Horan v Motorcity Limited Reference No. MVD 191/2014 (Auckland) [2014] NZMVDT 137 (28 November 2014)

Last Updated: 18 December 2014

Decision No: AK 120/2014 Reference No. MVD 191/14

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN AMY JOSEPHINE HORAN

Purchaser

AND MOTORCITY LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 25 November 2014

APPEARANCES

Mr K Horan, approved representative of the purchaser

There was no appearance by the trader.

DECISION

Background
[1] On 25 January 2014 Mrs Horan signed an agreement as agent for her daughter Amy Josephine Horan (“the purchaser”) to buy a 2005 VW Golf registration number HGL838 (“the vehicle”) from Motorcity Limited (“the trader”) for $11,095. The purchaser rejected the vehicle by email to the trader on 7 October 2014. She has applied to have the Tribunal uphold her rejection of the vehicle and the trader ordered to refund her purchase price as well as the cost of transporting the vehicle from Wellington back to the trader in Auckland.

[2] The trader did not appear at the hearing or supply the Tribunal with a statement of its defence as requested in writing of it by the Tribunal. The Tribunal is satisfied that the trader received written notice of the date, time and place of the hearing as well as a reminder from the Tribunal of the hearing details and chose not to attend the hearing.

[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 Tribunal’s decision was made by the adjudicator.

[4] Mr Horan was authorised by the Tribunal to represent his daughter, the purchaser, at the hearing.

The issues
[5]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 (“the Act”)?
[b] If it did not, is the failure of substantial character within the meaning of s21 of the Act?
[c] If so, was the purchaser entitled to reject the vehicle?

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

Relevant law
[6] 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, as applicable to the circumstances of the case. In this application the Act is applicable.

[7] 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.”

[8] The expression "acceptable quality" was, at the time of the sale of this vehicle, was defined in s7 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 to¾
(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.”

[9] 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 purchaser’s subjective perspective.

[10] 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 his/her right to reject the vehicle within a reasonable time.

Application of law to facts
[11] The purchaser’s parents bought the vehicle from the trader in the purchaser’s name after taking it for a short test drive. They did not have the vehicle appraised or even ask to inspect an AA report which the trader claimed existed for the vehicle. The vehicle is a Japanese import which had travelled 64,761kms at the time of sale. Its service history was unknown. The purchaser’s parents paid for the vehicle on 25 January and Mr Horan collected the vehicle on 30 January 2014. It had a new warrant of fitness but Mr Horan did not obtain a copy of the WOF check sheet and the trader has ignored the purchaser’s subsequent requests to be sent a copy of the WOF check sheet.

[12] Mr Horan gave evidence that the trader had failed to display a Consumer Information Notice (“CIN”) on the vehicle or supply the purchaser with the signed CIN notice. The trader has also ignored the Tribunal’s written request for a copy of the CIN signed by the purchaser’s mother and the Tribunal considers it probable that no CIN was ever displayed with the vehicle or supplied to the purchaser in breach of the trader’s obligations under the Consumer Information Standards (Used Motor Vehicles) Regulations 2003. The regulations are enforced by the Commerce Commission to whom a copy of this decision will be sent for its action.

[13] Mr Horan drove the vehicle on 30 January to his home in Tauranga and on 9 February the purchaser drove it from Tauranga to her home in Wellington. The vehicle suddenly lost power near Porirua and could not be accelerated beyond 70kph. The purchaser took the vehicle to a repairer in Wellington who diagnosed the cause of the loss of power as a fuel pressure sensor and replaced it at a cost of $401.35 which the trader subsequently reimbursed to the purchaser.

[14] In June 2014 the purchaser drove the vehicle from Wellington to visit her parents in Tauranga. The purchaser told Mr Horan that the vehicle was leaking water into the foot well by the front passenger’s seat and the purchaser left the vehicle in Tauranga so that Mr Horan could have the water leak repaired by a panel beater. On 27 June Mr Horan drove the vehicle back to the purchaser in Wellington and on the way there a “low coolant” warning lamp lit up. Mr Horan says he stopped the vehicle and filled the vehicle’s radiator with coolant.

[15] On 29 June the vehicle lost power/acceleration whilst being driven on the motorway at Wellington and the vehicle’s water leak reappeared. The purchaser had her mechanic scan the vehicle and determined there was a fault with the fuel pressure sensor which they replaced. They also fixed a coolant leak. The purchaser took the vehicle to Gazley VW Motors who scanned it but were unable to determine the cause of the loss of power.

