Hopkins v Robert Allen Wholesale Limited - Reference No. MVD 96/2013 (Auckland) [2013] NZMVDT 85 (31 July 2013)

Last Updated: 17 August 2013

Decision No: AK 71/2013
Reference No. MVD 96/2013

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN YVETTE MARIE HOPKINS

Purchaser

AND ROBERT ALLEN WHOLESALE LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 30 July 2013

APPEARANCES

Miss Y M Hopkins, the purchaser

Mr RV Allen, director representing the trader.

DECISION

Background

[1] On 19 April 2013 Miss Hopkins (“the purchaser”) bought a 2002 Renault Megane vehicle registration number EQL818 (“the vehicle”) from Robert Allen Wholesale Limited (“the trader”) for $3,500. The purchaser has rejected the vehicle because she says it has a serious fault namely the right rear shock absorber shaft is broken. She has applied to the Tribunal for its order upholding her rejection and ordering the trader to refund her with the purchase price of the vehicle.

[2] The trader says that after complaining the vehicle was vibrating soon after she bought it the purchaser accepted the trader’s offer to pay $266 towards a one year comprehensive mechanical breakdown warranty. The trader sent the purchaser the documentation for the policy but she then changed her mind and sent the trader a letter rejecting the vehicle claiming that the vehicle has a serious fault; namely a broken right rear shock absorber shaft. The trader denies the broken shock absorber is a serious fault and it says that it promptly sent the purchaser an email offering to have the fault rectified by its mechanic but the purchaser has not agreed to have the shock absorber replaced. The trader therefore denies the purchaser is now entitled to reject the vehicle.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr Gregory as expert assessor to assist in the determination of the complaint. Mr Gregory took the oath required by cl 10(2) of Schedule 1 to that Act. As an assessor Mr Gregory assisted the adjudicator but the application was determined by the adjudicator alone.

Issues

[4] The issues in this application are:
[a] Whether the vehicle was of acceptable quality when it was supplied to the purchaser?
[b] If not, is the failure one of substantial character?
[c] If so, is the purchaser entitled to reject the vehicle?

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

Legal Principles

[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

[8] The purchaser saw the vehicle advertised by the trader on TradeMe. She contacted the trader, inspected the vehicle, took it for a test drive and arranged, on the recommendation of the trader, for a Mr Mark Joseph of Vehicle Services NZ Ltd to do a pre-purchase inspection of the vehicle on 17 April 2013. The vehicle’s mileage was recorded on the pre-purchase inspection report as 157,817kms. The only faults that Mr Joseph’s report shows are the air intake pipe and the boot lock were both broken and that the vehicle’s warrant of fitness was due to expire on 28 June 2013. The vehicle, a Japanese import, had no service history and there was no record of the cam belt having been replaced. [9] The purchaser bought the vehicle from the trader on 19 April 2013 for $3,500 with the trader agreeing to fix the boot lock, replace the hubcaps and repaint the front windscreen wipers black. The trader did not obtain a new warrant of fitness for the vehicle within one month prior to the date of sale as it was required to do by Para 9.12(3) of Rule 35001/1 of Land Transport Rule: Vehicle Standards Compliance 2002.

[10] The purchaser says the vehicle would not start easily on the afternoon she bought it and its engine vibrated in idle and neutral. She took the vehicle to her mechanic, Keightley Motors Ltd who suggested she contact the trader. She contacted the trader. The trader says the purchaser claimed the vehicle’s transmission was faulty and on that basis the trader agreed to refund the purchase price but that this offer was withdrawn when the trader discovered after speaking to Keightley Motors Ltd that the transmission had not failed; the only problem Keightleys had observed was a noisy transmission convertor pump. On 19 April the trader offered and the purchaser accepted, subject to looking at the policy, that the trader would provide the purchaser with a 12 month Janssen Holdings Ltd mechanical breakdown insurance cover with the trader paying $266 and the purchaser paying $200 towards the cost of policy of $466. However the purchaser resiled from that arrangement over the weekend of 20-21 April.

[11] The purchaser claims that during the weekend of 20-21 April she drove the vehicle short distances and heard what she describes as “a loud rattling sound” and “significant lag through corners”. On 23 April the purchaser took the vehicle back to Keightley Motors Ltd who found the rear shock shaft was broken, the rear muffler was supported by a seat belt, the transmission convertor pump was noisy, and the fuel tank support bracket had a bolt missing. Keightley’s wrote a tax invoice dated 23 April 2013 recording those faults. Their report states “not safe to drive with rear shock problem”.

