Schofield v Motive Trading Limited - Reference No. MVD 148/14 (Auckland) [2014] NZMVDT 104 (26 September 2014)

Last Updated: 19 October 2014

Decision No. AK 88/2014

Reference No. MVD 148/14

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN PHILLIP EDWARD SCHOFIELD

Purchaser

AND MOTIVE TRADING LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 23 September 2014

APPEARANCES

Mr P E Schofield, the purchaser

Mr J W Keit, Director for the trader
Mr S Keit, General Manager Sales for the trader

DECISION

Introduction

[1] On 5 December 2013 Mr Schofield (“the purchaser”) bought a 1994 Nissan Safari registration DLP868 (“the vehicle”) for $7,500 sight unseen from Motive Trading Limited (“the trader”). The purchaser has applied to recover $2,500 he spent in removing rust from the vehicle which prevented it from getting a warrant of fitness, $816.50 he has been quoted to paint the vehicle’s roof, and $1,661.50 he spent in replacing the vehicle’s cylinder head gasket and water pump. The purchaser claims the vehicle supplied to him by the trader did not comply with the guarantee of acceptable quality in the Consumer Guarantees Act 1993 (“the Act”).

[2] Mr Keit for the trader says the purchaser did not give the trader the opportunity to repair the vehicle before having the work done and that the purchaser’s panel beater did more work that was necessary to enable the vehicle to pass a warrant of fitness.

[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] The issues in this case are:
[a] Whether the vehicle was of acceptable quality at the time of sale in terms of the Act?
[b] If not whether the failure to comply with the guarantee of acceptable quality is of “substantial character”?
[c] If so what damages is the purchaser entitled to obtain from the trader?

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

Relevant law

[5] The expression "acceptable quality" was, at the time this vehicle was sold to the purchaser was 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] The purchaser, who lives in Taradale, has a boat and trailer weighing three tonnes for which he required a vehicle suitable for towing. He saw the vehicle advertised by the trader and after obtaining an Automobile Association (“AA”) pre purchase inspection report on 22 November 2013 he agreed to buy it from the trader for $7,500. The vehicle had 365,600kms on its odometer at the date it was inspected by the AA.

[8] The AA report gave it a grade 4: “extreme risk of requiring unplanned maintenance and repair”. Its registration and road user charge had expired. The left front guard mirror was missing and the AA noted “wheel noise” on the road test. The vehicle passed a TeeKay test indicating there were no hydrocarbons in its engine cooling system. The AA noted as “potential WOF defects requiring urgent attention” that the vehicle’s washer nozzles were not working. Other defects noted by the AA were the coolant was dirty with antifreeze concentration weak, the engine oil and the transmission oil were both dirty and the vehicle required a service. The right hand headlamps were damaged and six other lamps were either damaged or not working.

[9] The body condition comments contained in the AA report recorded surface corrosion on exposed underbody metal surfaces, a corroded door with paint repairs, and that two body panels had corrosion.

[10] The purchaser did not enquire of the trader regarding the vehicle’s service history and was undeterred from proceeding to purchase the vehicle by the contents of the AA report or the very high mileage and age of the vehicle. The trader obtained a warrant of fitness for the vehicle on 27 November 2013. The purchaser arranged to collect it from the trader at Auckland Airport on 5 December 2013 and drove the vehicle non-stop from Auckland to Taradale after checking the vehicle’s engine oil and coolant levels. He says the vehicle drove well but its odometer was not working.

[11] The purchaser had a mechanic, Dave Sutton Mechanical, check the vehicle for him on 11 January 2014. Mr Sutton reported that the radiator was suspect, the transmission needed a service, and he suspected a problem with the head gasket. The purchaser then had Hawkes Bay Nissan check and replace the vehicle’s radiator and HB Transmission serviced the transmission.

[12] In early February 2014 the purchaser tried to tow his boat and trailer with the vehicle and the vehicle overheated and blew the top radiator hose on the first major hill. Dave Sutton Mechanical removed the cylinder head and found a blown cylinder head gasket which they replaced and they also replaced the worn water pump and fan. The cost of that work was $1,661.50. The purchaser did not contact the trader and require it to repair the vehicle before having it done.

