Szentesi v Goryachev t/a Greenwise Cars - Reference No. MVD 84/14 (Auckland) [2014] NZMVDT 61 (5 June 2014)

Last Updated: 22 July 2014

Decision No: AK:55/2014
Reference No. MVD 84/14

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN GABOR SZENTESI

Purchaser

AND NIKOLAI GORYACHEV T/A GREENWISE CARS

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr G Middleton, Assessor

HEARING at AUCKLAND on 3rd June 2014

APPEARANCES

Mr G Szentesi, the purchaser

Mrs D Szentesi, the purchaser’s wife
Mr N Goryachev, the trader
Mr D Fedovov, support person for the trader

DECISION

Background

[1] On 29 October 2013 Mr Szentesi (“the purchaser”) bought a 2003 Ford Explorer registration BFG483 (“the vehicle”) from Nikolai Goryachev trading as Greenwise Cars (“the trader”) for $9,400. The purchaser claims a connecting rod in the vehicle’s engine failed rendering a large hole through the engine block on 29th March 2014 destroying the engine. The purchaser rejected the vehicle under the Consumer Guarantees Act 1993 (“the Act”) on 30th March 2014 and seeks a full refund of the purchase price from the trader.

[2] The trader says first, that he sold the vehicle on behalf of another person and that he is not liable for the vehicle’s condition. Second, that the purchaser did not service the vehicle after buying it and this could have contributed to the engine failure.

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

Issues:
[4] The Tribunal considers that the following issues require consideration:
[a] Whether the Act applies to “on behalf” sales and if so whether the vehicle sold to the purchaser was of acceptable quality at the time of sale?
[b] If not of acceptable quality, whether the failure is one of substantial character?
[c] Is the purchaser entitled to reject the vehicle?

Issue [a]: Whether the Act applies to “on behalf” sales and if so whether the vehicle sold to the purchaser was of acceptable quality at the time of sale?

Relevant law

[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, as applicable to the circumstances of the case. In this application the Consumer Guarantees Act is applicable.

[6] Section 2 of the Act defines “supplier” as a person in trade and that it includes:
“(iv) a person who, in trade, is acting as an agent for another, whether or not that other is supplying in trade:”

[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 s 7 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 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 s
7(1)(a) to (e) of the Act as modified by the factors set out in s 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 s19 of the Act. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s21, 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 and his son travelled from Kaitaia to Auckland after seeing the vehicle advertised for sale on TradeMe. The text of the advertisement was produced by the purchaser and it reads as follows:-

“Ford Explorer XLT 2003 – 655857539
Features:
ABS brakes
Air conditioning
Alloy wheels
Central locking
Driver airbag
Power steering
Towbar
Thank you for taking a look at my listing
Ford explorer xlt 4wd 2003 model
Features:
nz new car
great and reliable 4000cc chainbelt (sic) engine
cruise control
great tires (two tires- brand new Dunlop, other two- 80% thread (sic)
front and side srs airbags
running boards roof rails
keyless entry key
car is in tidy condition
there is some sun fade on the top but otherwise body condition is good
interior is also on (sic) good condition for age and mileage
buy with confidence- I am a registered dealer and all my cars selected by myself and imported from japan
nationwide delivery is available at trade price for non akl buyers
we offer competitive finance and happy to consider your trade in vehicle/s.
please see my other listings under our tm name putnik or visit our website
http://www.greenwisecars.co.nz”

[12] The purchaser says that after speaking to the trader on the telephone and agreeing a price for the vehicle he travelled to Auckland and met the trader at his premises on 29th October 2013. The purchaser took the vehicle for a test drive of about 4kms. On returning from the test drive he went into the trader’s office and paid the trader $9,400 in cash for the vehicle. The purchaser was given a hand written receipt prepared by the trader which he and the trader both signed. This receipt is unusual in two respects. First, the purchaser has chosen to obliterate the price he paid for the vehicle. He told the Tribunal the reason he did this was to keep the price he had paid for the vehicle private from his family. The second unusual aspect of the receipt is that it is written on an old form MVDI window card. The window card describes the vehicle as a “Category D Motor Vehicle which is sold with a current warrant of fitness and is subject to the terms under the Sale of Goods Act 1908 as to merchantable quality and fitness for purpose”. The window card described the vehicle by reference to its registration number and showed its odometer as 175,000km. Under a heading “Other required particulars” the words: “Trade in vehicle selling as is” appear. The trader did not supply the purchaser with either a vehicle offer and sale agreement or a consumer information notice in the form prescribed by cl 7 of the Consumer Information Standards (Used Motor Vehicles) Regulations 2008.

[13] After paying for the vehicle the purchaser drove it back to Kaitaia. When he arrived at his home the purchaser discovered that the lower bolt holding the brake caliper on the front wheel was missing. He subsequently bought a bolt and his son fitted it to the vehicle on 6th November.