[12] The purchaser says that on 23 April she sent the trader an email with a copy of Keightley’s report and a request for the trader contact her. She says she also attempted to telephone the trader on 23 April but was unable to speak to Mr Allen that day. At 11-11pm on 23 April 2013 the purchaser sent the trader an email saying the vehicle had a serious fault, namely, the right rear shock shaft was broken and the vehicle was unsafe to drive. She also notified the trader in that email that she was rejecting the vehicle and required the trader to refund her purchase price. The trader replied by email at 6-59am the next day saying that a shock absorber is not a serious fault, that it had the right to repair the vehicle and was willing to fix the shock absorber if it was broken. The trader’s email asked the purchaser to take the vehicle to GK Engine Reconditioners at Jellicoe Road, Panmure at an arranged time. The trader, in its email to the purchaser on 24 April refused to refund the purchase price or the purchaser’s inspection fees and withdrew its offer to provide the Janssen warranty.

[13] On 29 April 2013 the purchaser took the vehicle back to Keightley Motors once again for a more comprehensive assessment. Keightley Motors listed the following faults with the vehicle:
“Aim and focus headlights
Right indicator bulb faded
Rear wiper rubber damaged
Air filter intake pipe broken
Transmission pump noisy
Bolt missing from left fuel strap
Exhaust leak centre muffler
Both rear exhaust mounts broken
Miss-matched tyres on both axles
Right rear shock absorber broken
Left rear shock absorber seized
Right front brake hose twisted and rub marked from inner guard
Oil leak from right corner sump area
Left sill bent by rear jacking point
Radiator leak left side”

[14] On 17 July 2013 the purchaser, at the request of the Tribunal, took the vehicle to Auto Services Newmarket for a warrant of fitness inspection. The odometer was then 158,102kms or 285kms more than at the time of sale. The vehicle failed a WOF for the following reasons:
“1. Headlights unfocused
2. Foglight aim incorrect
3. Rear wheel bearing noisy
4. Rear strut/shock broken right
5. Left rear strut/shock seized
6. Exhaust hanger insecure & incorrect hanger
7. Right front brake hose twisted
8. Exhaust leak at centre muffler
9. Fuel tank bracket insecure”

[15] Auto Services Newmarket gave the purchaser a tax invoice on 17 July 2013 in which they wrote:
“The rear suspension is extremely dangerous and would not recommend driving as the vehicle would be hard to control as one of the shock absorbers has snapped in half and the other is completely seized.”
The invoice quotes the purchaser the following amounts to remedy each of the vehicle’s WOF faults:
“Headlights unfocused, bulb retaining clips missing $100
Foglight aim incorrect $20
Right rear shock broken (shaft snapped) $275
Left rear shock seized $275
Rear wheel bearings worn/noisy $220 per side $440 total
Exhaust hanger bracket and mounts broken $420
Right front brake hose twisted $40
Fuel tank bracket insecure $35
Exhaust leak at centre muffler $65.”
The invoice also lists under “other issues” the following faults:
“Battery faulty $160
Suspect starter motor to be faulty $380
Coolant leak from radiator $600
Air intake pipe broken $150.”
The Tribunal calculates the cost of obtaining a WOF for the vehicle as $1,670 and the cost of repairing the other issues as $1,290; a total of $2,960.

[16] Mr Allen for the trader says first, that the vehicle passed an independent inspection before it was bought by the purchaser. Second, that although the purchaser claimed the transmission was “stuffed” there was no evidence of that. Third, that the purchaser and he had agreed the trader would provide a 12 moth Janssen mechanical warranty but the purchaser had changed her mind after accepting the trader’s offer of a warranty. Fourth, that the trader offered to replace the broken shock absorber. Mr Allen says he believes the purchaser has buyer’s remorse.

[17] The Tribunal, in deciding, as it is required to do, if the vehicle complied with the guarantee of acceptable quality at the time of sale has had regard to the fact that the vehicle is a 11 year old high mileage European car imported from Japan and sold without a service history for only $3,500. No reasonable purchaser buying such an old, well-travelled, cheap car would reasonably expect it to be in good condition. The Tribunal considers the report done by Mr Mark Joseph of Vehicle Services Ltd was probably not done with the care and skill reasonably expected of a firm doing pre-purchase inspections because Mr Joseph failed to find any of the numerous mechanical faults which would have prevented the vehicle getting a warrant of fitness which both Keightley Motors identified on 29 April and Auto Services Newmarket found when they carried out a warrant of fitness inspection on 17 July. In the meantime the vehicle had only been driven 285kms.