[13] On 5 July 2014 the purchaser took the vehicle to VTNZ Napier for a warrant of fitness inspection. The vehicle failed a WOF for the following reasons:
“Remedy corrosion at roof over right ‘A’ pillar both ‘D’ pillars left upper ‘C’ pillar
Both sides of roof (in structural areas)
Windscreen washers to operate
Remedy worn lower rear shock bushes (all)
Refit 3rd row seating for inspection”.

[14] The purchaser says he then took the vehicle to four panel beaters to look at the vehicle and quote for its repair. He says the panel beaters generally agreed it would cost about $1,000 to strip back the areas that were suspected to be rusty and repair those areas provided the rust was minor and there was no major cutting and welding required. One of the firms the purchaser asked for a quote was Taradale Panel and Paint Ltd. They quoted $1,000 initially but when they started the job the extent of the rust around the roof was uncovered and they notified the purchaser and asked him to inspect the vehicle after they had uncovered the extent of the rust.

[15] The purchaser telephoned the trader on 14 July and later the same day he sent the trader an email with photographs of the roof area after scraping off the plastic tape and filler which covered the rust bubbles. The purchaser said in his email of 14 July that he should not be faced with the problem only six months after buying the vehicle. The trader said that it would talk about the matter and get back to the purchaser. The trader did not do so.

[16] On 18 July the purchaser sent another email to the trader informing it that the panel beater had done more cutting and welding than originally estimated as six of the door pillars were not supporting the roof and the internal roof supports and the gutters above the doors were no longer attached to the vehicle once the filler was scrapped out. The roof sides and back and the gutters were being replaced and the work was estimated to cost $2,000 plus GST for the panel work and $800 plus GST for repainting the vehicle. The purchaser wrote in his email of 18 July to the trader:
“I believe you should cover the costs of this work as the vehicle was not of acceptable quality when you sold it to me in December 2013.”
The trader did not respond to the purchaser’s request until 1 August 2014 when it sent the purchaser an email saying that after talking to the purchaser’s panel beater about what could have been done to satisfy a WOF recheck and the extent of what has been done there are two different costings. The trader claimed that the purchaser “wanting us to pay for this work that has taken place is unorthodox, and the mention of other work you have done left off court filing, if we pay for your panel work in full.”

[17] The Tribunal received photographs of the vehicle’s roof and bodywork showing the extent of the rust after tape around the roof line was removed and photographs showing the cutting work that had been done to repair the rust. The Tribunal also took sworn evidence by a telephone conference call during the hearing from Mr I J Howard of Taradale Panel & Paint Ltd who described the condition of the vehicle and the work he had done on it to cut out rust and repair it and prime the finished metal.

[18] The Tribunal, in deciding whether the vehicle complied with the guarantee of acceptable quality has had regard to the following facts: first, the vehicle supplied by the trader was a 20 year old Nissan Safari. Second, it had travelled at least 365,660kms at the date of sale although this is probably somewhat less than the true distance this vehicle has travelled because its odometer does not work. Third, the vehicle was sold for $7,500 by the trader. The vehicle was, at the time of sale to the purchaser therefore near the end of its economic life.

[19] The Tribunal thinks that the vehicle’s engine was probably in a satisfactory condition for its age at the time of sale because it passed a TeeKay test on 22 November 2013 and the purchaser said he was able to drive the 400kms non-stop from Auckland Airport to Taradale in the vehicle without it overheating. However the purchaser’s mechanic Mr Sutton detected and reported a head gasket problem when he inspected the vehicle on 11 January 2014. The purchaser then put the matter beyond doubt by loading the vehicle with the weight of a three tonne trailer and boat and driving it up a hill. Not unexpectedly that test was well beyond this tired old engine’s capability. The vehicle’s engine most likely pressurised the cooling system due to a weeping or leaking head gasket which resulted in a failure of a radiator hose. The Tribunal, on the advice of its Assessor, thinks this was entirely predictable given the age of the vehicle, its high mileage and the absence of any service history.

