Kingston v North Harbour Enterprises Limited t/a North Harbour Hyundai - Reference No. MVD 10/2014 (Auckland) [2014] NZMVDT 30 (27 March 2014)

Last Updated: 5 May 2014

Decision No. AK 28 /2014

Reference No. MVD 10/2014

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN PAUL CHARLES KINGSTON & CATHERINE KINGSTON

Purchasers

AND NORTH HARBOUR ENTERPRISES LIMITED T/A NORTH HARBOUR HYUNDAI

Trader

AND HYUNDAI MOTORS NZ LIMITED

Manufacturer

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 25 March 2014

APPEARANCES

Mr and Mrs Kingston, the purchasers

Mr G M Lee, Director representing North Harbor Enterprises Ltd
Mrs L Lee, support person

Mr M Smith, After Sales Manager representing Hyundai Motors NZ Ltd

DECISION

Background

[1] On 3 July 2008 Mr & Mrs Kingston (“the purchaser”) bought a 2008 Hyundai Santa Fe registration EGT248 (“the vehicle”) from North Harbour Enterprises Limited trading as North Harbour Hyundai (“NHH”) for $44,300. The vehicle had travelled 13,823 kilometres when it was supplied to the purchasers.
[2] NHH agreed to sell its business as a going concern on 4 July 2008 and gave possession to the new owners on 1 August 2008. The purchasers did not name NHH as a defendant in their application to the Tribunal.

[3] On 24 January 2014 the purchasers filed an application with the Tribunal claiming the sum of $6,832.79 from Hyundai Motors NZ Ltd (“HMNZ) which the purchasers paid to replace the vehicle’s transmission on 18 September 2013. The basis of the purchaser’s’ claim is that the goods failed to comply with the guarantee of acceptable quality in the Consumer Guarantees Act 1993 (“the Act”).

[4] HMNZ denies that the goods were not of acceptable quality and says that if they are wrong the purchasers failed to require NHH or HMNZ to repair the goods before having them repaired by their repairer.

[5] 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
[6] 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, did the purchaser require HMNZ to repair the fault with the transmission and give it a reasonable time within which to do so?
[c] If so, what sum is the purchaser entitled to recover from HMNZ as their reasonable repair costs?

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

Relevant Law

[7] Section 6 of the Consumer Guarantees Act 1993 (“the Act”) imposes on a manufacturer "a guarantee that the goods are of acceptable quality." Section 2 defines "goods" as including "vehicles.” Section 2 Also defines “manufacturer” as a person that carries on the business of assembling, producing or processing goods and includes where goods are manufactured outside New Zealand and the foreign manufacturer of the goods does not have an ordinary place of business in New Zealand, a person that imports or distributes those goods.

[8] 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

[9] The purchasers bought the vehicle and Mrs Kingston said she was the main driver of it. She used IT to get to her work at the Auckland Airport from her home in Birkenhead. The purchasers also used the vehicle sometimes for towing a trailer.

[10] The purchasers say they serviced the vehicle regularly and produced a copy of the vehicle’s service record which shows that the vehicle was regularly serviced by NHH from the time the purchasers bought it until the 90,000km service when the vehicle was serviced at 91,449kms on 15 December 2011 by Auto Super Shoppe Enterprise (“ASSE”) who also serviced the vehicle on 11 June 2012 at 100,827kms. On the invoice for the 11 June 2012 service ASSE wrote “RECOMMEND TRANSMISSION SERVICE NEXT TIME.” The purchasers had the vehicle serviced next on 3 July 2013 by ASSE at 127,501kms (12,500kms after the recommended 15,000km service interval) but for reasons the purchasers could not explain the recommended transmission service did not occur.

[11] In early September 2013 the vehicle’s transmission started to make a noise at low speeds. The purchasers took the vehicle to ASSE who road tested it and confirmed the noise was coming from the transmission. ASSE’s repair invoice states they removed the transmission, stripped it and found extensive internal damage. ASSE informed the purchasers that a new transmission would cost $10,000 but a second hand transmission could be obtained for $4,500. The purchasers authorized ASSE to proceed to replace the transmission with a second hand assembly. ASSE overhauled the torque converter for warranty purposes and fitted the replacement transmission. Their invoice for the parts, labour and GST to replace the transmission dated 18 September 2013 was $6,832.79.

[12] Mrs Kingston gave evidence that she did not think the transmission should have failed at 132,000kms. She says they expected the transmission to last to about 180,000kms and she thought the vehicle was therefore not “fit for purpose”.

[13] Mrs Kingston also claimed that the mechanic at ASSE had told her the bearing in the transmission was made of metal that was too soft and this may have caused or contributed to the fault. Mrs Kingston sent a question to NHH’s website on 9 September 2013 asking if the bearing in the transmission was made of too-soft metal and if so had this been rectified in later models.

