it.

3. A copy of the transmission specialist’s report is to be sent to the Tribunal as soon as it is received by the purchaser with receipted GST invoices for the cost of transporting the vehicle to the transmission specialist and the cost of the transmission specialist’s report. The Tribunal will upon receipt of the transmission specialist’s report forward a copy of the report to the trader who will have ten working days from the date of its transmission to it to make written submissions on its contents to the Tribunal. The Tribunal will shortly thereafter either arrange for a further hearing to take place or issue its reserved decision on the purchaser’s application.

DATED at Auckland 14 October 2013.

C.H.Cornwell
Adjudicator