[16] On 1 August the purchaser wrote to the trader rejecting the vehicle. She also sent the trader a letter from Mr Morris of Fitzgerald Auto Point (1983) Ltd describing the vehicle’s faults and the work they had done on the vehicle to try and diagnose the cause of the acceleration/loss of power fault. Mr Morris’ letter also described a fault with the vehicle’s air conditioning unit. On 4 August the trader sent the purchaser a letter refusing to accept rejection of the vehicle claiming it had been purchased seven months previously and was outside a reasonable period of time for rejection. The trader advised the purchaser in that letter that it was prepared to remedy the vehicle’s faults. The trader’s letter of 4 August contained an undertaking to give the purchaser a full refund if Giltrap could not repair the vehicle. The purchaser sent the vehicle to the trader in Auckland and it arrived at the trader’s premises about 6 August. In an email dated 7 August Mr Reddish the trader’s Sales Manager advised the purchaser that Giltrap VW had diagnosed both issues and the loss of power was being caused by an issue with the fuel pump and the problem with the air conditioning system was caused by both “stepper motors” which control the temperature of the air conditioning. Mr Horan says he had no evidence of that because the trader did not provide the purchaser with a copy of an invoice to show what Giltrap VW had done to repair the vehicle’s faults. The vehicle was returned to the purchaser on 21 August.

[17] On 27 August the purchaser experienced another loss of power on the motorway. The purchaser sent the trader an email and advised the trader that she would be returning the vehicle to the trader. She received no response from the trader. On 6 October the purchaser sent the vehicle back to the trader and on 7 October she sent the trader a letter rejecting the vehicle and claiming that its sudden loss of power was a serious fault because it made the vehicle unsafe. On 17 October the purchaser filed an application with the Tribunal to have her rejection of the vehicle upheld. She says in her application that the vehicle has travelled approximately 76,000kms or 11,239kms more than at the time of sale.

The Tribunal’s findings
[18] The Tribunal, in determining whether the goods supplied by the trader complied with the guarantee of acceptable quality,has had regard to the nature of the goods, in this case a nine year old Japanese imported VW Golf with 64,761kms on its odometer at the time of sale, and also to the price paid for it of $11,095. According to the evidence given on the purchaser’s behalf, the vehicle first had a sudden loss of power and acceleration on 9 February 2014; ten days after it was supplied. The same fault next re-occurred on 29 June but the purchaser continued to use the vehicle and did not take it to Fitzgerald Auto Point until 11 July 2014. Even after receiving Fitzgerald’s report the purchaser continued to drive the vehicle until August when she returned it to the trader to repair it. The trader did not provide the Tribunal with any information as to what was done to the vehicle when it was returned to it in Auckland. However when the vehicle was returned to the purchaser it had another loss of power incident on 27 September which resulted in the purchaser rejecting the vehicle on 7 October and returning it to the trader who has since retained the vehicle. In addition to the loss of power fault the vehicle has also had a water leak into the cabin and an air conditioning fault. The Tribunal understands that the trader has fixed the water leak and air conditioning faults. Having regard to the vehicle’s faults the Tribunal considers that the vehicle was not of acceptable quality at the time of sale. The loss of power fault was very probably present at the time of sale and, if not, the vehicle was not as durable as a reasonable consumer would regard as acceptable for a VW Golf costing $11,095 with 64,753kms on its odometer.

Conclusion on issue [a]
[19] The vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because it was not free of minor faults nor as durable as a reasonable consumer would regard as acceptable for a vehicle of this age, type and price.

Issue [b]: Is the failure of “substantial character” within the meaning of s21 of the Act?

Relevant law
[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 s 18(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 evidence of the purchaser and Mr Morris of Fitzgerald Auto Point (1983) Ltd shows that the vehicle has an intermittent fault which causes a loss of power. The Tribunal accepts that this fault makes the vehicle unsafe to drive in that condition and the Tribunal also considers that the vehicle would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of that failure.

Conclusion on issue [b]
[22] The Tribunal considers that the failure to comply with the guarantee of acceptable quality is of substantial character in terms of s21(a) and (d) of the Act.

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

Relevant law
[23]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."

[24] Section 20 of the Act provides that a consumer will lose his or her right to reject goods under the Act if the right to reject is not exercised within a reasonable time of the time of supply. What is a reasonable time is defined in s 20(2) and requires consideration of several factors such as the type of goods, their use, the length of time it is reasonable for the goods to be used and the amount of use it is reasonable for them to be put before the defect becomes apparent. The relevant section is as follows:
“20 Loss of right to reject goods
(1) The right to reject goods conferred by this Act shall not apply if-
(a) the right is not exercised within a reasonable time within the meaning of subsection (2); or
(b) the goods have been disposed of by the consumer, or have been lost or destroyed while in the possession of a person other than the supplier or an agent of the supplier; or
(c) the goods were damaged after delivery to the consumer for reasons not related to their state or condition at the time of supply; or
(d) the goods have been attached to or incorporated in any real or personal property and they cannot be detached or isolated without damaging them.”

