Prestidge v Direct Cars (Hamilton) Limited - Reference No. MVD 2/2014 (Auckland) [2014] NZMVDT 22 (13 March 2014)

Last Updated: 5 May 2014

Decision No. AK 20 /2014

Reference No. MVD 2/2014

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN PAUL NIGEL PRESTIDGE

Purchaser

AND DIRECT CARS (HAMILTON) LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Hamilton on 11 March 2014

APPEARANCES

Mr P N Prestidge, the purchaser
Mr L C P Prestidge, purchaser’s son and witness
Mr N J Rapson, director for the trader
Mr B Gibson, witness for the trader
Mr A Dones, witness for the trader

DECISION

Background

[1] On 19 September 2013 Mr Paul Prestidge (“the purchaser”) bought a 1996 Subaru Impreza registration DBT828 (“the vehicle”) from Direct Cars (Hamilton) Limited (“the trader”) for $5,990. The purchaser told the Tribunal he bought the vehicle in his name in order to obtain finance from Metro Finance Ltd to complete the purchase but the vehicle was bought for and used by his son Levi Prestidge (“the driver”).
[2] The purchaser rejected the vehicle on 7 January 2014 because he claims the vehicle was not of acceptable quality and the trader had failed to remedy the vehicle’s serious faults within a reasonable time. The purchaser seeks a refund of his purchase price.

[3] The trader denies that the vehicle was not of acceptable quality. It says that the vehicle has been used by the driver in a manner that is inconsistent with how a reasonable consumer would have driven it, and that the vehicle would have complied with the guarantee of acceptable quality if it had not been used in that manner.

[4] Prior to the commencement of the hearing the Tribunal appointed Mr Gregory 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 Gregory assisted the adjudicator but the application was determined by the adjudicator alone.

The Issues
[5] The issues raised by this application are:
[a] Whether the vehicle was of acceptable quality when it was sold to the purchaser?
[b] If not, whether the vehicle’s fault is a failure of substantial character entitling the purchaser to reject it?

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

Relevant Law

[6] Section 6 of the Consumer Guarantees Act 1993 (“the Act”) imposes on a supplier "a guarantee that the goods are of acceptable quality." Section 2 defines "goods" as including "vehicles.”

[7] 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 obtain 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.”

Application of law to facts

[8] The purchaser told the Tribunal he bought the vehicle on or about 19 September 2013 from the trader for $5,990. He says the vehicle had a new warrant of fitness and the trader told him it would have the vehicle serviced before it was supplied. Mr Rapson, the trader’s director told the Tribunal he was unable to confirm if the vehicle had been serviced before it was supplied. The purchaser traded in a Mazda Familia car for $4,000 to the trader and borrowed the balance of the purchase price of $2,000 and financing fees from Metro Finance Limited on 19 September 2013 over a 12 month term. The vehicle’s odometer is recorded on a Consumer Information Notice as 210,033kms and on the Certificate of Registration as 210,062kms. There was no vehicle offer and sales agreement produced by either party to prove the date or terms of sale. Mr Rapson could not recall if he had prepared a VOSA and the CIN he had prepared was undated and the trader had failed to keep a signed original copy. Unfortunately the purchaser, the driver and Mr Rapson were all vague about the dates on which particular events occurred and the Tribunal has had to rely on evidence given by Mr Gibson, who replaced the vehicle’s engines and repaired the vehicle for the dates on which various events occurred. Mr Gibson kept a record of the dates he had worked on the vehicle and the dates he provided a loan car to the driver although the Tribunal thinks his records may not be entirely accurate. The following is a chronology of events.

(a) First engine failure
[9] About 23 September 2013 the vehicle’s engine failed. The vehicle was salvaged by the trader and taken to Subaroo Auto Spares (“Subaroo”) to be repaired. The vehicle’s fault was diagnosed by Mr Gibson of Subaroo as a failure of the bottom end bearings. Subaroo were instructed by the trader to replace the vehicle’s engine. Mr Gibson gave evidence that he is the manager of Subaroo and although not a qualified mechanic he has had 18 years in the motor industry. Subaroo only sell used Subaru vehicles and Subaru vehicle parts some of which they import. In the year to date Mr Gibson says Subaroo have sold 66 Subaru engines of which they have fitted about 25 engines themselves.

[10] Mr Gibson says he checked the condition of the clutch when he replaced the vehicle’s engine and the clutch was in good condition. Subaroo charged the trader $1,207.50 (including GST) to replace the vehicle’s engine. The trader produced a tax invoice dated 26 September 2013.

