Bussey v Euro City Limited - Reference No. MVD 215/12 (Auckland) [2013] NZMVDT 14 (11 February 2013)

Last Updated: 1 April 2013

Decision No. AK 14/2013

Reference No. MVD 215/12

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN DARREN THOMAS BUSSEY

Purchaser

AND EURO CITY LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Napier on 7 February 2013

APPEARANCES

Mr D T Bussey, the purchaser

Mr T Elmsly, managing director for the trader

DECISION

Introduction

[1] On 11 May 2012 Mr Bussey bought a 2009 Audi A4 3.2 FSI Quattro Tip car from Euro City Limited for $61,990. Mr Bussey has rejected the car. His reasons are first, because he says it has a serious fault and second, because he says Euro City did not repair the fault within a reasonable time of being asked to do so.

[2] Mr Elmsly for Euro City says first, that Mr Bussey bought the car for business purposes and he contracted out of the Consumer Guarantees Act 1993 (“the Act”) in the Vehicle Offer and Sale Agreement (“VOSA”) he made with Euro City on 11 May 2012. Second, that Mr Bussey has no right to reject the car because he drove it 8,693kms before he raised an issue and the damage to the left rear splash guard and the bent front suspension arm “suggests” that the car was damaged by Mr Bussey.

[3] Prior to the commencement of the hearing the Tribunal appointed Mr Middleton 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 Middleton assisted the adjudicator but the application was determined by the adjudicator alone.

The Issues

[4] There are four issues in this case:
[a] Whether Mr Bussey contracted out of the Act?
[b] If not, whether the car was of acceptable quality?
[c] Whether Euro City remedied the car’s fault within a reasonable time?
[d] Whether the fault is of “substantial character” entitling Mr Bussey to reject it?

Issue [a]: Whether Mr Bussey contracted out of the Act?

Relevant law

[5] Section 43(1) of the Act contains a prohibition on contracting out of the Act. However s 43(2) permits a supplier and a consumer who represents to the supplier that they are acquiring the goods or services for the purpose of a business to agree in writing to contract out of the Act. To do so they must agree in writing. The relevant provision is 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.”

Application of law to facts

[6] Mr Elmsly says that Mr Bussey told Euro City he was acquiring the car for the purpose of his business as an industrial electrician. He produces an application dated 18 April 2012 signed by Mr Bussey made to UDC Finance Ltd for finance to purchase a car on behalf of Dibussi Limited, a registered company of which Mr Bussey is the sole director and shareholder.

[7] Mr Elmsly says that UDC were not willing to make an advance to Dibussi Limited because that company had only been incorporated on 15 April 2011 but UDC were prepared to made an advance of finance to Mr Bussey for the same purpose; to enable him to buy the car for business purposes.

[8] Mr Bussey did not deny, when asked by the Tribunal if he had represented to Euro City when he bought the car that he was buying it for business purposes.

[9] The VOSA signed by the parties contains the following term:
“Consumer Guarantees Act 1993
It is a condition of sale that the Consumer Guarantees Act 1993 will not apply to any Goods or Services acquired for business purposes.
To the extent permissible by law the provisions of the Consumer Guarantees Act 1993 do not apply to this Agreement.
Any warranty is restricted to that warranty (if any) provided by the manufacturer of the vehicle.”

[10] The Tribunal was surprised that Euro City raised this issue as part of its defence because, when it was asked to inform the Tribunal of its defence prior to the hearing Euro City did not mention in its written statement to the Tribunal dated 8 January 2013 that it considered the Act had been excluded by agreement. Second, Mr Elmsly says that Euro City have paid $4,000 to repair the car which seems to the Tribunal to be inconsistent with its contention that it had no liability under the Act to repair the car for Mr Bussey. Leaving those two matters to one side on the basis that Euro City may not have been aware of its rights and obligations under the Act until it sought legal advice prior to the hearing of this application, the Tribunal is satisfied first, that Mr Bussey probably held himself out as acquiring the car for business purposes. Second, that he certainly agreed in writing at the time he bought the car that the provisions of the Act would not apply.

