Small v Continental Car Services Limited - Reference No. MVD 13/2014 (Auckland) [2014] NZMVDT 31 (31 March 2014)

Last Updated: 5 May 2014

Decision No. AK 29 /2014

Reference No. MVD 13/2014

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN BRETT LESTER SMALL

Purchaser

AND CONTINENTAL CAR SERVICES LIMITED

Trader

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 B L Small, the purchaser

Mr P Metcalfe, dealer principal for the trader

DECISION

Background

[1] On 29 August 2012 Mr Small (“the purchaser”) bought a new Jeep Wrangler registration FRETOW (“the vehicle”) from Continental Car Sales Limited (“the trader”) for $46,500. The purchaser has rejected the vehicle because he claims it leaks and the trader has failed to rectify the leak(s). The purchaser seeks the Tribunal’s order upholding his rejection and ordering the trader to refund the purchase price.

[2] The trader says the purchaser fitted a roof rack to the vehicle’s roof which it believes has caused the vehicle to leak. The trader also says that the purchaser has lost his right to reject the vehicle by fitting a roof rack to the vehicle because this has resulted in the vehicle being damaged after delivery to the purchaser for reasons not related to the state and condition of the vehicle at the time of supply.

[3] 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
[4] 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 trader remedied the failure within a reasonable time?
[c] If not, is the purchaser entitled to reject the vehicle?

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

Legal Principles

[5] 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.

[6] 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.”

[7] 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.”

[8] 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.

[9] 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

[10] The purchaser is employed as the operations manager for a company named Zebra The Broken Car Collection Company which collects broken down cars for parts. After purchasing the vehicle from the trader on 29 August 2012 the purchaser says he used it for a few months before ceasing to drive it whilst he recuperated from medical treatment to his back. Whilst he was recuperating his partner used the vehicle. The purchaser says that on two occasions he mounted a flashing light on the roof rack he had fitted himself to the roof of the vehicle to go out to assist in situations when his employer’s trucks broke down, but he used the vehicle mostly to get from his home in Ponsonby to his work in Onehunga and back.

[11] The purchaser says he fitted a towbar to the vehicle in March 2013 and he fitted a roof rack “at Easter” 2013. The Tribunal notes that Easter was observed in 2013 from 29 March to 1 April. The purchaser says he was unable to provide any documentation to show when he had bought the roof rack. The purchaser says the vehicle leaked whenever it rained. He says he thinks the first time it rained after he bought the vehicle on 29 August 2012 was in March 2013.

[12] The vehicle’s heater did not work. The purchaser says he telephoned the trader in March 2013 to arrange to have the heater and a leak in the vehicle rectified and he says he was told by the trader to contact Andrew Simms Newmarket (“Andrew Simms”) because they were the service agents for Jeep. The purchaser says he telephoned Andrew Simms in March to make an appointment to have the heater and the leak rectified and was told the earliest the vehicle could be seen was 29 May 2013.

[13] The purchaser produced a photocopy of a repair order #ASA-CJD-220251 he was given by Andrew Simms dated 29 May 2013 which shows they had the vehicle that day to check for water leaks into the cabin and also to check for the heater not getting hot. Andrew Simms repaired the heater by replacing an actuator. The repair order records the vehicle’s odometer as 4,278kms although those figures were struck out and the figures “6163” appear on the photocopy of the repair order provided to the Tribunal. Andrew Simms sent an invoice to the manufacturer’s agent under the manufacturer’s warranty on 9 August 2013 for their work doing those repairs. It reads:
“Check for water leaks into cabin area confirm. Remove carpets and dry out. Carry out water test on vehicle to conclude water ingress at windscreen header seal, r/f door seal, around freedom tops and thru hole in l/f door scuff panel. Remove and replace seals as described and use sealant where needed and replace foam in freedom top seals and refit dried carpet. Carry out water test, OK.”

[14] The repairs done on 29 May by Andrew Simms were not successful and the purchaser had to take the vehicle back to them in June 2013 to repair a water leak across the door sills on both sides of the vehicle. The purchaser was unable to provide a work order or any documentation for the repairs that he says were done by Andrew Simms in June but he says the repairs were not successful and the vehicle still leaked when it rained. The purchaser says that he took the vehicle back to Andrew Simms on six occasions from May until August 2013 but he has no record of the dates he did so and was unable to tell the Tribunal which months he had taken the vehicle back to be repaired and what the outcome of each visit had been.

