Athaullah v Motorcity Limited - Reference No. MVD 5/2013 (Auckland) [2013] NZMVDT 15 (21 February 2013)

Last Updated: 1 April 2013

Decision No. AK 15/2013

Reference No. MVD 5/2013

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN SITTI WAHEEDAH ATHAULLAH

Purchaser

AND MOTORCITY LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell Barrister & Solicitor, Adjudicator
Mr S D Gregory, Assessor

HEARING at Auckland on 18 February 2013

APPEARANCES

Dr S W Athaullah, the purchaser

Dr E N Murchie, witness for the purchaser

There was no appearance by the trader.

DECISION

Introduction

[1] On 13 November 2012 Dr Athaullah bought a 2004 Mazda RX8 car for $9,950 from Motorcity Limited. Dr Athaullah says the Mazda’s engine has a serious fault which causes it to fail to start when the engine is hot. She says this is a failure of substantial character under the Consumer Guarantees Act 1993 (“the Act”). Dr Athaullah has rejected the Mazda and seeks the Tribunal’s order upholding her rejection and ordering the trader to refund the purchase price and other sums she has paid.

[2] Motorcity were sent notice of the time and place of the hearing and asked to send a statement of its defence to the Tribunal and a report on the outcome of mediation discussions held with Dr Athaullah. Mr Scott Reddish, the sole director of Motorcity did not respond to the Tribunal’s requests. Mr Scott Reddish also failed to attend the hearing or offer any explanation to the Tribunal for his non appearance. Shortly before 5pm on Friday 15 February 2013 Mr Mark Reddish applied to have the hearing adjourned because he claimed he was having medical treatment on the day of the hearing. However Mr Mark Reddish did not provide a medical certificate to support his late request for an adjournment nor any explanation as to why Mr Scott Reddish could not attend the hearing to represent Motorcity. The Tribunal decided to proceed to hear Dr Athaullah’s application in the absence of Motorcity because Motorcity had been given adequate notice of the time and place of the hearing and had provided no explanation as to why its director could not attend the hearing.

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

The Issues

[4] There are only two issues in this case:
[a] Whether the Mazda was of acceptable quality at the time of sale in terms of the Act?
[b] If not whether the fault is of “substantial character” entitling Dr Athaullah to reject the Mazda?

Issue [a]: Whether the Mazda was of acceptable quality at the time of sale in terms of the Act?

Relevant law

[5] 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.

[6] 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:
[7] Dr Athaullah bought the Mazda on 13 November 2012 for $9,950 and traded in a 1997 Toyota Corona for which Motorcity allowed her $2,000. Dr Athaullah also bought a Janssen mechanical breakdown insurance policy from Motorcity for a further $1,000. The Mazda’s odometer was 110,000kms at the time of purchase.

[8] Dr Athaullah collected the Mazda on 14 November 2012. At that time she says Mr Scott Reddish told her it sometimes needed a “nudge” to start it. Dr Athaullah says that she understood this to mean the accelerator needed to be pushed. As soon as she collected the Mazda Dr Athaullah took it to a nearby service station to fill its tank with petrol. After filling the car she was unable to start it, even after giving the accelerator a nudge, and when she telephoned Mr Scott Reddish about the fault he told her to wait 20 minutes and then try and restart it which she succeeded in doing. The following day Dr Athaullah had difficulty starting the car’s engine when it was hot and arranged to return it to Motorcity on 19 November to have this fault remedied.

[9] Motorcity had the car from Monday 19 November until Friday 7 December (three weeks). During that period they provided Dr Athaullah with a VW Golf loan car but requested the return of that car the following day. Motorcity then lent Dr Athaullah her old Toyota Corona. On 7 December Dr Athaullah says she was told by Mr Mark Reddish that the Mazda had a problem with its engine seals which would necessitate the engine block being removed, dismantled and the rotor seals replaced at a cost of $3,800. Mr Reddish offered to pay for the repair or give Dr Athaullah a full refund and asked Dr Athaullah to consider that offer over the weekend and notify him on Monday 10 December of her decision. On 10 December Dr Athaullah sent Motorcity a text message asking for a refund and at Mr Mark Reddish’s request sent her bank account details on 13 December. Mr Mark Reddish promised her a full refund including the cost of the mechanical breakdown premium the following week.

