Hopkinson v Parkinson t/a Motueka Trading Post - Reference No. MVD 55/14 (Wellington) [2014] NZMVDT 76 (22 July 2014)

Last Updated: 20 August 2014

Decision No WN 11 /2014

Reference No. MVD 55/14

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN JANE HOPKINSON

Purchaser

AND GARY PARKINSON trading as MOTUEKA TRADING POST

Trader

BEFORE THE WELLINGTON MOTOR VEHICLE DISPUTES TRIBUNAL

N J Wills - Barrister, Adjudicator
S Johnson - Assessor

HEARING at NELSON on 22 May 2014

APPEARANCES

Jane Hopkinson, purchaser
Manu Berger, witness for the purchaser
Tom Bletso, witness for the purchaser (by telephone)
Gary Parkinson, trader

DECISION

Background

[1] In around late January 2014, Jane Hopkinson (the purchaser) purchased a 2000 Land Rover Discovery (registration EHY 795), (the vehicle) for $9,000 from Gary Parkinson trading as Motueka Trading Post (the trader). Ms Hopkinson alleges the vehicle is not of acceptable quality and that she is entitled to reject it and obtain a refund of the purchase price.

[2] Mr Parkinson denies that Ms Hopkinson is entitled to reject the vehicle.

[3] Prior to the commencement of the Tribunal’s inquiry the Tribunal appointed Mr Johnson who took the oath required of an assessor by Schedule 1, cl.10(2) of the Motor Vehicle Sales Act 2003. As an assessor appointed pursuant to the Motor Vehicle Sales Act 2003 Mr Johnson assisted the adjudicator but the application was determined by the adjudicator alone.

Facts
Background

[4] Ms Hopkinson entered into an agreement with the trader to buy the vehicle for $9,000 in early December 2013. Contrary to regulatory requirements, the agreement was not recorded in writing, nor was a Consumer Information Notice provided to Ms Hopkinson.

[5] The essential details of the sale are not disputed. Ms Hopkinson agreed to pay $9,000 for the vehicle. $2,000 of the purchase price was funded by a trade-in of another vehicle. Ms Hopkinson paid $2,000 as a deposit on 9 December 2013, another $2,000 on 10 January 2014 and the final payment of $3,000 on 28 January 2014. When she took possession of the vehicle after the final payment, the odometer reading was 131,618 kilometres.

[6] Mrs Hopkinson told the tribunal that since purchasing the vehicle, it has used significant amounts of oil. Mrs Hopkinson and her partner Manu Berger have kept detailed records of the vehicle’s oil consumption. From their records they have determined that the vehicle is using around a litre of oil for every 300 kilometres travelled. The records they have kept support that conclusion.

[7] The problem first became apparent immediately after purchase when Mr Berger noticed excessive tappet noise. Mr Berger checked the oil and found there was no oil registering on the dipstick. Mr Berger contacted Mr Parkinson who brought around some oil and added between three and four litres to the engine.

[8] Mr Parkinson suggested a wait and see approach. Shortly after that Mrs Hopkinson and Mr Berger drove the car from Nelson to the West Coast (a distance of between 200 and 300 kilometres). When they arrived in Westport, they checked the oil. The oil level had dropped so they topped it up with a litre of oil. They advised the tribunal that it has always been their practice to check the oil level after topping up to ensure the engine was filled with oil to the correct level.

[9] When they got back to Nelson, Mrs Hopkinson and Mr Berger contacted Mr Parkinson. Arrangements were made for the car to go to Nelson Independent Land Rover Centre Ltd (Nelson Independent), Land Rover specialists. The invoice from Nelson Independent indicates that the vehicle had a blocked PCV system (positive crankcase ventilation system). The PCV system is an emissions control system which takes crankcase combustion gases generated by the engine and feeds them in a controlled fashion into the air intake system.