[15] On 25 September 2013 the purchaser says he wrote to Fiat Chrysler NZ Ltd (“FCNZ”) regarding the work done by Andrew Simms. He was unable to produce a copy of his letter but he did produce a copy of a reply sent by Mr Keating the National Service Manager of that company dated 7 October 2013 saying that Andrew Simms appeared to have neglected to follow a repair process to affect repairs to the vehicle and that the purchaser had to “initiate alternative measures for the repair of [the] vehicle.” Mr Keating’s letter says that the trader has never been an agent of FCNZ and that FCNZ was contracted from 1 May 2013 to distribute Jeep vehicles in New Zealand and the trader had never been part of its dealer network. The trader was a retail outlet for the previous distributor.

[16] The purchaser took the vehicle back to the trader on 8 October 2013 and he says they had the vehicle for two and a half weeks. The purchaser says that a Mr Anthony Johns at the trader spoke to Mr Keating by telephone in his presence and it was agreed that the vehicle should be repaired again by Andrew Simms. Mr Keating was to arrange for Andrew Simms to do those repairs.

[17] The purchaser produced a repair order from Andrew Simms dated 15 October 2013 #ASA-CJD-228662 which records the odometer as 6,474 kms and shows the vehicle was taken back to Andrew Simms to have them check for water that was still leaking into the cabin. Andrew Simms sent a service tax invoice dated 4 November 2013 for the work done under that repair order to the manufacturer’s agent for under the manufacturer’s warranty which states:
“Defect: There is water leaking into the cabin
Cause: The lower windscreen seal is leaking
Remedy: removed the freedom tops and folded the windscreen over, we then removed the lower windscreen seal and sealed the leakage area with new fresh sealer.
We then resealed all the hardtop seal and refitted to vehicle
Tested all ok”

[18] The purchaser claims that Andrew Simms were supposed to contact him but failed to do so. On 17 October 2013 the purchaser sent a letter of rejection to the trader saying that he was rejecting the vehicle “due to ongoing issues relating to water ingress into the front floor area and numerous attempts to rectify the fault being unsuccessful by Andrew Simms and [the trader].”

[19] The purchaser was asked by the Tribunal prior to the hearing to take the vehicle to a panel repairer to have it report on the manner the roof rack had been installed. The purchaser produced a letter dated 6 March 2014 from Mr Patrick Okeeffe of Boss Panelbeaters 2000 Ltd which says:
“I have viewed Chrysler Jeep Wrangler Reg nos FRETOW today at my premises at 376 Neilson St Onehunga. I looked at the installation of the roof rack on the rear canopy. In my opinion the roof rack has been installed using the best practice of drilling 6mm holes through the roof and using rivet nuts to secure the roof rack base to roof surface. Additionally the rivet nuts are surrounded with silicone sealant to prevent any leakage. I can’t see any reason this installation would create a leakage problem further forward on the roof.”

[20] The purchaser produced a total of 26 photographs showing the vehicle and water in it as well as photographs showing the repairs that have been done to the vehicle to keep the water out.

[21] The purchaser says that he has removed the towbar, switch installed in the A Pillar, light control unit mounted in the floor well and headlights he had fitted with LED and the only accessory he fitted which he has not removed is the roof rail screwed into the hard top.

[22] Mr Metcalfe for the trader says the first time the purchaser returned the vehicle to the trader to be repaired was on 8 October 2013. Mr Metcalfe says that the purchaser gave evidence of having contacted the trader in March and being told to take the vehicle to Andrew Simms. He says that the purchaser could not have been told to take the vehicle to Andrew Simms in March 2013 because the trader did not cease to service Jeep vehicles until 1 May 2013 when Andrew Simms became an authorised dealer. Until that date the trader serviced Jeep vehicles.

[23] Mr Metcalfe says that the purchaser’s evidence of fitting the roof rack at Easter 2013 occurred before the purchaser complained of water leaks and well before his first visit to Andrew Simms on 29 May 2013 to have them repair water leaks.

[24] When the vehicle was returned to the trader on 8 October 2013 Mr Metcalfe says that the purchaser was told by the trader’s service staff that the fitting of the roof rack to the vehicle’s roof had probably caused the leaks. Mr Metcalfe produced the fitting instructions for the “Rola” TMX series roof racks which he obtained from the purchaser’s solicitors. He drew the Tribunal’s attention to the General Usage Information in the fitting instructions which states:
“The maximum permissible load for your Roof Bar is the lower of the maximum load capacity specified in your vehicle operation manual, or specified as a applying to the Roof-Rack. Do not exceed the maximum specified load capacity.”