(b) Clutch failure
[11] The driver collected the vehicle about 26 September and told the Tribunal that the clutch started feeling weird and made a grinding noise less than 100km of driving later. The vehicle was towed back to the trader who had it taken back to Subaroo. The driver was provided with a loan car whilst the vehicle was repaired. Mr Gibson told the Tribunal the vehicle was returned to Subaroo by the trader on 15 or 16 November. He says the clutch was “burnt to a crisp” and had to be replaced. There was an oil leak which Subaroo repaired by replacing the rocker covers with new covers and gaskets, and they also replaced both front axles because the constant velocity joints were worn and knocking. The vehicle was collected by the driver on 22 November. Unfortunately Mr Gibson said the technician had not plugged in the fans and topped up the coolant reservoir and the vehicle overheated a short distance after the driver drove it away from Subaroo’s workshop. The driver returned the vehicle immediately and the fans were plugged in and the coolant topped up. The vehicle was checked over on Subaroo’s premises to ensure no damage had occurred. The vehicle’s starter motor was not operating properly and Subaroo replaced it on 22 November. The total cost of this work was $655.50 (including GST) which was invoiced to the trader on 26 November 2013.

(c) The second engine failure
[12] In the first or second week of December 2013 (none of the parties or their witnesses could say when) the vehicle’s engine began to make a noise and the purchaser says the engine died and could not immediately be restarted. The trader sent the vehicle back to Subaroo to be repaired and Mr Gibson gave evidence that he was able to start the engine and from listening to it believed the bottom end bearings had failed once again. He says that Subaroo fitted a second replacement engine to the vehicle but he says he was reluctant to do so because he believed the driver was abusing the engine and over-revving it and had caused the damage to the engine. However the trader wanted the vehicle repaired and so Subaroo supplied and fitted another engine without making any charge to the trader- as a gesture of goodwill- although Mr Gibson said that the first engine had only been supplied with a one month warranty.
[13] The purchaser gave evidence that when the second engine had been fitted the vehicle was returned with its “engine check” light lit up. He says he called Subaroo and was told by the receptionist to disconnect the vehicle’s battery. The purchaser says that the presence of the engine check light on could indicate a fault with the vehicle’s CPU although Mr Gibson thought it could be for a number of other issues such as the TPS (throttle position sensor) or the IAC. The purchaser has not had the cause of the engine check light investigated.

(d) The third engine failure
[14] Once again in early December 2013 the vehicle’s engine failed and the vehicle was delivered to Subaroo on or about 11 December 2013. The trader refused to authorize Subaroo to repair the engine or replace it until he had the cause of the failure assessed. Mr Rapson gave evidence that he had instructed Subaroo to remove and strip the engine to find the cause of the repeated failures of the bottom end bearings. However before Subaroo started work on the engine Mr Rapson says he had a telephone call from the driver on 12 December who asked if the vehicle’s engine had been replaced and when he was told it had not Mr Rapson says the driver told him that he and the purchaser would collect the vehicle and take it to be assessed by David Watt Auto Services Ltd and that they would be “taking the trader to court”.

[15] The vehicle was collected by the driver and the purchaser on 12 December from Subaroo. Mr Gibson says he told the purchaser at that time that the driver was driving the vehicle very hard. Gibson told the purchaser the vehicle was safe to drive gently to David Watt Auto Services Ltd.

(e) David Watt’s evidence
[16] The trader produced a copy of an undated “To whom it May Concern” letter from David Watt of David Watt Auto Services Ltd in which he states he was asked to do a report on the engine as he [the purchaser] was going to take the person who sold him the vehicle to court as the motor had run the bearings three times. Mr Watt told the purchaser he was too busy and other than listen to the engine he could not offer any idea of cost and directed the purchaser to a motor reconditioner. When he left the workshop Mr Watt says the speed and noise from the vehicle was extremely excessive and unnecessary and he was glad not to be part of it. He also writes that:
“Mr Prestige (sic) mentioned he had installed a larger turbo on the engine and carried out other work on the Subaru, this along with the way it was driven led me to believe that I would tend to attribute some blame with Mr Prestige as an engine would not stand up to the revs being used when it left here for very long.”

(d) The Engine Shop Estimate
[17] On 12 December the purchaser and driver took the vehicle to The Engine Shop who gave them a written estimate of $3,450 to repair the engine including removing grinding and replacing the crankshaft, repairing or replacing the con rod bearings, main bearings, thrusts and gaskets.

