Skinner v Euro Vehicles Limited - Reference No. MVD 12/2014 (Auckland) [2014] NZMVDT 26 (21 March 2014)

Last Updated: 25 May 2014

Decision No. AK 24 /2014

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Reference No. MVD 12/2014

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN CLINTON MATTHEW SKINNER

Purchaser

AND EURO VEHICLES LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at AUCKLAND on 17 March 2014

APPEARANCES

Mr C M Skinner, the purchaser

There was no appearance on behalf of the trader

DECISION

Background

[1] On 14 December 2013 Mr Skinner (“the purchaser”) agreed to buy a 2011 Mercedes-Benz AMG C63 registration HEL525 (“the vehicle”) from Euro Vehicles Limited (“the trader”) for $72,500.

[2] Two weeks later the purchaser discovered that the vehicle had been involved in a collision in New South Wales in 2011 which had resulted in it being recorded as a “statutory write-off”. It was imported into New Zealand as a damaged vehicle and first registered on 3 December 2013. The purchaser also discovered that the vehicle has a number of faults which will require repairs estimated to cost about $30,000 to rectify.

[3] The purchaser’s solicitors rejected the vehicle on the purchaser’s behalf on 14 January 2014. The purchaser seeks the Tribunal’s order upholding his rejection and ordering the trader to refund his purchase price of $72,500, the cost of a mechanical breakdown policy premium of $1,500, $708 for two replacement tyres and $414 for the repair of a wheel; a total of $75,122.

[4] The trader was sent notice of the time, date and place of the hearing and asked to provide the Tribunal with a copy of the Consumer Information Notice and a statement off its defence. It did not do so. The Tribunal’s Case Manager also telephoned the trader on 12 March 2014 and left a voice mail message asking the trader to confirm its attendance and reminding the trader of the written request made previously of the trader to provide certain information to the Tribunal including a signed copy of the CIN and a statement of the trader’s defence. The Tribunal’s Case Manager telephoned the trader on 13 March 2014 at 12-40pm and received an email from the trader’s sales manager, Mr Meno at 12-49pm that day confirming that the trader would be attending the hearing. The Tribunal’s Clerk attempted to contact the trader at 2pm on 17 March 2014 when the hearing was due to start and the trader had not appeared but was unable to make contact with the trader. The Tribunal decided to proceed to hear the purchaser’s application in the trader’s absence because it was satisfied the trader had adequate notice of the time, place and date of the hearing but had decided not to attend.

[5] 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
[6] 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 what sum is repayable to him by the trader?

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

Legal Principles

[7] 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.

[8] 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.”

[9] 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.”

[10] 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.

[11] 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

[12] The purchaser says that in December 2013 he had sold a property and his car and wanted to purchase a white Mercedes-Benz C63. On 12 or 13 December 2013 he visited the trader from whom he had previously purchased a vehicle. The trader had the vehicle displayed for sale and the purchaser and a friend examined but did not test drive it. The purchaser says that his friend thought the vehicle was a New Zealand new car but Mr Meno, the trader’s salesman, told the purchaser the vehicle had been imported from Australia. Mr Meno told the purchaser he did not know the vehicle’s history but he repeatedly assured the purchaser that the vehicle was “in immaculate condition” and was “brilliant” and very hard to find because it had a Performance Package which increased the vehicle’s power output. The purchaser did not make any further enquiry regarding the vehicle’s history or have the vehicle mechanically inspected before he returned to the trader’s premises on 14 December 2013 where he test drove the vehicle a short distance and agreed to buy it for $72,500 subject to selling a property before 31 December 2013. The purchaser also agreed to buy a three year mechanical breakdown policy through the trader for a further single premium of $1,500. The purchaser paid a deposit of $5,000 on 14 December 2013, signed a vehicle offer and sale agreement, and collected the vehicle and paid the balance of the purchase price on 21 December 2013.

[13] The purchaser says a consumer information notice was not displayed with the vehicle. He says he was not asked to sign nor was he provided with a copy of the Consumer Information Notice signed by the trader. He says that none of the vehicles displayed for sale by the trader had CIN notices displayed on them.
The trader’s conduct in failing to display a CIN resulted in the purchaser being misled regarding the fact that the vehicle had been imported damaged. He would have been aware of that fact had the trader displayed a CIN with the vehicle. The Tribunal wrote to the trader before the hearing and asked for a copy of the CIN for the vehicle. The trader ignored that request. The Tribunal recommends that the purchaser notify the Commerce Commission of the trader’s failure to display and provide him with a CIN for the vehicle because the Tribunal considers the actions of the trader breached the provisions of the Consumer Information Standards (Used Motor Vehicles) Regulations 2008 which requires a supplier of used motor vehicles to display a CIN and to obtain a written acknowledgement from the buyer of the vehicle that he has received a copy of the CIN that relates to that vehicle. The Commerce Commission is responsible for the enforcement of the regulations.