Conclusion on issue [a]

[11] For the foregoing reasons the Tribunal concludes that Mr Bussey contracted out of the Act and as a consequence his application to reject it for a breach of the statutory guarantees in the Act, must be dismissed.

[12] The Tribunal has however decided to determine the other three issues in this application in case it is subsequently held on appeal that the Tribunal was wrong to find that the Act had been excluded.

Issue [b]: Whether the car was of acceptable quality?

Relevant law

[13] The expression "acceptable quality" is defined in s 7(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.

(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.”

[14] 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 s 19 of the Act. If the failure to comply with the guarantee of acceptable quality is of a “substantial character” within the meaning of s 21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser has exercised his/her right to reject the vehicle within a reasonable time.

Application of law to facts
[15] Mr Bussey sourced the car through a wholesaler in Auckland on the internet, asked Euro City to process his finance application, and Euro City agreed to do so for a margin of $2,000. Euro City entered into a VOSA with Mr Bussey dated 11 May 2012 but Mr Elmsly told the Tribunal the car had been supplied to Mr Bussey on 30 April and he had driven it from Napier to Masterton to test it before he completed the VOSA with Euro City and a collateral finance agreement with UDC Finance Ltd on 11 May 2012. The car’s odometer is recorded in the VOSA as 12,500kms but Mr Bussey says it was more likely the odometer was 13,000kms at the time it was supplied to him.

[16] Mr Bussey took the car back to Euro City on a number of occasions because of a noise which occurred intermittently when he reversed and braked the car. Mr Bussey did not keep a reliable record of the dates he had returned the car to Euro City for this issue but, from the invoices which Euro City prepared on each of the occasions the car was returned, and Mr Elmsly’s evidence the history appears to be as follows:

(i) 27 July 2012: car taken by Mr Bussey to Euro City without prior appointment for “clunk” noise when car was braked in reverse. Euro City carried out an under body inspection and found the left rear splash guard (a plastic lining fitted inside the mud guard) had been hit and was making contact with one of the suspension arms. Euro City refitted the splash guard and made an internal charge for their 0.48hr of labour of $41.48. The car’s odometer was then 21,192km indicating it had been driven about 8,000kms in the three months that Mr Bussey had owned it.

(ii) 14 to 17 August 2012: Mr Bussey returned the car to Euro City to identify and repair cause of the “clunk” noise in reverse. Mr Bussey says this noise was occurring intermittently- he estimates it occurred about 20% of the time he put the car in reverse and then applied the brakes. Euro City confirmed the fault existed and attempted to locate the source of the noise. Mr Bussey says the mechanic at Euro City told him he was confident the noise did not make the car unsafe and that some parts were changed.

(iii) 1 October 2012: Mr Bussey returned the car to Euro City to ask it to repurchase the car because he was going overseas to work. In the course of his visit the car was again inspected by Euro City’s technicians to attempt to locate the cause of the “clunk” noise when the car was braked in reverse. Mr Bussey says that the frequency of the occurrence of the noise had increased to 50% of the occasions he put the car into reverse and applied the brakes. Mr Elmsly says he told Mr Bussey that an Audi technical specialist from Germany would be visiting Euro City on 18 October and that he would like that person to inspect and try and diagnose the fault. Mr Bussey agreed to that inspection.

(iv) 18 October 2012: Mr Bussey returned the car back to Euro City so that the Audi technical specialist could inspect it. The specialist did so and was unable to diagnose the cause of the “clunking” sound but recommended that Euro City get some special listening equipment from Audi NZ so that they could better trace the source of the noise.

(v) 29 October 2012: Mr Bussey took the car back to Euro City and informed the person to whom he spoke (whose name he could not recall), that he did not want the car back until the “clunk” noise had been eliminated.

(vi) 5 November 2012: Mr Bussey delivered a letter to Euro City rejecting the car claiming it has a serious fault namely a loud “knock” when the car is driven in reverse. He also claimed in his letter that the car had been looked at on four occasions already and was now in Euro City’s possession for the fifth time and he felt they had been given more than a reasonable time to remedy the fault. Mr Elmsly acknowledged receipt of the letter on 5 November and said that Euro City had gone “to all lengths” to find the problem and that Euro City did not accept that he had the right to reject the car.

