Mohammeds Freighting NZ Limited v Advance Enterprises NZ Limited Reference No. MVD 147/14 (Auckland) [2014] NZMVDT 125 (28 October 2014)

Last Updated: 28 November 2014

Decision No: AK 147/2014
Reference No. MVD 147/14

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN MOHAMMEDS FREIGHTING NZ LIMITED

Purchaser

AND ADVANCE ENTERPRISES NZ LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARINGS at Auckland on 23 September and 22 October 2014

APPEARANCES

Mr M Hussain, director for the purchaser

Mrs S Hussain, witness for the purchaser
Mr S Yang aka Young, director for the trader
Mr J Lu, salesperson for the trader

DECISION

Background

[1] On 17 January 2014 Mohammeds Freighting NZ Limited (“the purchaser”) bought a 2005 Nissan Fairlady 350Z registration number HFS475 (“the vehicle”) from Advance Enterprises NZ Limited (“the trader”) for $25,990 plus $350 on road costs. On 22 July 2014 the purchaser purported to reject the vehicle and it seeks a refund of its purchase price and other consequential costs.

[2] The trader denies that the purchaser is entitled to reject the vehicle and claims there is nothing wrong with the vehicle.

[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.

The Issues
[4] The issues are:
[a] Was the vehicle of acceptable quality as defined in s7 of the Consumer Guarantees Act 1993 (“the Act”)?
[b] If the vehicle was not of acceptable quality did the purchaser require the trader to remedy the failure within a reasonable time in accordance with s19 of the Act?

Issue [a]: Was the vehicle of acceptable quality as defined in s7 of the Consumer Guarantees Act 1993 (“the Act”)?

Relevant legislation
[5] 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.”

[6] The expression "acceptable quality" was, at the time of sale, defined in s7 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 considering whether or not goods meet the guarantee of acceptable quality the Tribunal must consider the quality elements as set out in s7(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.

[8] 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 s19 of the Act. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser exercised its right to reject the vehicle within a reasonable time.

Application of law to relevant facts
[9] In January 2014 Mr Hussain, a director of the purchasing company, agreed to buy the vehicle, a yellow Nissan Fairlady 350Z high performance sports car, as a wedding present for his daughter. The price was $25,990 and $350 on road costs. The purchaser paid the trader a deposit of $6,190 and arranged to borrow the balance of the purchase price of $20,150 from Kiwi Asset Finance Ltd over 18 months at 9.6%. After the vehicle had passed compliance it was road tested for about 30 minutes by one of Mr Hussain’s sons and accepted on the purchaser’s behalf. The Vehicle Offer and Sale Agreement signed by the parties records the vehicle’s odometer as 14,350kms at the date of purchase and also records the trader’s agreement to provide a 28 day or 1500kms warranty for the vehicle. The trader also arranged for a 12 Month Autosure mechanical breakdown warranty for the vehicle at its cost.

[10] Mr Hussain told the Tribunal that his daughter did not enjoy driving the vehicle and that he has, apart from some brief use by his daughter, been the sole driver of it. He says soon after taking delivery of the vehicle he noticed that its clutch pedal had a high release threshold. He took the vehicle to Manukau Nissan on 13 February 2014. Manukau Nissan inspected the vehicle, road tested it and found the clutch to be worn and in need of replacement. Manukau Nissan also found the transmission, differential and brakes were noisy and the brake disc rotors needed skimming.

[11] Mr Hussain then took the vehicle to Kaspa Transmissions Otahuhu 2005 Ltd (“Kaspa”) on 13 February 2014. Kaspa recorded the vehicle’s odometer as 14,672kms and wrote the following:
“Test drive vehicle, found hard to engage all gears and noisy on and off the clutch pedal.
Suspect release bearing fault and clutch worn.
Possible gearbox bearing noise.
Best to remove gearbox and inspect clutch and release bearing first before any gearbox work is carried out.
Estimated cost to repair if clutch issue-- $1675 +GST clutch kit, $400 +GST labour.”