[14] The purchaser says that when he washed the vehicle soon after he bought it he noticed that repairs had been made to the rear guard and he also noticed chrome on the vehicle’s bonnet was mis-aligned. He also noticed that plastic trim by the doors popped out. On 28 December 2013 the purchaser searched the carhistory.com.au site and bought a report, a copy of which he produced which showed the vehicle was a statutory write-off in New South Wales as a result of a collision recorded on 14 December 2011.

[15] The purchaser says he telephoned Mr Meno and told him the vehicle was a statutory write–off and Mr Meno said he knew the vehicle had been in an accident but did not know the extent of the damage. Mr Meno told the purchaser he was away on holiday until 6 January 2014 and he and the purchaser would “sort it out” then but the purchaser should continue to enjoy the vehicle.

[16] The purchaser said he took the vehicle to VTNZ for an assessment on 3 January 2014 but when they put the vehicle on a hoist and found a plastic cover over the underside of the vehicle which they were unwilling to remove to assess the vehicle.

[17] On 4 January the purchaser found the rear tyre on the vehicle was flat and on 6 January he had the two rear tyres- which were badly worn- replaced. He paid $708 for the replacement tyres. He says he also found that the reason the tyre was flat was because there were cracks and bends from heavy impact on the inner rim section on one of the wheels. He paid $414 on 8 January to have the wheel welded.

[18] On 6 January 2014 the purchaser says he telephoned Mr Meno and asked the trader to refund his purchase price. Mr Meno refused his request and when the purchaser told him he would file a claim with the Tribunal Mr Meno said he would appeal against any decision and tie up the dispute for at least six months. The same day the purchaser telephoned the trader’s sole director Mr Graham Wouldes. He says that Mr Wouldes agreed that he would not have bought the vehicle either if he knew its history. Mr Wouldes promised the purchaser he would talk to Mr Meno and have him “sort it out”. The purchaser did not hear from Mr Meno so he telephoned Mr Wouldes again who once again promised to speak to Mr Meno. When the purchaser had not heard from Mr Meno after several days he telephoned Mr Wouldes a third time who told him there was nothing he could do.

[19] On 14 January 2014 the purchaser had his solicitors, Goodmans, write a letter rejecting the vehicle to the trader which was sent to Mr Graham Wouldes at his residential address. The letter required the trader to refund the purchase price and other sums claimed to have been paid by the purchaser for the mechanical breakdown insurance, the two replacement tyres and the wheel repairs on 17 January in exchange for the vehicle. The purchaser says he took the vehicle back to the trader on 17 January but Mr Meno told him he knew nothing about a refund.

[20] The purchaser lodged his claim with the Tribunal on 28 January 2014 and a copy was immediately sent to the trader. The purchaser says that Mr Meno contacted him and offered to exchange the vehicle for a white 2011 C63 Mercedes-Benz with similar mileage to that of the vehicle for an additional $10,000. The purchaser counter-offered $5,000 and the trader in turn reduced the sum requested to $7,000 which the purchaser refused to pay.

[21] On 30 January 2014 Mr Meno told the purchaser the trader would refund his purchase price but not the cost of the tyres and wheel repairs. The purchaser required the trader to refund the cost of the warranty of $1,500 and the cost of the tyres and wheel repairs. The purchaser says that Mr Meno agreed but told him that the trader could not pay the money straight away because it was short of funds from re-stocking. The next day the purchaser had his solicitor prepare a re-purchase contract for the trader’s signature. However when he telephoned Mr Meno to make an appointment to have the contract signed Mr Meno promised to telephone him back. He did not do so and the purchaser says Mr Meno has since made himself unavailable and the contract has not been signed.