[14] After replacing the brake caliper bolt the vehicle could not be started. The purchaser diagnosed the cause as a faulty starter motor and he telephoned the trader who agreed to the purchaser buying a replacement starter motor for the vehicle on TradeMe. The trader reimbursed the purchaser with $141 for the starter motor by lodging funds from his daughter’s bank account into the purchaser’s bank account on 10th November 2013.

[15] The purchaser used the vehicle from 10th November 2013 until 29th March 2014 to travel about 3,967kms. On 29th March 2014 after travelling about 53kms in the vehicle that day the purchaser says he heard a sudden loud noise and the vehicle’s cabin became filled with smoke and oil and water poured onto the road. None of the vehicle’s engine warning lights had lit up. When the purchaser examined the engine he found a connecting rod had punctured the vehicle’s engine block. He produced photographs showing the damage to the engine.

[16] On 30th March the purchaser sent the trader an email rejecting the vehicle. The trader replied by email on 31st March saying the vehicle had never been the trader’s stock and claimed he provided VOSA’s and CINs for all cars he sells. The trader wrote:
“I understand that this Ford has been sold privately by one of our contractors who has been doing panelbeating for us at this time and rented garage on the back of our yard. We did not accept this vehicle as our stock trade in due to its high mileage and some panel damage . So its owner offered vehicle to Vadim. He has taken it from previous owner and later get (sic) it sold. Please refer to ownership history records from NZTA database (attached). I acted as interpreter in this transaction and you were fully informed that this car did not go through any mechanical inspection and sold on as is basis. This is reflected on the receipt you have signed.”

[17] The purchaser told the Tribunal he and his wife live on a rural property about 25kms from Kaitaia and 1.5kms from a public road which is not served by public transport. His house does not have electricity. His six children are home schooled or do University studies by correspondence. He says his family were stranded and that the vehicle was his life line which he needed in order to get LPG gas cylinders and food. The nearest supermarket is a 30 minute drive from his home.

[18] The purchaser obtained an estimate dated 5th May 2014 from Coopers Beach Garage of the cost of replacing the engine in the vehicle of $5,205.51.

[19] Mr Goryachev told the Tribunal that at the time the vehicle was sold to the purchaser he was and had for some six years been trading as a sole trader under the name of Greenwise Cars under M139972. The Register of Motor Vehicles shows that Greenwise Limited, a company the trader incorporated on 25th May 2007 did not become a registered motor vehicle trader (M259907) until 13th December 2013. Accordingly the Tribunal has amended the application to cite the trader as the respondent rather than Greenwise Limited.

[20] The trader told the Tribunal that the vehicle was brought to his yard by a customer who wanted to trade it but since he specialises in hybrid and low mileage cars he refused to accept the vehicle as a trade-in due to its high mileage, unknown service history and the presence of some panel rust and damage. The vehicle was then purchased by Vadim Gourdjia a panel beater of Nor-East Panel and Paint Ltd who rented a shop next to the traders. The trader says he met the purchaser and helped Vadim negotiate the price and had “a very brief interaction with the purchaser”. The trader says he wrote out the receipt for the vehicle in the purchaser’s presence and he and the purchaser both signed the receipt. He says he cannot remember how much the purchaser paid him in cash for the vehicle but thought that Vadim had told him it was $7,500 but he was unsure despite having counted out the money when he received it from the purchaser. He says he explained to the purchaser that the vehicle was being sold by a “private and unrelated party and as such no warranties or guarantees were provided and no formal contract of sale was obviously concluded.” The trader says that Vadim asked the trader to collect the cash payment for the vehicle which he did on his behalf claiming he was acting as “a mere interpreter in this transaction and not a seller.” The trader states in a letter he sent to the Tribunal that “I never took any responsibility for the sale of the vehicle and clearly stated it to the complainant at the time of sale and confirmed it when he contacted me in relation to car breakdown.”

[21] The trader says that he noticed the engine oil in the vehicle’s sump was dirty and the vehicle was due for a service when it was sold to the purchaser. He says that the vehicle was not serviced by the purchaser after he bought it and he thinks the purchaser’s failure to service the vehicle in due time could have contributed to engine break down.

[22] The trader told the Tribunal that “due to family circumstances” his witness, Vadim, was unable to attend the hearing and was overseas. He also stated in his written evidence that there were “at least two people who was at the yard when this sale was concluded and they both could become my witnesses in case this hearing will go to District Court, but they are very busy people and I feel uncomfortable asking them to spend half a day to resolve my problem.”

