Black v JR (Bay of Islands) Limited t/a Cars for Cruisers - Reference No. MVD 6/2014 (Auckland) [2014] NZMVDT 24 (21 March 2014)

Last Updated: 5 May 2014

Decision No. AK 22 /2014

Reference No. MVD 6/2014

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN BRIAN JOHN BLACK

Purchaser

AND JR (BAY OF ISLANDS) LIMITED T/A CARS FOR CRUISERS

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Whangarei on 19 March 2014

APPEARANCES

Mr B J Black, the purchaser

Ms M E Lewis, support person for purchaser
Mr R F Miller, director of the trader
Mr R Evans, support person for the trader

DECISION

Background

[1] On 25 November 2013 Mr Black (“the purchaser”) bought a 1997 Toyota Camry registration WA7903 (“the vehicle”) from JR (Bay of Islands) Limited trading as Cars for Cruisers (“the trader”) for $4,995. The vehicle had travelled 278,000kms at the time of sale.

[2] A month later after the vehicle had travelled about 1,800kms its engine overheated and the cylinder head gasket failed. The purchaser rejected the vehicle on 29 December 2013. He says the vehicle lacked durability and that its engine failure is of substantial character. He seeks the Tribunal’s order upholding his rejection and ordering the trader to refund his purchase price.

[3] The trader says it believes the driver of the vehicle at the time the vehicle overheated must have continued to drive the vehicle to cause the cylinder head gasket to fail. It therefore denies liability to the purchaser for the vehicle’s condition.

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

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?
[b] If it did not, whether the failure to comply is of substantial character?
[c] If so, is the purchaser entitled to reject the vehicle and obtain a refund of the purchase price?

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

Legal Principles

[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 (“the Act”), as applicable to the circumstances of the case. In this application the Consumer Guarantees 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" 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.”

[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 purchasers’ 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 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 his right to reject the vehicle within a reasonable time.

Application of law to facts

[11] The purchaser is an overseas visiting sailor who bought the vehicle from the trader for $4,995 on 25 November 2013. He says he intended to use it to travel around New Zealand. The trader agreed to repurchase the vehicle for $2,995 within six months of the date of purchase provided it was returned in the same condition as it was sold and on payment of a $50 re-inspection and warrant of fitness fee.

[12] The purchaser says he was told by the trader when he bought the vehicle to “watch the fluids” which he said he did. He says he topped up water in the vehicle’s radiator two or three times with “less than a pint” on each occasion but did not think to tell the trader the vehicle’s cooling system was loosing coolant.

[13] On or about 25 December 2013 the purchaser lent the vehicle to a friend named Aaron Boland to travel with two other people from Opua to Auckland. On 26 December on the way back from Auckland to Opua the Tribunal understands from an unsigned, undated email which the purchaser says Mr Boland sent him, that somewhere near Ruakaka the vehicle’s temperature gauge suddenly rose and steam started coming out of the vehicle’s bonnet. Mr Boland’s email says the vehicle was stopped immediately and he found a blown heater hose. The AA was called the heater hose by-passed and the cooling system filled with water. The vehicle was restarted and driven approximately 20kms into Whangarei. Mr Boland’s email says after inspecting the radiator he found it bubbling and called the AA again who towed the vehicle from Whangarei to Opua. The purchaser produces a copy of the AA Job Details report which shows the vehicle was towed 61.9km from Whau Valley to Opua on 26 December 2013 and that the vehicle had been previously visited by the AA that day.

[14] On 27 December the purchaser says he tried to siphon some fuel out of the vehicle’s tank to use in his outboard motor. He was unable to do so. The purchaser then decided to cut the vehicle’s nylon fuel line near the base of the petrol tank to try and extract the fuel. After he did so he attempted to repair the cut fuel line with a piece of garden hose and some clamps without apparently understanding that the fuel tank was under pressure and that the cut fuel line could not be repaired with garden hose and clamps. The vehicle thus leaked petrol. The purchaser then took the vehicle back to the trader and told Mr Miller what had happened to the vehicle and asked to exchange it for another or have a refund his purchase price. Mr Miller says he had observed the purchaser attempting to siphon fuel from the vehicle and was suspicious of what had happened to the vehicle. He told the purchaser he would have his mechanic look at the vehicle that day. Mr Miller telephoned the purchaser later the same day and told him the vehicle would not start and was leaking fuel. The purchaser says he told Mr Miller that he had cut the fuel line and would have it repaired but he still wanted the vehicle exchanged or a refund.

[15] On 28 December Mr Miller telephoned the purchaser and told him that the trader’s mechanic had confirmed the head gasket was leaking. Mr Miller said that it was a serious matter but not the trader’s problem and he would return the vehicle’s key to the purchaser by leaving it under the mat outside his office. The purchaser says that on 29 December he retrieved the key and repaired the vehicle’s fuel line. The purchaser then sent a letter rejecting the vehicle by email to the trader and left a copy in the jam of its office door.

[16] The parties discussed the matter on 30 December without resolution. Mr Miller took the view that the vehicle’s engine must have been damaged by the manner that Mr Boland had driven the vehicle. Mr Miller promised to respond to the purchaser’s rejection letter.

