Julian v Jolliffe t/a Smart Car Buy Limited - Reference No. MVD 31/2013 (Auckland) [2013] NZMVDT 33 (15 April 2013)

Last Updated: 19 June 2013

Decision No. AK 31/2013

Reference No. MVD 31/2013

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN CALEB JULIAN

Purchaser

AND BLAIR HILTON JOLLIFFE T/A SMART CAR BUY LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Christchurch on 11 April 2013

APPEARANCES

Mr C Julian, the purchaser

Mrs S Julian, purchaser’s support person
Mr B H Jolliffe, the trader
Mr R L Johnston, director, Smart Car Buy Ltd

DECISION

Introduction

[1] On 22 January 2013 Mr Julian bought a 1994 Mitsubishi Pajero for $6,250 from Mr Blair Jolliffe, a registered motor vehicle trader trading as Smart Car Buy Limited. Mr Julian has rejected the vehicle because he says it smokes excessively and leaks oil and hence does not comply with the guarantee of acceptable quality in the Consumer Guarantees Act 1993. He says that the failure to comply is of substantial character. He also says Mr Jolliffe failed within a reasonable time to fix the vehicle’s oil leaks and smoking.

[2] Mr Jolliffe says he was willing to remedy the vehicle’s oil leaks but Mr Julian only gave him two opportunities to do so before he rejected the vehicle and refused to return it to be repaired.

[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 four issues in this case:
[a] Whether the vehicle was of acceptable quality at the time of sale in terms of the Consumer Guarantees Act 1993 (“the Act”)?
[b] If not, whether Mr Jolliffe remedied any failures within a reasonable time?
[c] Whether the vehicle’s failures are of substantial character?
[d] Whether Mr Julian is entitled to reject the vehicle and have a full refund of his purchase price?

Relevant law

[5] Section 6 of the Act provides a guarantee that goods supplied to a consumer must be of acceptable quality. Section 6 provides:
“6 Guarantee as to acceptable quality
(1) Subject to section 41, where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality.
(2) Where the goods fail to comply with the guarantee in this section,-
(a) Part 2 may give the consumer a right of redress against the supplier; and
(b) Part 3 may give the consumer a right of redress against the manufacturer.”

[6] 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.”

[7] 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

Issue [a]: Was the vehicle of acceptable quality at the time of sale in terms of the Consumer Guarantees Act 1993 (“the Act”)?
[8] Mr Julian says he bought the vehicle for two purposes; to get to work as a roofer and to transport his family in the weekends. Mr Julian says he was approached by Mr Jolliffe to trade in his L300 Mitsubishi van on the vehicle. He agreed to trade in the Mitsubishi van for $5,000 and buy the Pajero for $6,250. He paid the difference of $1,250 to Mr Jolliffe in cash on 22 January 2013. Mr Julian did not sign a vehicle offer and sale agreement and no other written agreement was made between the parties to exclude the provisions of the Act. Mr Julian did not have a pre-purchase inspection carried out on the vehicle before agreeing to buy it but he was given an undated report prepared by Checking Mobile Leakdown and Compression Testing which shows that at 213,547kms that firm did a compression and leak down test on the vehicle’s engine with no serious faults reported. The vehicle’s odometer was 213,400kms at the time of sale according to the Consumer Information Notice but this may have been understated by several hundred kilometres. The CIN also records incorrectly that the vehicle was sold by auction. It was not. The evidence shows that the vehicle was sold by agreement between the parties. This inaccuracy in the CIN is a breach of the reg 7 of the Consumer Information Standards (Used Motor Vehicles) Regulations 2008. Further, Mr Jolliffe did not obtain a new warrant of fitness for the vehicle issued within 28 days prior to the date of sale as he is required by law to do.

[9] Mr Julian says that almost immediately after he bought and first used the vehicle he noticed smoke coming out of the engine bay and oil stains on the pavement where it was parked. Within five days of buying the car he contacted Mr Johnston, Mr Jolliffe’s business partner regarding the oil leaks. Mr Johnston asked him to bring the vehicle back, which he did on 29 January 2013. Mr Julian says he waited whilst an oil sensor was replaced and the trader tightened some bolts on the exhaust.