[23] The Tribunal, having listened to the parties and read the TradeMe advertisement, the receipt signed by the trader and received evidence of how the trader received the cash price from the purchaser and subsequently reimbursed the purchaser for the starter motor, is in no doubt whatsoever that the trader sold this vehicle to the purchaser as a trader. The trader claimed as his defence that he was selling the vehicle “on behalf” of a Mr Vadim Gourdjia, a private seller and a panel beater. The Tribunal finds that defence has little credibility, merit or relevance because the Act clearly applies to traders supplying vehicles as agents for another person. If the trader had witnesses who could have provided relevant evidence he should have arranged for them to be present at the hearing to give sworn evidence. He chose not to do so. He also failed to attempt to mediate the dispute with the purchaser after receiving the purchaser’s application. With regard to the trader’s claim that he was unable to remember the price paid for the vehicle the Tribunal considers that claim to be incredible particularly when the trader counted out the cash handed to him by the purchaser for the vehicle.

[24] The vehicle sold to the purchaser by the trader was a moderately high mileage (172,132kms), 11 year old Ford Explorer with an unknown service history. However the Tribunal considers that for a sale price which it accepts was probably $9,400 the vehicle should have lasted longer than 4,000kms and five months without a conrod failure. The Tribunal accepts that the trader was negligent in selling a vehicle which he knew needed an oil service and the purchaser was careless in buying a vehicle with an unknown service history without immediately getting it serviced. However the Tribunal does not consider there is sufficient evidence that the purchaser’s carelessness in failing to get the vehicle serviced caused the damage to the vehicle’s engine. The Tribunal therefore finds the vehicle did not comply with the guarantee of acceptable quality because it was not as durable as a reasonable consumer would regard as acceptable.

Conclusions on issue [a]

[25] The Tribunal finds first, that the trader sold the vehicle in trade to the purchaser and is thus a “supplier” and is responsible to the purchaser for the vehicle complying with the guarantees in the Act. The trader acknowledged at the hearing that he was aware of the provisions of the Act and so he is also aware that his attempt to sell the vehicle without any warranties was a breach of s43(4) of the Act. Second, that the vehicle failed to comply with the guarantee of acceptable quality because it was not reasonably durable.

Issue [b]: Is the failure one of substantial character?

Relevant law

[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 is satisfied, on the basis of the purchaser’s evidence and in particular the colour photographs of the engine he produced to show the damage to the engine that the vehicle’s engine is irreparable and the likely cost of replacing it is $5,200.

Conclusion on issue [b]

[28] The Tribunal considers that the vehicle would not have been acquired by a reasonable consumer acquainted with the nature and extent of the failure and so the failure is one of substantial character in terms of s21(a) of the Act.

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

Relevant law

[29] Section 18(3) of the Act provides as follows:
“(3) Where the failure cannot be remedied or is of substantial character within the meaning of section 21, the consumer may-
(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.”

[30] Section 20 of the Act provides that the right to reject goods will be lost if it is not exercised within a reasonable time of the date of supply of the goods. Section 22 of the Act requires a consumer who wishes to exercise the right to reject to notify the supplier of the decision to reject and of the grounds for rejection.

Application of law to facts

[31] The Tribunal finds the purchaser complied with s 22(1) of the Act by sending the trader an email rejecting the vehicle on 30th March 2014, the day after the engine failure which was the ground for rejection. The Tribunal notes that the purchaser rejected the vehicle within approximately five months of the supply date of 29th October 2013 which is within a reasonable time of the time of supply as required by s 20 of the Act.

Conclusion on issue [c]

[32] The purchaser’s rejection of the vehicle will be upheld.

[33] The vehicle cannot be returned to the trader without transporting it from Kaitaia to Auckland and the cost of transporting it back to the trader will incur the purchaser in a significant cost. The Tribunal will therefore order that the purchaser is to retrieve the vehicle at his cost from his friends’ property and tow it onto his property at 101 Burma Road, Peria, Kaitaia. When the purchaser has done so he is to notify the trader who shall, at the trader’s expense, collect the vehicle from the purchaser’s home, and refund the full purchase price of $9,400 to the purchaser.

Costs

[34] 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.”

[35] The Tribunal believes this application ought reasonably to have settled before proceeding to a hearing because the trader failed, without reasonable excuse, to take part in the discussions he was requested by the Tribunal in writing to institute in terms of clause 5(1)(b) of the Schedule to the Motor Vehicle Sales Act 2003. The Tribunal also notes that the trader is experienced; he has been registered as a motor vehicle trader’s (registration number M139972) since 11th December 2007 and because the trader conceded in the course of making his submissions to the Tribunal at the hearing that his case was weak. 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 under the Consumer Guarantees Act 1993 is upheld with effect from 30th March 2014.

2. The purchaser shall immediately, at his cost, salvage the vehicle and have it towed onto his property. When the purchaser has the vehicle on his property he should notify the trader by email that the vehicle is ready for collection from 101 Burma Road, Peria, Kaitaia.

3. The trader shall refund to the purchaser the sum of $9,400 by direct crediting that sum to the purchaser’s bank account details of which are to be sent by the purchaser to the trader.

4. As soon as the trader has refunded the purchaser with $9,400 he shall arrange at his expense to uplift the vehicle from the purchaser’s property.

5. 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 5th day of June 2014

C.H Cornwell
Adjudicator