[17] On 6 January 2014 when Opua Auto Marine opened for business after the holidays Mr Kevin O’Brien its mechanic examined the vehicle and gave the purchaser a written report dated 31 December 2013 which states:
“Check for leaking head gasket.
Top up water. Run engine to hot
Lots of compression bubbles from cooling system
Confirmed leaking head gaskets.
Second hand engine $2200 + gst
Repairs for either engine replacement or original engine head
repairs would run to over $4,000 + gst”

[18] On 9 January the purchaser gave the trader a copy of the report he had obtained from Opua Auto Marine on the vehicle and asked why the trader had not responded to his letter of rejection. He says that Mr Miller told him he had been advised not to do so. The purchaser filed his application with the Tribunal on 13 January 2014. He arranged to place the vehicle in storage at J&B Marine for which he says he is charged $145 a month.

[19] Mr Miller says in reply to the purchaser’s application that he had been told by Mr O’Brien that the vehicle probably has a blown head gasket. He agrees he told the purchaser to “watch the fluids” when he sold him the vehicle but says he tells all purchasers of old vehicles the same thing. Mr Miller says the vehicle was running well when he sold it to the purchaser and he is “100% positive it did not have any issues at the time of sale”. In reply to questions from the Tribunal as to how long he thought a 16 year old Camry with 278,000kms sold for $4,995 should last Mr Miller agreed it should “certainly last for more than a month”

[20] The Tribunal, in determining whether this vehicle was of acceptable quality at the time of sale has had regard to the fact that the vehicle is a 16 year old very high mileage Toyota Camry which was sold for $4,995 to the purchaser on 25 November 2013. The purchaser used it for a month during which its cooling system needed topping up with water. In December the purchaser lent the vehicle to Mr Boland who drove from Opua to Auckland and back to near Whangarei before the vehicle overheated and its head gasket failed.

[21] The Tribunal is not as sure as Mr Miller was that the vehicle did not have issues at the time of sale. The Tribunal’s Assessor believes that there may very well have been a small leak in the heater hose at the time of sale which would account for the loss of water from the vehicle’s cooling system the purchaser experienced in the month he used the vehicle. He said he had to top up two or three times with less than a pint of water on each occasion before the vehicle overheated on 26 December 2013.

[22] The Tribunal, in the absence of any evidence provided by the trader to show that the vehicle was mis-used or abused by the purchaser or by Mr Boland whilst the vehicle was in his care, has come to the conclusion first, that the vehicle’s sudden loss of coolant, probably from the split heater hose on 26 December 2013 caused the cylinder head gasket to fail. The Tribunal thinks this indicates the vehicle had a minor fault at the time of sale. Second, the Tribunal finds that this 16 years old 278,000kms $4,995 vehicle was not as durable as a reasonable purchaser would regard as acceptable, even for an old, well used, cheap vehicle near the end of its economic life. Mr Miller said that the vehicle should have lasted longer than one month and the Tribunal agrees with him.

Conclusion on issue [a]:

[23] The Tribunal therefore finds as a fact that the vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because it was neither free of minor fault at the time of sale nor was it as durable as a reasonable consumer would regard as acceptable for such a vehicle.

Issue [b]: Whether the failure to comply is of substantial character?

Legal Principles

[24] 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) 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

[25] The Tribunal accepts as reasonable the quotation given to the purchaser by Opua Auto & Marine of $2,200 +GST to replace the engine with a second hand engine. The Tribunal does not think the vehicle would have been acquired by a reasonable consumer aware of the nature and extent of the vehicle’s fault and of the need, within one month to replace the engine at a cost equivalent to 50% of the original cost price of the vehicle.

Conclusion on issue [b]:

[26] The Tribunal concludes that the vehicle’s failure was of substantial character as defined in s21(a) of the Act.

Issue [c]: Is the purchaser entitled to reject the vehicle and obtain a refund of the purchase price?

Legal Principles

[27] Section 18 of the Act sets out the remedies available to the purchaser in respect of a failure in the guarantee of acceptable quality. It 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 of this Act 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—
(a) Require the supplier to remedy the failure within a reasonable time in accordance with section 19 of this Act:
(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,—
(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 of this Act, reject the goods in accordance with section 22 of this Act.

(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21 of this Act, the consumer may—
(a) Subject to section 20 of this Act, reject the goods in accordance with section 22 of this Act; 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) of this section, 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

[28] The Tribunal having found the failure was of substantial character is required to consider if the purchaser has complied with ss20 and 22 of the Act so as to be able to reject the vehicle.

[29] Section 20 provides that the right to reject goods will be lost if that right is not exercised within a reasonable time from the time of supply. The Tribunal thinks the purchaser’s rejection of the vehicle one month and four days from the date of supply was well within a reasonable period. The Tribunal is also satisfied that the purchaser complied with s 22(1) of the Act which requires the consumer to notify the supplier of his decision to reject and the reasons for it. The purchaser complied with these requirements by sending the trader his letter of rejection on 29 December 2013.

[30] The Tribunal will therefore uphold the purchaser’s rejection of the vehicle on 29 December 2013 and order the trader to refund the full purchase price of $4,995 immediately.

[31] The purchaser lives on a boat at Opua and had to arrange to have the vehicle stored after he rejected it. He has claimed a refund of the amount he paid to store the vehicle from the 14 January to 14 April 2014 of $435. The Tribunal considers it reasonable for the trader to pay storage charges from 14 January to 31 March 2014 of $365. In addition the Tribunal will order the trader to pay the cost of the Opua Auto Marine inspection of $50.

Orders

1. The purchaser’s rejection of the vehicle is upheld with effect from 29 December 2013.

2. The trader shall immediately pay the purchaser the sum of $5,410 by direct crediting that amount to 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 $5,410 to the purchaser’s bank account in cleared funds the purchaser shall return the vehicle to the trader.

DATED at Auckland this 21st day of March 2014.

C H Cornwell
Adjudicator