[22] On the 11 March the Tribunal requested the purchaser to take the vehicle to a Mercedes-Benz franchised repairer for a scan and appraisal of the vehicle listing each of the vehicle’s faults and the cost of parts and labour to fix each fault identified. The purchaser took the vehicle to Precision AutoWerk who wrote a report, (produced as Exhibit 5) on 11 March 2014 listing 16 faults with the vehicle which are reproduced below:
“1. Car has been re-painted with various amounts of firt, runs and pinholes in the paint- To return this car to resemble an immaculate finish it has to be repainted and possibly paint stripped to avoid any preparation issues and high film build issues.
2. Bad repair in left front door- this will require being stripped back and assessed as to whether it can be re-repaired.
3. Dents in roof panel around the sunroof, not repaired properly, require re-repair.
4. Interior kick trims and seals all require replacing due to being damaged during previous repair.
5. Front bumper not aligned to left front guard- required repair and alignment.
6. Grille not fitting with bumper or top air guide- need new top air guide and grille that match
7. Right sill cover missing front edge- replace
8. Left sill cover missing back edge-replace
9. Rear bumper has been badly glued on left side lower- requires replacing (new body panels require painting)
10. Engine top cover has a wheel centre cap instead of correct badge- replace
11. Spare wheel retainer broken, investigation lead to bonded boot floor broken- replace bonded boot floor
12.Various rubber seals have been oversprayed with 2k paint- replace
13. Clips and retainers are replaced with re-assembly
14. Client has advised that all four wheels are bent and require replacing
15. Suspect bolt placement on strut towers indicate possible suspension damage or chassis out of alignment (would require further investigation at further cost).
16 Driver’s seat bolts not secured- we would need to investigate if these are stretch bolts (single use only) and possibly need replace”
The approximate cost to carry out the above work was estimated as $11,000 and parts were $11,181.29 as per an attachment to the quote.

[23] Precision AutoWerk also listed the following faults which are not serviceable by them:
“1.Front seat electrics not working
2. Park sensors not operational- system requires diagnosing by Mercedes Dealership
3. Windscreen washer reservoir leaking- possibly require replacement
4. Incorrect (too small) battery fitted
5. Factory fire extinguisher and first aid kit missing
6. Front brakes squealing- possibly need replacement rotors and pads
7. Fitting tyres to replacement wheels.”
The approximate cost of outwork required was $3000 to $4000 bringing the total rectification cost to $26,181.29 plus GST or $30,108.48 incl GST.

[24] 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 two year old imported Mercedes-Benz C63 AMG model with only 11,900kms on its odometer which was sold by the trader for $72,500. The trader did not disclose, as it should have done on a CIN displayed with the vehicle, that it was imported damaged. The Tribunal finds, on the basis of the Precision AutoWerk’s report and its estimate of the cost of repairs required to the vehicle that it is not acceptable in appearance and finish and most certainly not free from minor defects as a reasonable consumer would regard as acceptable.

[25] The Tribunal finds as a fact that the vehicle did not comply with the guarantee of acceptable quality in section 6 of the Act.

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

Legal Principles

[26] 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

[27] The Tribunal does not think the vehicle would have been acquired by a reasonable consumer aware of the nature and extent of this vehicle’s many faults. In coming to this decision the Tribunal has had regard to the estimated cost of curing the vehicle’s many faults of upwards of $30,000; equivalent to 42% of the cost price of the vehicle. It therefore finds the failures were of substantial character within the definition in s21 (a) of the Act. The Tribunal will therefore uphold the purchaser’s rejection of the vehicle on 14 January 2014 and order the trader to refund the full purchase price of $72,500 to the purchaser immediately.

[28] The purchaser has claimed a refund of the $1,500 he paid for a mechanical breakdown insurance policy. The Tribunal does not consider that the premium paid for that policy falls into the category of damages in s18(4) which the Tribunal is able to order the trader to refund because it is not a loss or damage resulting from the failure of the vehicle to comply with the guarantee of acceptable quality but a loss the purchaser may incur as a result of buying an insurance cover over a vehicle he has rejected. The purchaser should approach the insurance company and see if they are willing to cancel the policy and make a pro rata refund of the premium for the unexpired period of cover.

[29] The purchaser is not able to order the trader to refund the cost of the two tyres and the repair work on the wheel because the purchaser did not comply with s18(2)(a) of the Act and require the trader to replace the tyres and weld the wheel before he had that work done.

[30] The Tribunal thinks that it was reasonably foreseeable that the purchaser would incur costs in having the vehicle’s faults assessed and in obtaining legal advice resulting from the vehicle’s failure to comply with the Act. The Tribunal will therefore order the trader to pay the full amount of $414 charged by Precision AutoWerk for its report on the vehicle, and the purchaser’s reasonable legal costs of $1,500 of the $2,663.25 total billed by Goodmans to the purchaser for legal advice; a total of $1,914 in addition to the refund of the purchase price of $72,500; making an overall total of $74,414.

Costs
[31] 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.”

[32] 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 hearings of $500.

Orders
1. The purchaser’s rejection of the vehicle is upheld with effect from 14 January 2014.

2. The trader shall pay the purchaser the sum of $74,414 by direct crediting that amount to the credit of 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 $74,414 to the purchaser’s bank account in cleared funds the purchaser shall return the vehicle to the trader.

4. The trader shall within ten days of the date of this order pay the Tribunal’s reasonable hearing costs of $500 to the Crown at the Ministry of Justice Tribunal’s Unit, Level 1 Chorus House, 41 Federal Street Auckland.

DATED at Auckland this 21st day of March 2014.

C H Cornwell
Adjudicator