[17] The fault has subsequently been identified as caused by a slightly bent suspension arm in the front of the car which caused part of the arm to knock against the sub-frame when the car is braked in reverse. The fault in the suspension arm was so slight that it was undetectable visually. Both the left and right front lower suspension arms were replaced by Euro City on 29 November 2012 at their cost. At the same time, as a goodwill gesture, Euro City replaced a set of brake linings on the front wheels of the car. Mr Elmsly says Euro City has spent about $4,000 in repairing the car. Its odometer is now 28,376kms.

[18] On the basis of the above facts the Tribunal finds, first, that at the time of supply the vehicle was probably free of minor defects, safe, acceptable in appearance and finish and fit for the purpose for which it was sold. It makes this finding because Mr Bussey made no complaint of any fault with the car from 30 April 2012 when he first drove it to 27 July by which time the car had travelled a distance of about 8,000kms. The only issue is whether the fault with the front lower suspension arm was one which occurred because the car lacked durability or because the car’s suspension was damaged whilst being driven by Mr Bussey. Euro City although suggesting in paragraph 25 of their written submission that the bent suspension arm was damaged by Mr Bussey, were unable to produce any evidence to support that statement. The Tribunal thinks it a remarkable coincidence that the car’s left rear splash guard became detached at about the same time in July 2012 as Mr Bussey complained after driving the car for about 8,000kms of the “clunk” noise occurring when he braked the car in reverse. The Tribunal has been advised by its Assessor that lower suspension arms (particularly those made from alloy) can be easily bent by the car hitting a pothole or even a judder bar at speed without the driver being aware of the consequence. However, in the absence of any evidence to base such a finding, the Tribunal is unable to conclude that the damage to the suspension arm was caused by Mr Bussey’s misuse of the car or by impact damage.

Conclusion on issue [b]

[19] The Tribunal has therefore come to the conclusion that the front lower left or right hand suspension arms were not as durable as a reasonable consumer paying $61,990 for a 3 year old Audi A4 car with 13,000kms on its odometer at the time of supply would regard as acceptable. It follows that the car did not comply with the guarantee of acceptable quality in s6 of the Act.

Issue [c]: Whether Euro City remedied the car’s fault within a reasonable time?

Relevant law

[20] Section 18 of the Act requires that where a failure to comply with a guarantee in the Act can be remedied, and the Tribunal is satisfied this failure could be, the consumer may[1] require the supplier (here Euro City) to remedy the failure within a reasonable time in accordance with s 19 of the Act.
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."

Application of law to facts

[21] The fact that Mr Bussey required Euro City to remedy the fault with the “clunk” noise is not in dispute and the Tribunal is satisfied that Mr Bussey first asked Euro City to do so on 27 July 2012. The question is whether Euro City remedied the failure within a reasonable time. The Tribunal notes that there is no definition of “reasonable time” in the Act and so it believes it must decide whether, on the facts, Euro City remedied the fault in a reasonable time. There are a number of factors which the Tribunal thinks are relevant to such a determination. They include the following:
a) the nature of the fault and its seriousness from a safety point of view,
b) the extent to which the fault compromises the use or operation of the vehicle (makes it undriveable)
c) the frequency of the occurrence of the fault,
d) the complexity of the vehicle in which the fault occurs,
e) the complexity of the system in which the fault occurs,
f) the time within which a competent technician employing best industry practise and the diagnostic equipment that most auto technicians have available to them should be able to diagnose and repair the fault, and
g) the availability within New Zealand of replacement parts or equipment (where parts or equipment are needed to effect the repair).

