Huang v Euro Vehicles Limited - Reference No. MVD 104/13 (Auckland) [2013] NZMVDT 99 (19 September 2013)

Last Updated: 16 October 2013

Decision No. AK 83/2013

Reference No. MVD 104/13

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN HUI YING HUANG

Purchaser

AND EURO VEHICLES LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at AUCKLAND on 29 August and 16 September 2013

APPEARANCES

Ms H Y Huang, the purchaser

Mr T Zheng, witness for purchaser
Mr A Meno, sales manager for the trader (at 16 September hearing only)

DECISION

Background

[1] On 27 May 2013 Mr Zheng bought a 2008 BMW X5 registration GTB84 from Euro Vehicles Limited (“the trader”) for $53,000 in the name of his wife Hui Ying Huang (“the purchaser”). The purchaser rejected the vehicle on 9 June 2013 because she says the trader has refused to remedy a number of faults found with the vehicle. The purchaser seeks the Tribunal’s order upholding her rejection and ordering the trader to refund her purchase price.

[2] The trader did not attend the first hearing on 29 August 2013 and failed to file a statement of defence as requested by the Tribunal in writing on 25 July 2013. At the adjourned hearing on 16 September 2013 the trader was represented by its sales a manager Mr Meno. Mr Meno told the Tribunal that the trader had given the purchaser a cheque for the cost of the broken handbrake switch and had obtained a warrant of fitness for the vehicle before it sold it. He denied the vehicle had any other faults.

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

The issues

[4] The issues requiring consideration are:
[a] Whether the vehicle complied with the guarantee of acceptable quality in s.6 of the Consumer Guarantees Act 1993?
[b] If it did not whether the purchaser required the trader to rectify the vehicle’s faults and if so whether the trader rectified the faults within a reasonable time?
[c] If not, is the purchaser entitled to reject the vehicle?

Issue [a]: Whether the vehicle complied with the guarantee of acceptable quality in s.6 of the Consumer Guarantees Act 1993

Legal Principles

[5] In terms of s.89 of the Motor Vehicle Sales Act 2003 the Tribunal has jurisdiction to inquire into and determine applications or claims between a Motor Vehicle Trader and the purchaser of a motor vehicle. In doing so, it may apply the provisions of the Sale of Goods Act 1908, the Fair Trading Act 1986 , the Contractual Remedies Act 1979 or the Consumer Guarantees Act 1993 (“the Act”), as applicable to the circumstances of the case. In this application the Consumer Guarantees Act is applicable.

[6] Section 6 of the Act imposes on a supplier and the manufacturer of consumer goods "a guarantee that the goods are of acceptable quality." Section 2 of the Act defines "goods" as including "vehicles.”

[7] The expression "acceptable quality" is defined in Section 7 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.”

[8] In considering whether or not goods meet the guarantee of acceptable
quality, the Tribunal must consider the quality elements as set out in section
7(1)(a) to (e) of the Act as modified by the factors set out in section 7(1)(f) to
(j) from the perspective of a “reasonable consumer”. The test is an objective
one; it is not a view of those factors from the purchasers’ subjective perspective.

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

Application of law to facts

[10] The purchaser’s husband Mr Zheng inspected the vehicle at the trader’s premises on 25 May 2013. He noticed the handbrake switch in the vehicle was broken and agreed to buy the vehicle on Mr Meno’s promise that he would have the switch repaired at the trader’s cost by 27 May. The purchaser bought the vehicle from the trader for $53,000 on 27 May 2013. The purchase price included a one year warranty. The vehicle’s odometer recorded on the VOSA was 117,000kms. The vehicle was supplied with a new warrant of fitness issued by XR Automotive although the trader failed to produce a copy of the WOF check sheet as the Tribunal had requested it to do before the hearing.

[11] When the purchaser collected the vehicle on 27 May the handbrake switch had not been repaired and once again Mr Meno promised to have it repaired by the following Saturday, 1 June. Mr Zheng also discovered before he took delivery of the vehicle that there was no water in the windscreen washer tank and Mr Meno topped the tank up with water but the next day a warning lamp indicated the windscreen water tank was empty. Mr Zheng filled it with water but within 30 minutes the warning light came on showing the tank was empty again and was probably ruptured. Mr Zheng telephoned Mr Meno about the washer tank and Mr Meno promised to have it repaired with the handbrake switch on 1 June.

[12] On 1 June Mr Zheng took the vehicle back to the trader and told the trader of another fault with the vehicle; the air conditioning dash vents were broken and could not be adjusted. Mr Meno asked Mr Zheng to leave the vehicle with the trader to be fixed. When he returned a few hours later none of the faults had been fixed by the trader. The trader asked Mr Zheng to return on 4 June but once again after leaving the vehicle with the trader for half a day none of the faults had been attended to except the broken air conditioning vent which had been glued together.

[13] Mr Zheng went to Team McMillan BMW to get prices to repair the vehicle’s faults but when he took the quotations back to the trader Mr Meno’s attitude changed. Mr Meno told Mr Zheng that the trader would only pay to fix the broken handbrake switch and nothing else. Mr Meno also refused to pay the labour charge to have the handbrake switch replaced. Mr Meno told Mr Zheng that if he did not take a cheque for the cost of the handbrake switch he would not get anything and he would have the vehicle towed away if Mr Zheng returned it with any other faults. Mr Zheng says he accepted a cheque from the trader made payable to Team McMillan BMW for the cost of the handbrake switch of $275.

[14] On 6 June 2013 Mr Zheng took the vehicle for a warrant of fitness inspection by VTNZ. The vehicle failed for the following reasons:
“H/Brake release switch broken
Moisture inside rear light lens
LH rear tyre”
The WOF check sheet notes that the wheel rims have been repaired.