[10] The vehicle was checked over, the oil and filter changed and a compression test undetaken. Compression was good but ash deposits on the spark plugs were noted indicating that the engine was burning significant amounts of oil. The recommendation was that the purchaser monitor oil consumption. The invoice also notes that the air flow meter was “on the way out”.

[11] Mr Parkinson paid for these repairs and investigations – a total of $399.17. Mrs Hopkinson told the tribunal that when she collected the car from Nelson Independent she was advised her that if the oil consumption persisted she should take the vehicle back to the trader.

[12] The oil consumption problem persisted. On 10 March 2014, Mrs Hopkinson sent a letter to the trader setting out in some detail the history of the oil consumption problems – advising in particular that the vehicle had used 22 litres of oil since she bought it. Mrs Hopkinson asked for either a refund of $3,000 and the engine reconditioned or to return the vehicle to the trader for a complete refund.

[13] Mr Parkinson responded the next day. He declined to take up either of Mrs Hopkinson’s options. He noted that 12 weeks had elapsed since purchase, that Mrs Hopkinson had had the vehicle inspected before she bought it, that Mrs Hopkinson had been offered her old car and money back but this offer was declined.

[14] The last point was disputed by Mrs Hopkinson who told the tribunal that any offers to take the vehicle back had been couched in terms of taking the vehicle back to sell on behalf as opposed to providing a refund.

[15] The parties exchanged correspondence but were unable to reach an agreement. Mrs Hopkinson filed this application on 18 March 2014.

[16] In mid-April 2014 the trader’s mechanic at Stevens Automotive Ltd (Stevens) inspected the vehicle. Mr Parkinson provided the tribunal with a copy of Stevens’ invoice. The invoice confirms Mr Parkinson’s evidence to the tribunal that he was advised by Stevens that the vehicle had been overfilled with oil by 1.5 litres. The invoice also notes that the wrong grade of oil was being used in the vehicle and a faulty air flow meter.

[17] Mr Parkinson told the tribunal that the advice he had received from Stevens was that over-filling the vehicle could cause significant damage by creating a lack of breathing room in the sump which in turn blows out the seals. Mr Parkinson told the tribunal that the vehicle was blowing black smoke when presented at Stevens Automotive and that this was consistent with a diagnosis of blown seals. He also said that the fact that Stevens had not been able to find any oil leak was consistent with this diagnosis.

[18] Mr Parkinson was not able to arrange for the mechanic who inspected the vehicle to attend the tribunal hearing. He told the tribunal that the mechanic did not want to be involved in the hearing.

[19] Mrs Hopkinson obtained an estimate for the cost of repairs fron Nelson Independent. The estimate was to strip and re-build the engine at an estimated cost of around $5,400 plus GST.

[20] The tribunal heard from Mr Bletso, from Nelson Independent. Mr Bletso is a qualified automotive technician (English qualifications) with around 16 years experience. Mr Bletso told the tribunal that he inspected the vehicle and determined that the next step in remedying the oil consumption issue was to strip and rebuild the engine. He told the tribunal that he had eliminated any other possible causes. When questioned by the tribunal’s assessor Mr Johnson as to why valve guides had not be included in the repair estimate, Mr Bletso agreed that these may also be implicated in the oil consumption problem and estimated that should it be necessary to replace the valve guides, an additional $800 plus GST would need to be added to the repair estimate.

[21] Mr Parkinson told the tribunal that he did not agree that the vehicle needs a rebuild. He told the tribunal that he would have preferred that the vehicle was checked out by a MTA assured repairer (Nelson Independent is not MTA assured). In response to questions from the tribunal, Mr Hopkinson confirmed that he had not made any request of the purchaser to have the vehicle checked out by a MTA assured repairer.

The Consumer Guarantees Act 1993

The guarantee of acceptable quality

[22] Section 6 of the Consumer Guarantees Act 1993 provides a guarantee as to the acceptable quality of goods sold:

"6 Guarantee as to acceptable quality

(1) Subject to section 41 of this Act, where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality.