[25] Mr Metcalf also produced a copy of the vehicle’s operation manual which he says was supplied to the purchaser when he took delivery of the vehicle. It states at page 98:
“FREEDOM TOP THREE PIECE MODULAR HARD TOP- IF EQUIPPED
CAUTION

• The hard top is not designed to carry any additional loads such as roof racks, spare tires, building, hunting, or camping supplies, and/or luggage, etc. Also it was not designed as a structural member of the vehicle, and thus cannot properly carry any additional loads other than environmental (rain, snow, etc).
• Do not move your vehicle until the top has been either fully attached to the windshield frame and bodyside, or fully removed.

CAUTION!

Failure to follow these conditions may cause interior water damage, stains or mildew.”

[26] Mr Metcalfe submitted that the reason the vehicle leaked was because the purchaser had fitted a roof rack to the roof. He also submitted that the purchaser had lost his right to reject the vehicle under s20(1)(c) of the Act because the vehicle has been damaged after delivery to the purchaser by his drilling holes in the roof to affix a roof rack and the trader says this damage is not related to the vehicle’s state or condition at the time of supply. Mr Metcalfe also submitted that s20(1)(d) of the Act applies. Mr Metcalfe’s last two submissions only need to be considered by the Tribunal if it finds the vehicle did not comply with the guarantee of acceptable quality and the trader did not remedy the fault within a reasonable time.

[27] The Tribunal, in deciding whether this vehicle was of acceptable quality at the time of sale has had regard to the fact that the vehicle was a new Jeep Wrangler sold for $45,500. The vehicle appears to have been free of any leaks from 29 August 2012 when he took delivery until, in the Tribunal’s view, early May 2013. There were some aspects of the purchaser’s evidence which the Tribunal had difficulty accepting as credible. First, the purchaser’s claim he telephoned the trader in March and they referred him to Andrew Simms to have the repairs done. He said he had telephoned the trader in March and made an appointment in March to have the vehicle seen by Andrew Simms on 29 May lacked credibility. The Tribunal accepts Mr Metcalfe’s evidence that the trader did not cease to repair Jeep vehicles until 1 May 2013. The probability is that the purchaser did not contact Andrew Simms about the non-function heater and leaks in the cabin until May and was unable to get the vehicle seen by them until May 29 2013. Second, the purchaser’s claim that he did not wash the vehicle and that it did not rain from 29 August 2012 to April 2013. The Tribunal considers as a matter of common sense that the vehicle was probably washed at some time in the first seven months he owned it. The Tribunal also considers it fairly unlikely, as the purchaser claimed, that the vehicle was not exposed to rainfall in the period from its delivery until April 2013 which was after the date the purchaser says he fitted a roof rack on the vehicle at the end of March or early April 2013. Third, the purchaser’s evidence that the vehicle had started to leak in March before he fitted the roof rack was as vague and unconvincing as the evidence he gave of the date he fixed the roof rack to the vehicle.

[28] The Tribunal thinks it far more likely the leaks did not start until April or May 2013 after the purchaser had fitted the roof rack, a job he did himself without, he admitted, first having read the owners handbook to see if a roof rack could not be fitted to the vehicle without causing interior water damage. It is possible the fitting of the roof rack and the onset of leaks are connected but the Tribunal doubts, despite the purchaser’s action in fitting a roof rack to the vehicle against the manufacturer’s advice in the owners handbook, that the fitting of the roof rack caused the leaks in parts of the vehicle which were some distance from the roof; specifically in the front doors and the windscreen.

[29] The Tribunal has decided that the purchaser has proved that the vehicle was probably not as durable as a reasonable purchaser of a new $46,500 vehicle would regard as acceptable because it leaked. Its reasons are as follows. First, the photographs supplied by the purchaser clearly show the vehicle leaked and that poor repairs were made, or attempted, by Andrew Simms to the vehicle’s seals. Second, the report of Mr OKeeffe regarding the manner the roof rack was fitted to the vehicle shows it was fitted properly and therefore the Tribunal thinks it is unlikely to have been the source of water ingress into the vehicle. Third, the two Andrew Simms’ work orders dated 29 May and 15 October 2013 and the warranty invoices from Andrew Simms to the manufacturer’s agent dated 9 August and 4 November 2013 make no reference to the roof rack being the cause of the leaks. It follows that the Tribunal does not accept the trader’s submission that the vehicle leaked because the purchaser fitted a roof rack to it.

Conclusion on issue [a]:

[30] The vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because it was not water tight and as durable as a reasonable consumer would regard as acceptable.

Issue [b]: Whether the trader remedied the failure within a reasonable time?