[10] On 30 January 2013 Mr Julian, without first requiring the trader to replace the battery had a new commercial battery fitted to the vehicle at a cost of $450.02.

[11] Mr Julian drove the vehicle to Blenheim. He says it consumed or leaked five litres of oil in 400 to 500 kms of use. Grey smoke was coming into the cab of the vehicle from oil leaking from the engine onto the exhaust and a considerable volume of black smoke was emitted from the exhaust on acceleration. Mr Julian says he informed the trader of these faults on 8 February and returned the vehicle to the trader for the second time on 11 February 2013.

[12] Mr Johnston says that when the vehicle was returned the second time the trader’s mechanic replaced the sump gasket, the power steering fluid was also replaced because it contained water, and the ETR valve was removed and a plate put over the aperture where it had been. The stone covers underneath the engine were not replaced so that any oil leaks could be monitored. Mr Johnston told the Tribunal that there was “an awful lot” of oil leaking out of the engine and burning on the exhaust. The trader had the vehicle for a day doing these repairs but when it was returned to Mr Julian and driven it still leaked oil from and burnt oil through the engine.

[13] On 21 February 2013 when the vehicle’s odometer recorded the distance the vehicle had travelled as 216,738kms Mr Julian arranged for Canterbury Car Inspections (“CCI”) to assess it. He produces a copy of the report CCI prepared which describes the vehicle’s general condition as: “Requires some attention to couple of issue. Potentionally (sic) tidy vehicle”
The CCI report lists the vehicle’s defects as:
a) Steering control arm ball joint worn
b) Passenger side front inner CV boot broken
c) Both front upper control arm balljoints worn
d) Major oil leak requiring attention, around engine and possibly front diff as well, to (sic) much oil around to pinpoint location
e) Tyres worn down to 2mm of tread, replace soon
f) Brake lights no go- trailer plug wiring bare
g) No interior lights
h) Starter not engaging all the time
i) Oil level low
j) Alternator failing to recharge batterys (sic) after compression test, reading 6-7 volts whilst running

[14] On 6 March 2013 Mr Julian sent Mr Jolliffe an email letter rejecting the vehicle on the grounds that it “has serious faults and can not be driven”. The letter also states that Mr Julian understood that Mr Jolliffe had attempted to fix the vehicle twice but it had become worse and was undriveable. The letter referred to a mechanical report and claimed the cost of that but surprisingly Mr Julian did not send a copy of it to Mr Jolliffe.

[15] On 2 April 2013 Mr Julian took the vehicle to VTNZ for a warrant of fitness which it failed at 216,772kms for two reasons:
“remedy excessive exhaust smoke
all brake lamps to operate”.
The WOF checksheet shows that when the vehicle was previously inspected at 212,047kms it passed a WOF but it was noted that the front disc pads were low and the engine leaked oil.

[16] On 5 April Mr Julian took the vehicle to Gasson Motors Ltd who checked it for oil leaks and starting problems. Their report states:
“Checked over the engine
Steam cleaned the engine and dried the engine
Ran the engine and checked for leaks
Found the injection pump is leaking
There may be a rear main leak and the pump needs to be first (sic) and re-checked
There was oil on the right side of the engine but after cleaning there is no oil leaks visible there may be a minor leak and over time looks to be bad
The alternator needs to be repaired or replaced.”

[17] Gasson Motors quoted $565.80 to repair the rear main oil leak and $629.05 to replace the alternator; a total of $1194.85 however their estimate appears to include provision for a further 6.5 hours of labour at $80 an hour plus GST which is not allocated.

[18] In a letter to the Tribunal dated 16 March Mr Jolliffe said that he would fix the oil leak which he thought had been remedied on 11 February 2013 but that he had not had the vehicle back to do so. Mr Jolliffe said he was not prepared to fix the alternator because it had been water damaged whilst being driven by Mr Julian.

[19] In deciding this matter the Tribunal has had regard to the following facts:
First, that the vehicle is a 19 year old imported Mitsubishi Pajero diesel truck. Second it had 213,400 (and probably more) kilometres on its odometer when it was sold to Mr Julian for $6,250. On the basis of the evidence given by Mr Julian, the CCI report, the VTNZ report and the Gasson Motors report the Tribunal finds that at the time of sale the vehicle very probably had the following faults:
a) it leaked oil
b) its engine consumed oil and its exhaust blew black smoke
c) its alternator was not working properly.