[12] Mr Hussain returned the vehicle to the trader who sent it to Joshua Motors to have the clutch replaced. Joshua Motors subcontracted the work to SAM Autos because they were too busy to do the work. Joshua Motors had SAM Autos fit a new solid flywheel and clutch kit replacing the dual mass flywheel and clutch kit that had been previously fitted. The trader says it spoke to Mr Hussain about the replacement of the dual mass flywheel with a single mass flywheel before the work was done and he agreed to a single mass flywheel being fitted.

[13] Mr Hussain says he found the clutch release threshold was still too high when he collected the vehicle and it was returned to SAM Autos to be adjusted. The clutch fitted by SAM Autos only lasted three weeks before it burnt out. The clutch was returned under warranty to the Australian supplier, Australian Clutch Services who sent a letter to BNT, the flywheel supplier, saying that the information provided on an ACS warranty inspection sheet indicated the clutch was operating normally and the reasons the clutch had failed were either:
1. the vehicle had been overloaded
2. the hydraulics were faulty
3. driver error.

[14] The trader agreed to replace the clutch after requesting the purchaser pay half the cost; a request Mr Hussain refused. The trader had the vehicle towed on 18 June 2014 to Giltrap Nissan who received it disassembled. Giltrap Nissan gave the trader and the purchaser the choice of either rebuilding the twin plate/solid flywheel clutch assembly or replacing it with a new dual mass flywheel /clutch assembly. The trader produced copies of emails from Mr Tipler the Assistant Service Manager at Giltrap Nissan in which Mr Tipler states that he and a person named Fiona had discussions with Mr Hussain regarding the options as to which clutch to install in the vehicle. Mr Tipler’s emails show that he believed that Mr Hussain was aware that Giltrap Nissan were fitting a solid type flywheel and became frustrated when he was told the clutch only had a 12 month warranty in line with that provided by the manufacturer. After the vehicle’s clutch was replaced by Giltrap Nissan at a cost of $3,427.49, paid by the trader, Mr Hussain test drove the vehicle and told the trader that he was happy with the repair but wanted a two year factory warranty for the new clutch.
[15] Mr Hussain told the Tribunal that he was concerned that the replacement clutch would not be as durable as a twin plate clutch and the trader had refused to change the clutch again to a twin plate clutch and that was the reason he sought to reject the vehicle.

[16] Before the first hearing the Tribunal sent the purchaser a written request to obtain two independent reports on the state of the clutch and the vehicle’s transmission and the cost to repair any faults found with either. It did this because it had found in preparing for the hearing that the purchaser had not provided any technical evidence to prove that either the clutch or the transmission were faulty. At the first hearing Mr Hussein said that he had ignored the Tribunal’s request and had not obtained either of the reports requested of him by the Tribunal. He then requested an adjournment to obtain the reports to which the Tribunal agreed.

[17] At the second hearing of the purchaser’s application on 22 October 2014 the purchaser produced a copy of a report from Davie Motors Holden (“DMH”) dated 26 September 2014 which records the vehicle’s odometer as 16,276kms and states that DMH did a pre purchase check on the vehicle and found front and rear disc pads were aftermarket. Front and rear tyres were badly worn. Front and rear coil springs are non-genuine and there is a noise from the front suspension which DMH suspect is from the upper arms. The report states “Checked clutch operation and found it to be working OK at this time. No clutch adjustment available as this is a hrdrolic (sic) system. Customer had the clutch replaced and the clutch release is now much higher. No other faults seen at this time.

[18] The purchaser also had Kaspa prepare a report on the vehicle on 29 September 2014 which records the odometer as 16,310kms and states:
“Customer instructions:
Noise coming from vehicle raise vehicle on hoist & inspect. Noise coming out of gearbox. Clutch has lack of free play. Clutch will also require inspection once gearbox is removed & may require replacement.”
Kaspa’s quote to replace the main shaft bearings, a pilot bearing and counter shaft front and rear bearings in the transmission, as well as a dual mass flywheel & clutch kit was $5,705.73 with labour and GST of which the dual mass flywheel & clutch kit were $3,071.65 inclusive of GST. Mr Hussain denied that he had asked Kaspa to include the dual mass flywheel in the quote but surprisingly when Kaspa quoted for a replacement flywheel and clutch on 13 February 2014 for the vehicle their quote had not provided for a dual mass flywheel.