[14] HMNZ says it received all enquiry emails sent to NHH. HMNZ produced a narrative of the purchasers’ contact with its customer service department which shows that the purchasers’ first communication was an enquiry sent to NHH and received by HMNZ on 9 September 2013 at 9-16am. That message said:
“About 4 years ago we bought a Santa Fe from you. Recently the transmission has self-destructed, apparently because of a bearing made of too-soft metal a defect which Hyundai has fixed in later models. We had a 3 year warranty which has expired, I just wanted to check though that there was not a longer warranty on the drivetrain. The number plate is EGT248 and our names are Cath and Toby (also called Paul) Kingston. I can get more details if you need but everything at the moment is in the vehicle which is in a local garage
Regards Cath Kingston”

[15] HMNZ’s customer service contact record shows that a CSR spoke to Mrs Kingston on 9 September and found out the vehicle was at a Birkenhead Garage and that the purchasers had not been to NHH since they had a 75,000km service and that the vehicle’s odometer was then 132,000kms. The contact narrative states:
‘Customer not prepared to move vehicle to NHH explained difficult for us to diagnose in these circumstances she will discuss with husband.”

[16] HMNZ say the second contact with the purchasers was on 22 September 2013 at 5-18pm when the CSR who was dealing with the purchasers said she would be talking to HMNZ’s technical team and would let Mrs Kingston know their response. Subsequently HMNZ advised the purchasers on 18 October 2013 that they would not be contributing to the purchasers’ repair costs because HMNZ has not been given the opportunity to diagnose and repair the vehicle. However on 3 December 2013 HMNZ contacted the purchaser Mrs Kingston to tell her their Service/Warranty Team would review her case. HMNZ then offered the purchasers $3,000 of which about $2,000 was to be applied as a credit towards three services of the vehicle. The purchasers made a counter-offer which was rejected by HMNZ.

[17] Mr Smith for HMNZ told the Tribunal that the purchasers’ refusal to return the vehicle to NHH to inspect it meant that HMNZ did not know what caused the transmission to fail. Mr Smith says that as at 4 February 2014 HMNZ’s statistics on transmission failures reported through their network show that there are 2,482 vehicles with the same type of transmission as was in the purchasers vehicle of which there have been 19 transmission failures since 2006 equivalent to 0.7 of 1%. In reply to the Assessor Mr Smith said that there is no requirement for customers to service the transmission up to 100,000kms unless the vehicle is used under severe conditions or for regular 4-wheel use or towing but that after 100,000kms the transmission should be inspected at each 15,000km service interval and the transmission fluid replaced if the fluid is found to be discolored.

[18] The Tribunal, in determining the first issue: whether the vehicle sold to the purchaser complied with the guarantee of acceptable quality, has had regard to the following factors in s7 of the Act: first, the vehicle was a five year old New Zealand new Hyundai Santa Fe. Second, it had travelled 13,823kms at the time of sale and 132,132kms when the transmission started to become faulty. Third, the vehicle was sold by NHH to the purchasers for $44,300. Fourth, the vehicle’s transmission had never been serviced. Fifth, ASSE had recommended to the purchasers on 11 June 2012 at 100,827kms that the vehicle’s transmission be serviced “next time.” The vehicle should have been serviced at 115,000kms but it was not serviced next until 3 July 2013 at 127,501kms and then the transmission service that ASSE had recommended be done 13 months previously was not done. The issue the Tribunal has to determine is whether the vehicle was as durable as a reasonable consumer would regard as acceptable. The Tribunal was not persuaded by anything the purchasers said that the vehicle lacked durability. Instead the Tribunal thinks the vehicle’s transmission was as durable as a reasonable consumer would regard as acceptable lasting over five years and 132,000kms particularly having regard to the fact that the purchasers chose not to have the transmission serviced for 13 months after they had been recommended by ASSE to have it serviced.

Conclusion on issue [a]:

[19] The vehicle complied with the guarantee of acceptable quality in s6 of the Act.

Summary

[20] The Tribunal having found that the vehicle did not fail to comply with the guarantees in the Act must dismiss the purchasers’ application and will do so.

[21] The Tribunal considers that the purchasers’ application should probably not have been brought. The Tribunal considered making an order for the purchasers to pay the Tribunal’s hearing costs of $500 under clause 14 of Schedule 1 of the Motor Vehicle Sales Act 2003. It has however decided not to do so because the purchasers have had to pay over $6,800 to repair the transmission and, in the Assessor’s view, they were unwise to reject the without prejudice offer made by HMNZ to pay them $3,000 towards the cost of the repairs as a matter of goodwill.

Order

The purchasers’ application is dismissed.

DATED at Auckland this 27th March 2014.

C.H.Cornwell
Adjudicator