(e) Had a larger turbo been fitted by the driver or purchaser?
[18] The purchaser gave evidence in answer to questions from the Assessor that the vehicle’s engine had not been modified in any way and that he used only high octane fuel in the vehicle. However Mr Gibson’s evidence was that when the vehicle was returned to Subaroo on the second occasion the engine had failed, he found a TD05 turbo had been fitted to the vehicle and the TD04 turbo was in a plastic bag in the rear of the vehicle. The purchaser admitted that a TD05 turbo had been obtained from someone on TradeMe but denied that it had been fitted to the vehicle and that the turbo fitted was the TD04. Mr Gibson also gave evidence that a boost gauge had been incorrectly fitted and could have affected the boost levels of the vehicle. The Tribunal considers on the basis of the evidence given by Mr Gibson and that in Mr Watt’s written statement that it is probable that the turbo on the engine had been changed from a TD04 to a larger and more powerful TD05 model and the Tribunal, again on the basis of Mr Gibson’s evidence thinks it is also likely that the boost was interfered with by the driver after the vehicle was supplied by the trader.

(f) Mr Dones’ evidence
[19] Mr Dones, an employee of Subaroo for the last two years attended the hearing and gave evidence that on one of the occasions that the vehicle was at Subaroos premises a female passenger in the driver’s vehicle told another passenger “every time we see a rest area we pull over and do helis”.

(g) The Tribunal’s findings
[20] The Tribunal, in determining whether this vehicle complied with the guarantee of acceptable quality at the time it was sold to the purchaser has, as it is required to do by s7(f) to (j) of the Act had regard to the following facts. That that the vehicle was at the time of sale a 17 year old Japanese imported Subaru Impreza hatchback which had travelled 210,033kms. The vehicle was thus an old high mileage performance vehicle near the end of its economic life. It was sold to the purchaser without any known service history and although it had been test driven by the driver and the purchaser before it was purchased, neither had obtained a mechanical assessment of the vehicle. The trader bought it as a trade in. The trader told the Tribunal he deals in trade in vehicles at the lower end of the market.

[21] Within about four days of the date of supply to the driver the vehicle’s engine had been seriously damaged whilst being used by the driver. The bottom end bearings had failed. The trader was asked to repair the fault and had Subaroo do so on its behalf. Significantly Mr Gibson gave evidence the clutch in the vehicle was in good condition. Within only 100kms of further use – according to the driver’s evidence- the clutch started feeling weird. It was diagnosed by Mr Gibson who described the clutch as “burnt to a crisp” - so badly damaged it had to be replaced. The repaired vehicle was returned to the trader and then within a further week or so the bottom end bearings were damaged again on the replacement engine. The engine was again replaced and once again, in short time it too was damaged and once again the damage was to the lower end bearings. The Tribunal has come to the view that it considers it very probable that the damage to the vehicle’s engine and its clutch was caused by misuse by the driver. Its reasons are as follows: first, the Tribunal considers it highly improbable that a vehicle- even an old high mileage Impreza- would require three engine replacements within three months and less than 800kms of use- caused by damage to the same part of the engine- the bottom end bearings. Second, the destruction of the clutch within a month of being inspected and found to be in good condition when the engine was replaced at the end of September indicates the driver abused the vehicle. Third, the evidence of Mr Gibson and Mr Watts points strongly to the probability that the driver replaced the TD04 turbo charger with a more powerful TD05 model which, in the Assessor’s opinion probably caused or hastened the damage to the bottom end bearings. Fourth, Mr Gibson’s evidence that the vehicle’s boost gauge had been tampered with indicates the probability that the vehicle’s engine was over-boosting and again this probably caused the damage to the engines. Finally, the evidence of Mr Dones that he overhead a female passenger speak of the vehicle being used for “helis” and the evidence of Mr Watts regarding the manner he observed the vehicle being driven when it was bought to him for a report on 12 December support the Tribunal’s view that the driver abused the vehicle’s engine even when he knew it was in a damaged state and had been told by Mr Gibson to drive it carefully.

Conclusion
[22] The Tribunal’s conclusion is that the vehicle did not fail to comply with the guarantee of acceptable quality because the vehicle was used in a manner that a reasonable consumer would not have used it, and the Tribunal thinks the vehicle would have complied with the guarantee of acceptable quality if it had not been used in that manner. The purchaser’s application to reject the vehicle will therefore be dismissed.

Order

The purchaser’s application is dismissed.

DATED at Auckland this 13th day of March 2014

C.H.Cornwell
Adjudicator