[19] The trader, represented at the hearing by Mr Yang, told the Tribunal that he had the vehicle inspected on 24 September 2014 by City Nissan who reported in a tax invoice:
“Carried out courtesy check of clutch operation
No leaks from gearbox and gear selection and operation (sic) normal”

[20] Mr Yang also took the vehicle to Auckland Transmission Services Ltd trading as The Gearbox Factory (“ATS”) on 23 September and he produced a letter signed by the manager of ATS, Mr Lane, which states:
“SUBJECT Nissan 350Z Registration No HFS475
We have test driven the above vehicle and have found the clutch operation in keeping with the solid flywheel and the clutch that was fitted. Clutch pedal operation is normal.”

[21] Both parties produced photographs of the vehicle’s tyres. The purchaser also produced an undated and unsigned report from Bridgestone Otahuhu as to the tread depth of the tyres. The trader produced a VTNZ compliance check sheet which showed that on 17 January 2014 at 14,338kms the tread depth of the tyres was 5mm on the left front and left rear tyres and 2mm on the right front and right rear tyres and photographs to show the tyres were now badly worn. The Tribunal does not consider that VTNZ’s report is particularly reliable because the vehicle’s tyres are badly perished and probably should never have passed VTNZ’s compliance inspection anyway and the issue of the past or present condition of the tyres is not one the Tribunal needs to determine. The trader also submitted photographs of damage to the left rear quarter of the vehicle which it had paid to have repaired but again the Tribunal does not consider that to be relevant to the issues the Tribunal has to determine.

The Tribunal’s findings on issue [a]
[22] The first issue the Tribunal has to decide is whether the vehicle complied with the guarantee of acceptable quality in s6 of the Act. In order to decide that the Tribunal has had regard to the factors in s7 of the Act. First, to the nature of the goods- in this case a nine year old Nissan Fairlady 350Z Japanese imported high performance vehicle with a surprisingly low odometer reading of 14,350kms for its age. Second, to the price of $25,990 plus $350 on road costs.

[23] The Tribunal thinks the vehicle probably had a worn clutch when it was sold to the purchaser in January 2014. The evidence of that is the Manukau Nissan Report which diagnosed that the clutch was worn on 13 February 2014 at 14,657kms or 307kms after sale. Joshua Motors had the clutch replaced and also fixed the right hand brake which was rattling, the rear screen washer and a leaking washer bottle when they had the vehicle on 16 February. It maybe that the replacement clutch the trader had fitted to the vehicle by Joshua Motors and its subcontractor SAM Autos in late February 2014 was not as durable as a reasonable consumer would regard as acceptable because it failed within about one month. The vehicle may have been abused by whoever drove it after the clutch was first replaced. The Tribunal had no evidence provided to enable it to establish what caused the first clutch to fail. In the Assessor’s experience clutch failures at low mileages are generally operator induced rather than caused by component failure and in this case the pressure plate was tested and was found not to be faulty.

[24] The evidence that the purchaser offered the Tribunal to show that there is a fault with the vehicle’s transmission comprised:
(a) a comment in the Manukau Nissan report of 13 February that there was a noise from the gearbox;
(b) a similar comment in the Kaspa report dated 13 February that there was a “possible gearbox bearing noise”;
(c) a report from Kaspa dated 4 March in which the proprietor, Vange, wrote ... “found noise in gearbox in 1st & 2nd gears. Have advised the gearbox needs to be striped & assessed for any signs of damage.”
The vehicle’s odometer reading when those three reports were written was 14,900kms.
(d) a report from Kaspa dated 29 September when the vehicle’s odometer was 16,310kms which referred to a noise coming from the vehicle’s gearbox and provided an estimate of $5,705 to replace various parts of the transmission. The most expensive item in the estimate; the dual mass flywheel and clutch kit, was not diagnosed as faulty and it is not even apparent from this report if the vehicle was road tested and if so what faults were found to exist with the vehicle’s transmission.