[20] The Tribunal does not think that a reasonable consumer who had paid $6,250 for an old truck like this would expect it to be fault free but would not expect it to leak and burn oil to the extent this vehicle does. Accordingly the Tribunal finds the vehicle did not, at the time of sale, comply with the guarantee of acceptable quality in s6 of the Act.

Issue [b]: Whether Mr Jolliffe remedied any failures within a reasonable time?

[21] Section 18 of the Act provides that where a failure can be remedied, the consumer must require the supplier to remedy the failure within a reasonable time by repairing the goods. Section 18 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] Mr Julian took the vehicle back to Mr Jolliffe twice to have the oil leaks and engine smoking fixed. Mr Jolliffe did not succeed in fixing those faults because when the vehicle was inspected by the CCI 11 days later and Gasson Motors on 5 April the oil leaks were still present. VTNZ rejected the vehicle for a warrant of fitness on 2 April for excessive exhaust smoke. The Tribunal therefore concludes that Mr Jolliffe did not succeed in remedying the vehicle’s faults within a reasonable time of being required first on 29 January and again on 11 February 2013 to do so.

Issue [c]: Whether the vehicle’s failures are of substantial character?

[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 section 18(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 particula0 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] Mr Julian claimed in his letter rejecting the vehicle sent to Mr Jolliffe on 6 March 2013 that the vehicle had “serious faults and could not be driven”. The Tribunal, on the advice of its Assessor thinks that this vehicle probably has three serious faults; the engine is still leaking oil and needs a rear main oil seal replaced which will cost at least $570, the engine burns oil which probably requires major engine repairs or an engine replacement, and the alternator needs replacing which will cost $629. The Tribunal does not think that this vehicle would have been acquired by a reasonable consumer fully acquainted with those faults and the cost to repair each of them. Accordingly the Tribunal concludes that the vehicle’s failure to comply with the guarantee of acceptable quality was of a substantial character in terms of s 21(a) of the Act.

Issue [d]: Whether Mr Julian is entitled to reject the vehicle and have a full refund of his purchase price?

[25] The Tribunal believes Mr Julian is entitled to reject the vehicle for two reasons: first, because Mr Jolliffe did not succeed in remedying the defects of leaking oil and the vehicle’s excessive exhaust smoke within a reasonable time. Second, because the failure to comply with the guarantee of acceptable quality is of substantial character.
[26] Mr Julian rejected the vehicle by notifying Mr Jolliffe in writing of his decision to reject and the grounds for rejection on 6 March 2013 as is required by s 22(1) of the Act. This occurred within 43 days of the date of supply of the vehicle which, given that Mr Julian had to allow Mr Jolliffe a reasonable time to remedy the defects, is a reasonable time. The Tribunal will therefore uphold Mr Julian’s rejection of the vehicle and order Mr Jolliffe to refund the purchase price of $6,250 as well as the cost of the CCI report of $179 and the Gasson Motors report of $206.22; a total of $6,635.22. Mr Julian cannot recover the cost of the battery he installed in the vehicle because he did not require Mr Jolliffe to replace it before he bought the battery himself. The vehicle cannot be driven on the road because it does not have a current warrant of fitness and so Mr Jolliffe will be ordered to collect the vehicle from Mr Julian’s home.

Conclusion

[27] The vehicle sold to Mr Julian did not comply with the guarantee of acceptable quality. Its failure to comply with that guarantee is of substantial character. Furthermore Mr Jolliffe did not succeed in fixing the vehicle’s faults within a reasonable time and therefore the Tribunal will uphold Mr Julian’s rejection.

Orders
1. Mr Julian’s rejection of the 1994 Mitsubishi Pajero registration CSP103 is upheld from 6 March 2013.

2. Mr Jolliffe shall pay Mr Julian $6,635.22 immediately.

3. When he has paid Mr Julian $6,635.22, Mr Jolliffe will at his cost arrange to collect the vehicle from 91 Ti Rakau Drive, Woolston, Christchurch 8023.

DATED at AUCKLAND this 15 April 2013

C.H.Cornwell
Adjudicator