Relevant law

[31] Section 18 of the Act provides that where a failure to comply with a guarantee can be remedied the consumer must require the supplier to do so within a reasonable time. If the supplier refuses or neglects or fails to do so the consumer may then have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied, or the consumer may reject the goods. The relevant section is 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."

[32] The definition of “supplier” in s 2(a) of the Act is as follows:
“supplier-
(a) means a person who, in trade,-
(i) supplies goods to a consumer by-

(A) transferring the ownership or the possession of the goods under a contract of sale, exchange, lease, hire, or hire purchase to which that person is a party; or

(B) transferring the ownership of the goods as the result of a gift from that person; or

(C) transferring the ownership or possession of the goods as directed by an insurer; or
(ii) supplies services to an individual consumer or a group of consumers (whether or not the consumer is a party, or the consumers are parties, to a contract with the person);”

Application of law to facts

[33] The purchaser says he took the vehicle back to Andrew Simms on six occasions between May and August. Although the purchaser was unable to say when he took the vehicle to Andrew Simms the Tribunal is in no doubt he took it back to them at least twice; on 29 May and 15 October 2013. The trader also acknowledged that the purchaser had returned the vehicle to them on 8 October to have the leaks repaired. Although Andrew Simms were not the supplier of the vehicle in the sense that they transferred the ownership of the vehicle to the purchaser, they are a “supplier” as defined in (a)(ii) (see paragraph 33 above) because they supplied services (repairs) to a group of consumers under the Chrysler Jeep manufacturer’s warranty.

[34] The Tribunal accepts that discovering the source of water leaks in a vehicle can be a frustratingly difficult and time consuming task for a supplier. However the Tribunal considers the purchaser probably gave the supplier a reasonable time within which to do so and the supplier failed to fix the water leaks after several months of attempting to do so.

Conclusion on issue [b]:

[35] The purchaser complied with his obligation to require the supplier to remedy the failure within a reasonable time but the supplier did not succeed in doing so.

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

Relevant law

[36] Section 18(2) of the Act (reproduced in paragraph 31 (above)) provides that where a supplier does not succeed in remedying a fault the consumer may either have the failure remedied elsewhere and recover the reasonable costs of doing so from the supplier or, subject to section 20, reject the goods.

[37] Section 20 of the Act provides 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.”

Application of law to facts

[38] Mr Metcalfe submitted that s20(1)(c) and or (d) of the Act provided that the purchaser lost the right to reject the vehicle because it was damaged after delivery to him for reasons not relating to its state or condition at the time of sale. He also submitted that the vehicle had been attached to personal property (the roof rack) and could not be detached or isolated without damaging the vehicle.

[39] The Tribunal does not accept the trader’s submission because first, the purchaser has agreed to return the vehicle with the roof rack attached and not to seek any additional compensation from the trader for the value of the roof rack. Hence the Tribunal cannot see any basis on which the vehicle can reasonably be said to have been damaged by the purchaser.

[40] The Tribunal notes from correspondence from a letter dated 25 October 2013 from the purchaser’s solicitors, Gaze Burt to the trader that it was claimed:
“We note that the existence of an attached accessory such as a roof rack does not disqualify our client from exercising his remedies (see Cooper v Ashley & Johnson Motors Limited [1997] DCL 170) as the addition of accessories do not constitute “damage” to the vehicle.” The Tribunal has referred to the decision of Judge G V Hubble in Cooper v Ashley & Johnson Motors Limited and can find no reference in that decision to the Court having decided that the addition of accessories do not constitute “damage”. Nevertheless, it agrees with the proposition advanced by the purchaser’s solicitors.

[41] The Tribunal does not agree with the trader’s submission that the purchaser has lost his right to reject because in terms of s20(1)(d) of the Act the vehicle has been attached to a roof rack. Such an interpretation of s20(1)(d) strains the wording of that sub-section of the Act.

Conclusion

[42] The Tribunal will uphold the purchaser’s written rejection of the vehicle with effect from 17 October 2013 because the purchaser notified the trader of his decision to reject the vehicle and of the grounds for rejection as he was required to do by s22(1) of the Act. Rejection took place within a reasonable time from the time of supply of 29 August 2013 after the defect becoming apparent and after the purchaser had given the supplier and the trader a reasonable time within which to rectify the fault.

Orders

1. The purchaser’s rejection of the vehicle is upheld with effect from 17 October 2013.

2. The trader shall refund the purchaser with the sum of $46,500 upon the purchaser returning the vehicle to the trader with the roof rack attached to the vehicle.

DATED at Auckland this 31st day of March 2014.

C H Cornwell
Adjudicator