[25] On the other hand the trader provided the following evidence to show that there was nothing wrong with the transmission or the replaced clutch:
(a) an invoice dated 3 July 2014 showing that the clutch had been replaced by Giltrap Nissan at 16,063kms which included removing and inspecting the gearbox as part of the clutch replacement;
(b) a report from ATS dated 23 September stating that they found the clutch operation in keeping with the solid flywheel and that the clutch operation was normal; and
(c) a report from City Nissan dated 24 September at 16,186kms stating they checked the clutch operation and the gearbox and gear selection on the vehicle is normal;
The Tribunal notes that the DMH report of 26 September obtained by the purchaser confirmed that the clutch was working satisfactorily and that there were no other faults with the vehicle.

[26] The Tribunal considers the vehicle was probably sold with a worn clutch which was found to be defective and replaced by the trader in February and again in July 2014. The Tribunal is not however satisfied that the purchaser proved, on a balance of probabilities, after using the vehicle for eight months and travelling about 2,000kms in it that there is anything wrong with the vehicle’s transmission.

Conclusion on issue [a]
[27] The vehicle, because of the worn clutch, was not free of minor faults or as durable as a reasonable consumer would regard as acceptable for a vehicle of this age, low mileage and price. The Tribunal therefore concludes it did not, at the time of sale, comply with the guarantee of acceptable quality in the Act.

Issue [b]: Did the purchaser require the trader to remedy the failure within a reasonable time in accordance with s19 of the Act?

Relevant legislation
[28] Section 18 of the Act 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."

Application of law to facts
[29] The Tribunal considers that a clutch is a wear and tear item on a vehicle and can be readily and reasonably cheaply replaced when it fails. The Tribunal does not consider a worn clutch to be a failure of substantial character within the meaning of s21 of the Act.

[30] Mr Hussain required the trader to replace the vehicle’s worn clutch as soon as he became aware of it as a fault in February 2014. When the clutch failed a second time he returned the vehicle to the trader who had the clutch replaced again at its cost by Giltrap Nissan on 3 July. The Tribunal is satisfied that the trader had Giltrap Nissan replace the worn aftermarket twin plate clutch/dual mass flywheel with a single plate/solid flywheel kit and the subsequent tests which ATS, City Nissan and DMH have done on the vehicle in September confirm that the clutch is operating normally.

Conclusion on issue [b]:
[31] The purchaser required the trader to remedy the vehicle’s clutch failure and the trader did so within a reasonable time and in a satisfactory manner. Both parties complied with their respective obligations under s18 of the Act. The Tribunal does not consider therefore that the purchaser has any basis on which to reject the vehicle and its application to do so will be dismissed.

Costs
[32] 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.”

[33] The Tribunal considers that the purchaser should not have brought these proceedings because it had insufficient evidence that there was any fault with the vehicle’s clutch or its transmission and when requested to obtain that evidence by the Tribunal before the first hearing it chose not to do so. The report the purchaser obtained from DMH on 26 September 2014 confirmed that the clutch operation was working properly and disclosed no fault with the vehicle’s transmission. The report the purchaser obtained from Kaspa dated 29 September 2014 was just an estimate of costs and did not state that the vehicle had a transmission fault or a faulty clutch. The Tribunal considers the purchaser should be ordered to pay the Tribunal’s reasonable hearing costs for the two hearings at which the purchaser requested the presence of a Hindi interpreter amount to $1200.

Orders

1.The purchaser’s application to reject the vehicle is dismissed.

2. The purchaser shall within ten days of the date of this order pay the Tribunal’s reasonable hearing costs of $1,200 to the Crown at the Ministry of Justice Tribunal’s Unit, Level 1 Chorus House, 41 Federal Street, Auckland.

DATED this 28th day of October 2014

C.H Cornwell
Adjudicator