[20] The position regarding the rust in the vehicle is a different matter. The vehicle was sold with a warrant of fitness yet within six months of being sold the VTNZ inspector found rust in the roof area and in the ‘A’, ‘C’ and ‘D’ pillars which had been deliberately concealed by a previous owner who in 2013 (because the purchaser gave evidence that newspapers used to pack the roof showed that date) filled the roof with newspaper and body filler so as to mask the extent of the rust and then taped over the filler. The rust was therefore present in the vehicle at the date of sale to the purchaser. The vehicle was unsafe to be on the road at the date it was sold to the purchaser and its condition most certainly meant that it was neither free of minor faults nor as durable as a purchaser of a vehicle- even one as old as this- would regard as acceptable.

Conclusion on issue [a]:

[21] The Tribunal concludes that the vehicle did not, at the time of sale, comply with the guarantee of acceptable quality because of the presence of rust in the vehicle’s roof and door pillars making the vehicle unsafe.

Issue [b]: Whether the vehicle’s failure to comply with the guarantee of acceptable quality is of “substantial character”?

Relevant law:
[22] 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

[23] The vehicle failed a warrant of fitness on 5 July 2014 because the corrosion in the roof over the right ‘A’ pillar, both ‘D’ pillars and the left upper ‘C’ pillars made the vehicle extremely unsafe to be on the road. The cost to remove that rust was $2,500, equivalent to a third of the cost price of the vehicle. The Tribunal does not consider that the vehicle would have been acquired by a reasonable consumer aware of the nature and extent of the rust in this vehicle and the cost to rectify it.

Conclusion on issue [b]:

[24] The Tribunal concludes that the failure of the vehicle to comply with the guarantee of acceptable quality was of substantial character in terms of the definition in s21 (a) and (d) of the Act.

Issue [c]: What damages is the purchaser entitled to obtain from the trader?

Relevant law

[25] Section 18 of the Act sets out the remedies available to a consumer where a supplier fails to comply with the guarantees in the Act. The remedies depend on whether the failure can be remedied, which are contained in s18(2) of the Act, or whether the failure cannot be remedied or the failure is of substantial character within the meaning of s21. The relevant section is 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
[26] Tribunal has found that the vehicle’s rust issues (but not the failure of its head gasket) amounted to a breach of the guarantee of acceptable quality and has also found that the failure was of substantial character in terms of s21(a) and (d) of the Act. The purchaser provided evidence that he had spent $2,500 having the rust removed from the vehicle and that he has been quoted a further $816.50 to repaint the vehicle’s roof.

[27] The Tribunal has had regard to the trader’s claim that the purchaser spent more in repairing the vehicle rust than he needed to in order to get a warrant of fitness. The Tribunal therefore put that suggestion to Mr Howard of Taradale Panel & Paint when he gave his evidence to the Tribunal. Mr Howard did not agree that the purchaser had spent more in getting the rust removed than he needed to and said that it was simply not possible to only partially repair a rust affected vehicle and still expect it to pass a VTNZ WOF re-check. The Tribunal has also carefully examined Mr Howard’s invoice on which the purchaser paid for the rust removal and it is struck with the reasonableness of Mr Howard’s hourly charge rate of $45 per hour plus GST which is about a half the hourly rate a reputable Auckland based panel repairer would charge. Accordingly, the Tribunal does not accept the trader’s submission. It finds the charge made by Taradale Panel & Paint Ltd was reasonable and the proposed charge for the painting of the roof at $816.50 is also reasonable.

Conclusion
[28] The Tribunal will order the trader to pay the purchaser $3,316.50 as damages in compensation for the reduction in value of the vehicle below the price paid for it. It will order the trader to pay that sum to the purchaser immediately.

Order

Motive Trading Limited shall pay Phillip Edward Schofield $3,316.50 immediately.

DATED at AUCKLAND this 26th day of September 2014

C.H.Cornwell
Adjudicator