[10] On 19 December Mr Mark Reddish again promised Dr Athaullah a full refund of her purchase price and the cost of the insurance premium by the end of that week. Dr Athaullah spoke to Mr Mark Reddish on 3 and 4 January and to Mr Scott Reddish on 7 January when the refund had still not been deposited into Dr Athaullah’s bank account. On 8 January 2013 Mr Mark Reddish offered to pay one half of the refund before the end of the week and the balance the following week. Dr Athaullah rejected that proposal and sent Motorcity a letter rejecting the car on 8 January 2013. When Motorcity ignored her refund request she filed her application with the Tribunal on 15 January 2013.

[11] Dr Athaullah says that Motorcity have made no attempt to contact her and attempt to resolve the dispute in spite of a request to do so sent to Motorcity by the Tribunal with a copy of Dr Athaullah’s application on 15 January 2013.

[12].The Tribunal is satisfied, on the basis of the sworn evidence of Dr Athaullah, that the Mazda was faulty at the time of sale; the fault is that the car has worn rotor seals which prevented it from starting. It is also apparent from Mr Scott Reddish’s advice to Dr Athaullah at the time of supply to give the car a “nudge” when starting it that Motorcity were aware of the existence of the fault when it sold the car to Dr Athaullah. No reasonable consumer paying $9,950 for a car would expect it to have starting problems at the time of sale.

Conclusion on issue [a]:

[13] The Tribunal concludes that the Mazda did not, at the time of sale, comply with the guarantee of acceptable quality because its engine had worn rotor seals and was thus not free of faults or as durable as a reasonable consumer buying such a car would regard as acceptable.

Issue [b]: Whether the Mazda has a fault which is of “substantial character” entitling Dr Athaullah to reject it?

Relevant law:

[14] 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 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

[15] The Tribunal considers that the failure in this car is one of substantial character because no reasonable consumer would purchase a Mazda RX8 knowing it had worn rotor seals requiring repairs estimated to cost $3,800; a sum equivalent to 38% of the cost price of the car.

Conclusion on issue [b]:

[16] The Tribunal finds that the failure is one of substantial character entitling Dr Athaullah to reject the car. She rejected it in writing on 8 January 2013 and in accordance with s22 of the Act by notifying Motorcity of her decision to reject the car and of the grounds for rejection. Rejection took place within two months of the date of supply of the car and as soon as Dr Athaullah became aware of the nature of the fault, the cost to repair it, and of Motorcity’s unfulfilled promises to repay her the full purchase price.

[17] Motorcity provided Dr Athaullah with the use of her 1997 Toyota Corona car whilst they were attempting to repair her Mazda RX8 car. Motorcity did not transfer the Corona into its name as it should have done after it agreed to accept the Corona as a trade in on 13 November 2012. On 26 November 2012 the licence for the Corona expired. So that she could continue to use the Corona as a loan car Dr Athaullah paid $147.47 for six months licence renewal on 24 January 2013. The Tribunal will order Motorcity to reimburse that sum to Dr Athaullah.

[18] In summary: Motorcity will be ordered to pay Dr Athaullah the following sums:

a) Refund of purchase price for car $9,950

b) Refund of Janssen premium $1,000

c) Refund of cost of registration of the Corona $147.47

TOTAL $11,097.47

Costs

[19] The Tribunal has limited power to make an award of costs to or against a party to any proceedings under clause 14(1) 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.”

[20] Motorcity were sent a letter from the Tribunal with a copy of Dr Athullah’s application reminding it of its responsibility under cl 5(1)(b) of the Schedule to the Motor Vehicle Sales Act 2003 to discuss the application with Dr Athullah and to make a written report to the Tribunal on the outcome of the discussions. Dr Athullah told the Tribunal that Motorcity had made no effort to discuss the claim with her. The Tribunal considers that this matter ought reasonably have been settled before proceeding to a hearing and should have done so but for Motorcity’s refusal, without proper excuse, to take part in the discussions referred to in cl 5(1)(b). The Tribunal therefore considers that Motorcity should be required to pay the sum of $500 towards the Tribunal’s hearing costs.

Orders
1. Dr Athullah’s rejection of the 2004 Mazda RX8 registration DAR587 is upheld from 8 January 2013.

2. Motorcity Limited shall pay Dr Athullah immediately, by Bank Cheque the sum of $11,097.47.

3. As soon as Motorcity has paid Dr Athullah $11,097.47, Dr Athaullah shall return the Toyota Corona registration CFD565 to Motorcity.

4. Motorcity Limited shall pay to the Crown at Auckland District Court, Private Bag 92-020, Auckland the sum of $500 as court costs within 21 days of the date of this order.

DATED at AUCKLAND this 21 February 2013

C.H.Cornwell
Adjudicator