[18] The Tribunal is satisfied on the evidence first, of the report prepared by Keightley Motors Ltd four days after the vehicle was supplied to the purchaser, that within four days of sale it had a serious safety issue with its right rear shock shaft. Second, the warrant of fitness inspection report done by Auto Services Newmarket on 17 July 2013 only 285kms after the vehicle was sold supports Keightley Motors’ finding that the vehicle was not safe to be on the road because of the broken shock shaft. The Tribunal therefore rejects as unfounded the trader’s defense that the broken shock absorber was not a serious fault. Auto Services’ warrant of fitness inspection was done with some care and lists a further eight faults the vehicle has which prevent it getting a warrant of fitness. It leads the Tribunal to conclude that at the time of sale the vehicle was not free of minor faults, safe, or as durable as a reasonable consumer buying a vehicle- even of the age, mileage and at the price this vehicle was sold for- would regard as acceptable.

Conclusion on issue [a]:

[19] The vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because at the time of sale it was not free of faults nor as safe and not as durable as a reasonable consumer would regard as acceptable.

Issue [b]: Is the failure one of substantial character?

Legal Principles

[20] 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."

Application of law to facts

[21] The Tribunal has found that the vehicle was not as durable as a reasonable consumer would regard as acceptable because of the broken right rear shock shaft which occurred within four days of the date of sale. The Tribunal therefore finds that the vehicle’s failure to comply with the guarantee of acceptable quality was one of substantial character in terms of s21(d) of the Act.

[22] The trader’s offer in its email of 24 April to replace the shock absorber after the purchaser had rejected the vehicle by her email sent on 23 April was of no effect because a consumer is not required to give a supplier an opportunity to repair faulty goods where the failure is one of substantial character. A consumer’s obligation under s18(2)(a) of the Act to give a supplier a reasonable time within which to repair faults only applies where the fault is capable of being remedied and is not a failure of substantial character. Otherwise a consumer may under s18(3) of the Act, in cases where the failure cannot be remedied or is of a substantial character either reject the goods or obtain damages in compensation from the supplier. In this application the purchaser claimed, and the Tribunal agrees, that the broken shock absorber was a failure of substantial character which entitled her to reject the vehicle. She did so by her email to the trader sent at 11-11pm on 23 April 2013.

[23] The cost of repairing the vehicle to warrant of fitness standard is estimated by Auto Services Newmarket to be $1,670; equivalent to about 47% of the cost price of the vehicle. The Tribunal does not consider that any reasonable consumer aware of the defects this vehicle has and the cost of getting a warrant of fitness for the vehicle to make it roadworthy within two months of buying it would have acquired the vehicle. The Tribunal therefore also finds the vehicle would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure, in terms of s21(a) of the Act.

Conclusion on issue [b]

[24] The failure was one of substantial character in terms of s21(a) and (d) of the Act because no reasonable consumer would have bought it knowing the nature and extent of the vehicle’s faults and that within four days of purchase a broken shock shaft would make the vehicle unsafe to be on the road.

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

Legal Principles

[25] In order to exercise the right of rejection a consumer must according to s 22 of the Act notify the supplier of the decision to reject the goods and the ground or grounds for rejection and must, according to s 20 of the Act, reject the goods within a reasonable time of the time of supply.

Application of law to facts

[26] In this application the purchaser gave the trader notice that she was rejecting the vehicle by email sent on 23 April which contained the grounds for her decision to reject. Rejection also took place within four days of the date of supply which is well within a reasonable time.

Conclusion on issue [d]:

[27] The Tribunal considers the purchaser is entitled to reject the vehicle and will order that her rejection on 23 April 2013 is upheld. The trader will be ordered to refund the purchaser, within ten days of the date of this order, with the full purchase price of $3,500 as well as the consequential damages the purchaser has suffered of $82.80 for the Keightley Motors Ltd inspection, $130.80 for the Auto Services Newmarket warrant of fitness and inspection and the purchaser’s towing costs of $210 a total of $3,923.60. The vehicle is not safe to be driven on the road so the trader shall at its expense collect the vehicle from the purchaser’s home as soon as it has lodged $3,923.60 into the purchaser’s bank account.

Costs

[28] 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.”

[29] The Tribunal considers that the matter ought reasonably to have been settled before proceeding to a hearing but the trader failed, without reasonable excuse, to take part in the discussions referred to in clause 5 (1)(b) of Schedule 1 of the Motor Vehicle Sales Act 2003. The Tribunal will therefore order the trader to pay to the Crown the reasonable costs of the hearing of $500.

Orders

1. The purchaser’s rejection of the vehicle is upheld with effect from 23 April 2013.

2. The trader shall pay the purchaser $3,923.60 within ten days of the date of this order.

3. As soon as the trader has paid the purchaser $3,923.60 in cleared funds it shall at its expense collect the vehicle from the purchaser’s home.

4. The trader shall within ten days of the date of this order pay the Tribunal’s reasonable hearing costs of $500 to the Crown at the Auckland District Court, 69 Albert Street, Auckland.

DATED at Auckland 31 July 2013

C.H Cornwell
Adjudicator