(2) In subsection (1)(a), the term reasonable time means a period from the time of supply of the goods in which it would be reasonable to expect the defect to become apparent having regard to—
(a) the type of goods:
(b) the use to which a consumer is likely to put them:
(c) the length of time for which it is reasonable for them to be used:
(d) the amount of use to which it is reasonable for them to be put before the defect becomes apparent.
(3) This section applies notwithstanding section 37 of the Sale of Goods Act 1908.”

[25] The Court of Appeal in Nesbit v Porter [2000] NZCA 288; (2000) 9 TCLR 395 in considering s20 and what was a “reasonable time” under the Act in respect of an 11 year old Nissan Navarra sold for $10,990 and rejected because of rust nine months after purchase said:
“In many, if not most cases the period will be longer for new goods, which a buyer is entitled to expect to be defect free when first used, than it will be for second hand goods of the same type. As a general rule, the older the goods, the shorter is likely to be the reasonable time.” The Court in Nesbit also said:
“Another factor which will influence the period to be allowed for exercise of the right of rejection is whether regular inspections of the goods for defects are customary or, as in the case of motor vehicles, required by law. But for defects which cannot be expected to be revealed by such inspections the reasonable time may be longer.” And later in the same decision the Court said:
“A reasonable time under s20 must accordingly be one which suffices to enable the consumer to become fully acquainted with the nature of the defects, which, where the cause of a breakage or malfunction is not apparent the consumer can be expected to do by taking the goods to someone, usually and preferably the supplier, for inspection. In this context therefore, a defect is not “apparent” until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial.” Finally and probably most relevantly to the present fact situation the Court said:
“We consider that in a vehicle the age and type of this Navara it is reasonable to expect defects of the kind actually encountered by the Nesbits, latent at the time
of the supply, to become apparent relatively soon after the supply. (We do not understand there to have been an allegation that there was any concealment on the part of Porter Motors.) In our view the motor vehicle dealer should generally be freed from the burden of having to accept rejection of a vehicle of this age and pedigree after the time of the next mandatory six monthly Warrant of Fitness check has passed. If, at the latest, a defect of the kind found in the Navara has not manifested itself on such an inspection, it would be an unfair burden upon the supplier if a buyer of such a vehicle, which must be assumed to have been in daily use, sometimes in rough conditions, should thereafter be able to reject it. Bearing in mind, however, that most people do not have their vehicles tested until the six month period is expiring; there is a need for some latitude to give time to decide whether to exercise that right.”

Application of law to facts
[26] The period of time within which rejection must occur runs from the date of supply; in this application 30 January 2014. The purchaser became aware that the vehicle had a fault which caused loss of power on 9 February 2014, 10 days after the vehicle was supplied. She attempted, without success, to have it remedied and notified the trader of the problem on 11 February. The problem did not occur again until 29 June and the purchaser sought advice from her mechanic who confirmed the existence of the fault. The purchaser then sent the trader a letter of rejection on 1 August. The trader chose not to accept the rejection although the Tribunal considers the purchaser was fully entitled to reject the vehicle at that time. However, she was persuaded to allow the trader to repair the fault and returned the vehicle to the trader on the trader’s promise contained in its letter to the purchaser of 4 August, that if Giltrap were unable to fix the fault the trader would give the purchaser a full refund of the purchase price. Giltrap did not succeed in repairing the fault because within 37 days of the vehicle being returned to the purchaser the fault reoccurred. Once again the purchaser rejected the vehicle in her emails to the trader of 27 September and 7 October 2014.

[27] The Tribunal takes the view that this intermittent fault causing a loss of power was probably not “apparent” to the purchaser in the sense that she realised how serious it was until she rejected the vehicle after obtaining the advice of her mechanic Mr Morris at the end of July. She then rejected the vehicle. The trader chose to ignore her rejection and required her to return the vehicle to be repaired however the Tribunal takes the view that the purchaser was entitled to reject the vehicle on 1 August and did so in terms of s22(1) of the Act in writing and gave the trader her grounds for rejection. The Tribunal therefore considers that rejection took place within six months of the date of supply and that in the circumstances this was within a reasonable time.

Conclusion on issue [c]
[28] The purchaser was entitled to reject the vehicle and did so within a reasonable time and in accordance with s22(1) of the Act. The Tribunal will therefore uphold the purchaser’s rejection of the vehicle.

Costs
[29] 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.”

[30] The trader, after receiving notice of the hearing, failed to attend the hearing without good cause. The Tribunal will therefore order the trader to pay to the Crown the reasonable costs of the Tribunal’s hearing of $600.

Orders

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

2. The trader shall immediately pay to the purchaser $11,492.44 comprising the following amounts:
[a] the purchase price of $11,095; and
[b] the cost of transporting the vehicle back to the trader of $397.44.

3. The trader shall within ten days of the date of this order pay the Tribunal’s reasonable hearing costs of $600 to the Crown at the Ministry of Justice Tribunal’s Unit, Level 1 Chorus House, 41 Federal Street Auckland.

DATED this 28th day of November 2014

C.H Cornwell
Adjudicator