[15] On 6 June 2013 at 118,205kms the purchaser also took the vehicle to Precision Automobiles for a pre purchase inspection. The check sheet records the following faults:
“Front and rear rims cracked
Front brakes noisy & close to sensors
Moisture in tailgate lights
Oil leak from engine
Hand brake switch broken
Rear tyres worn
Under body rusty”

[16] On 9 June 2013 the purchaser sent the trader a letter listing the faults found by Precision Automobiles and VTNZ and rejected the vehicle “owing to the large number and seriousness of the faults”.

[17] When the trader failed to respond by 20 June the purchaser filed an application with the Tribunal with a number of parts estimate quotations from Team McMillan BMW and a copy of the letter of rejection dated 20 June 2013 claiming around $10,000 of work was required on the vehicle. When the Tribunal received the purchaser’s application it sent out a direction to the purchaser to take the vehicle for a comprehensive inspection and written report to identify the faults. The purchaser failed to obtain that report so that when the matter was first heard by the Tribunal on 29 August it decided it had insufficient evidence to make a decision and adjourned the hearing. The Tribunal again directed the purchaser to provide a comprehensive inspection report and a quotation to repair the vehicle’s faults as the Tribunal had previously asked the purchaser to provide.

[18] On 3 September 2013 Mr Zheng had Team McMillan BMW prepare a service estimate listing the vehicle’s faults and the cost to repair each. The service estimate totals $7,037.95 but it contains a number of what could reasonably be considered service items which a reasonable consumer would expect to have to spend on a UK imported five year old European car which had travelled 118,000kms. The items which the Tribunal does not consider to be service items found to be faulty by Team McMillan BMW are- for parts and labour:
a) Replace handbrake switch $342.54
b) Replace windscreen washer pump and seal $193.62
c) Replace rear and left front air vents $508.83
d) Replace rear axle differential oil seal $389.86
e) Replace transmission oil pan gasket
and wiring sleeve seal $648.16
f) Recondition both tail lights $405.00
g) Replace one tyre $810.00
Total $3,298.01
GST $494.70
TOTAL $3,792.71

[19] Mr Meno for the trader told the Tribunal the trader had paid $342 to have the handbrake switch repaired but Mr Zheng denied that and said the trader had only paid about $200 for the part without labour.

[20] The factors to be considered by the Tribunal in deciding if the vehicle was of acceptable quality at the time of sale are first that the vehicle is a five year old BMW X5 3,0D M Sport which had travelled 117,000kms at the time it was sold by the trader for $53,000. Although the vehicle was supplied with a new warrant of fitness there were obviously faults which should probably have resulted in the vehicle failing a warrant of fitness when it was inspected by XR Automotive, the trader’s warrant issuer namely:
a) the broken handbrake switch,
b) the windscreen washer pump not operating,
c) the worn left hand rear tyre and
d) the moisture inside the rear light lens.
Each of those faults was identified by VTNZ and Precision Automobiles when they inspected the vehicle on 6 June some 10 days after the vehicle was supplied to the purchaser. On the basis of those two reports the Tribunal has come to the conclusion that the vehicle was not free of minor faults, safe, or as durable as a reasonable consumer would regard as acceptable for a $53,000 five year old BMW X5 vehicle.

Conclusion on issue [a]

[21] The Tribunal finds as a fact that the vehicle did not comply with the guarantee of acceptable quality in section 6 of the Act.

Issue [b]: Whether the purchaser required the trader to remedy the faults and if so did the trader remedy the faults within a reasonable time?

Legal Principles

[22] Section 18 of the Act provides as follows:
“s.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—

(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

[23] The purchaser’s evidence, which was not challenged by the trader, was that the trader had promised to fix the faults with the handbrake switch, the windscreen washer and to replace the rear air vent and left front air vents which were broken. However in spite of Mr Zheng returning the vehicle on 1 and 4 June to have those faults fixed the trader did not have the work done on either occasion and after giving Mr Zheng a cheque for the cost of the handbrake switch refused to do any other repairs to the vehicle. Accordingly the Tribunal finds that the trader failed to remedy the vehicle’s defects within a reasonable time. The consequence of this is that the purchaser became entitled on 4 June 2013 to make an election as to whether to have the faults repaired elsewhere and obtain from the trader the reasonable costs of doing so, or to reject the vehicle under section 18(2)(b)(ii) of the Act. The purchaser elected to exercise her option to reject the vehicle and she gave the trader written notice of her decision to reject the vehicle on 9 June and again on 20 June 2013. That notice complied with section 22(1) of the Act and was given within one month of the date of supply which was well within a reasonable period from the date of supply.

Conclusion

[24] The Tribunal therefore concludes that the purchaser did require the trader to remedy three of the vehicle’s faults; the broken handbrake switch, the windscreen washers and the broken air vents but the trader failed or refused to do those repairs within a reasonable time. Accordingly the purchaser is entitled to reject the vehicle because of the trader’s failure to remedy its faults within a reasonable time.

Costs

[25] 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.”

[26] The Tribunal considers that the matter ought reasonably to have been settled before proceeding to a hearing but the trader refused 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 Tribunal’s hearings of $500.

Orders
1. The purchaser’s rejection of the vehicle is upheld.

2. The trader shall pay the purchaser the sum of $53,000 by direct crediting that amount to the credit of the purchaser’s bank account, details of which are to be provided by the purchaser to the trader.

3. As soon as the trader has lodged the sum of $53,000 to the purchaser’s bank account in cleared funds the purchaser shall return the vehicle to the trader.

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 this 19 September 2013

C H Cornwell
Adjudicator