(2) Where the goods fail to comply with the guarantee in this section,—

(a) Part 2 of this Act may give the consumer a right of redress against the supplier; and

(b) Part 3 of this Act may give the consumer a right of redress against the manufacturer."

[23] Section 7 sets out a definition of the guarantee of acceptable quality:

"7 Meaning of “acceptable quality”
(1) For the purposes of section 6 of this Act, 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,—
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—
(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."

[24] 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) as modified by the factors set out in section 7(1)(f) to (j) from the perspective of a “reasonable consumer”. This test is an objective test. It is not a review of those factors from the purchaser’s subjective perspective.

[25] In this case the goods supplied are an 14 year old second hand Land Rover with an odometer reading of 131,618 kilometres sold for a purchase price of $9,000. The tribunal accepts the evidence of Mr Bletso as to the state of the vehicle. It is consuming excessive oil and needs to be stripped and rebuilt. The oil consumption was noted immediately after purchase and has continued since that time.

[26] Relying on the expertise of the tribunal’s assessor Mr Johnson, the tribunal has noted a number of items in the Nelson Independent estimate of repairs that are not directly related to the oil consumption issue, including the big end bearing set, the camshaft, lifter set, water pump, frost plugs and cam bearing set. Mr Johnson also considers the reconditioner’s machining charges could be reduced by approximately half. Adjusting the estimate to deduct those items and costs that are not related to the oil consumption problem (and not taking account of the possibility of the requirement for replacment of the valve guides), the tribunal concludes that the minimum repair costs are around $4,000 – almost half of the purchase price.

[27] The tribunal has considered and rejected Mr Parkinson’s submission that the vehicle has been over-filled by the purchaser and that this has caused the failure. Mr Parkinson’s submissions about the diagnosis of the problem were unhelpful. For example, he submitted that the fact the vehicle was emitting black smoke was consistent with his mechanic’s diagnosis that the vehicle had been over-filled with oil when in fact black smoke is an indication of unburned fuel.

[28] While the tribunal accepts that it is possible that over-filling the engine with oil may result in blown seals (as submitted by Mr Parkinson), the tribunal is not persuaded that this occurred. The tribunal found Mrs Hopkinson and Mr Berger to be careful and honest witnesses. On being questioned by the tribunal’s assessor, it was clear that they understood how to top up the oil – and of particular relevance given Mr Parkinson’s submission, that they understood the necessity of checking the oil level after the oil had been added to ensure the engine was not over-filled.

[29] The tribunal finds that the car failed the guarantee of acceptable quality. A reasonable purchaser would not expect to have to undertake an engine strip and rebuild so soon after purchasing a vehicle.

Was the failure a substantial failure in the guarantee of acceptable quality?

[30] Section 21 sets out the circumstances in which a failure is deemed to be a substantial failure in the guarantee of acceptable quality. Whether or not the failure is substantial as defined in section 21 has ramifications for the remedies available to the purchaser.

[31] Section 21 provides:

“21 Failure of substantial character

For the purposes of section 18(3) of this Act, a failure to comply with a guarantee is of a substantial character in any case where—

(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 one 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) of this Act 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 of this Act because they are unsafe.”

[32] Having carefully considered the facts of this case, the tribunal finds that the failure is a substantial failure. The tribunal is satisfied that a reasonable purchaser, acquainted with the nature and extent of the problems with the vehicle would not have purchased it.

What are the remedies available to the purchaser?

[33] Section 18 of the Consumer Guarantees Act 1993 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."

[34] In this case the tribunal is satisfied that Mrs Hopkinson has grounds for rejection because the failure in the guarantee of acceptable quality was a substantial failure (section 18(3)(a)).

Orders

1. Mrs Hopkinson is entitled to reject the vehicle.
2. Mr Parkinson shall pay Mrs Hopkinson $9,000.
3. Once the payment in order 2 has been paid, Mrs Hopkinson shall return the vehicle to the trader.
   

DATED at WELLINGTON this 22nd day of July 2014

___________________
N Wills
Adjudicator