[22] In this application the Tribunal notes that Mr Bussey took the car back to Euro City on five occasions before rejecting it on 5 November 2012. Looking at the first visit on 27 July the Tribunal thinks that it was reasonable for Euro City’s technician to think that re-attaching the left rear splash guard to the inside of the guard would cure the fault that Mr Bussey complained of. The second return visit in mid-August resulted in Euro City discovering the fault which at that time was still only occurring intermittently on 20% of the time the car was reversed and braked. Euro City did not succeed in fixing it on that occasion although the car was with them for three working days. The third visit on 1 October resulted in Mr Bussey agreeing to allow Euro City to have an Audi specialist technician look at the car to try and diagnose the fault and the fourth return visit on 18 October resulted in that specialist attempting to locate the origin of the noise and recommending that specialist listening equipment be sourced to do so. Mr Bussey was apparently told that it would take a little time to source the necessary equipment to locate the noise. He did not indicate to Euro City that he was not prepared to wait for this to happen and on 29 October returned the car to Euro City and rejected it a week later.

[23] Applying the criteria which the Tribunal has listed in paragraph 21 (above) as relevant to determine what a reasonable period of time is to remedy a fault the Tribunal finds first, the fault had no safety implications. Second, the fault did not compromise Mr Bussey’s use of the car. Third, the fault occurred very intermittently. Fourth, it was hard to diagnose because it was impossible -even for an Audi specialist technician from Germany- to diagnose the cause of the noise without specialist listening equipment which (on the advice of the Assessor) the Tribunal understands is not generally available to even well-equipped workshops. Finally, Mr Bussey agreed at the 1 October visit to allow the Audi specialist technician from Germany to try and diagnose the fault and was aware that Euro City were obtaining the listening equipment to diagnose the fault.

Conclusion on issue [c]

[24] The conclusion the Tribunal has come to having regard to the above considerations is that Mr Bussey’s rejection of the car occurred before Euro City had been given a reasonable time within which to remedy the failure. It follows that Mr Bussey was not entitled to reject the car in terms of s18(2)(b)(ii) of the Act.

Issue [d]: Whether the fault is of “substantial character” entitling Mr Bussey to reject it?

Relevant law

[25] 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."

Application of law to facts

[26] Mr Bussey claimed in his letter of rejection that the car had a serious fault. The Tribunal understands from this that Mr Bussey believes the failure was one of substantial character. When asked at the hearing why he believed the fault was serious he said first, the nature of the fault makes it serious, and second, that the fact that a specialist technician from Audi in Germany was asked to inspect the car and the need to have specialist listening equipment used to diagnose the fault made it serious. The Tribunal does not accept that the fact that the fault was either hard to diagnose or that it required specialist equipment to diagnose it brought the fault within any of the four definitions of a failure of substantial character in s 21 (a) to (d) of the Act.

Conclusion on issue [d]

[27] The failure was not one of substantial character entitling Mr Bussey to reject the car.

Summary of the Tribunal’s findings

[28] The Tribunal has found first, that Mr Bussey contracted out of the Consumer Guarantees Act 1993 and hence he is unable to reject the car on the basis that Euro City breached the guarantee of acceptable quality in that Act.
However the Tribunal proceeded to determine Mr Bussey’s application on the basis that its finding that the Act had been excluded is, on appeal, found to be wrong.
Second, that in the absence of any evidence that Mr Bussey had caused the damage to the lower front suspension arms by his manner of using the car, the Tribunal found the lower suspension arms were not durable and hence the vehicle failed to comply with the guarantee of acceptable quality in the Act.
Third, the Tribunal found that Mr Bussey did not give Euro City a reasonable time to remedy the fault and thus he was not entitled to reject it on the grounds that Euro City had not succeeded in repairing the fault within a reasonable time.
Fourth, the Tribunal found that the failure was not one of substantial character and so Mr Bussey was not entitled to reject the car on that ground.

[29] At the conclusion of the hearing the Tribunal inspected the car and the Assessor reversed it on about five or six occasions to check for the presence of any unusual noise. There was none.

Order

Mr Bussey’s application is dismissed.
DATED at AUCKLAND this 11 February 2013

C.H.Cornwell
Adjudicator

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[1] The word “may” has been interpreted to mean “must” see Acquired Holdings Limited v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107