786 Holdings Limited v Import Investments Limited - Reference No. MVD 139/2014 (Auckland) [2014] NZMVDT 95 (15 September 2014)

Last Updated: 19 October 2014

Decision No. AK 79/2014

Reference No. MVD 139/2014

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN 786 HOLDINGS LIMITED

Purchaser

AND IMPORT INVESTMENTS LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at AUCKLAND on 10 September 2014

APPEARANCES

Mr M M Peerbhai, Director for the purchaser

Mr A A Patni, witness for the purchaser
Mr P Tweedie, Manager for the trader
Mrs T Tweedie, Administration Manager for the trader

DECISION

Background

[1] On 17 December 2013 Mr Peerbhai agreed to buy, sight unseen, a 2010 Volvo V50 vehicle registration HGD473 (“the vehicle”) from Import Investments Limited (“the trader”) for $15,400. Mr Peerbhai paid a deposit of $3,000 to the trader and when he advised the trader that he did not want to take delivery of the vehicle until later in January 2014 the trader requested and Mr Peerbhai paid a further deposit of $10,000 to the trader. Mr Peerbhai took delivery of the vehicle on 24 January 2014 at which time he requested the vehicle be transferred by the trader into the name of his investment company, 786 Holdings Limited (“the purchaser”) on the advice of his accountant.

[2] The purchaser wishes to reject the vehicle because it claims the transmission is faulty and the trader has failed to supply it with a duplicate key for the vehicle.

[3] The trader says first, that there is nothing wrong with the vehicle’s transmission. Second, that it was not a condition of sale that the trader would supply a duplicate key for the vehicle. The trader says that in April 2014 it did tell the purchaser that it would attempt to obtain a duplicate key for the vehicle from the Japanese auction house and, if it was unable to do so it would buy another key for the vehicle from its supplier providing its supplier was able to make a duplicate key for the vehicle. The trader says it has been unable to obtain a duplicate key from Japan and its local supplier is unable to provide a key for the vehicle. The trader therefore denies that the purchaser is entitled to reject the vehicle.

[4] 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
[5] The issues requiring consideration are:
[a] Whether the parties agreed to contract out of the provisions of the Consumer Guarantees Act 1993 (“the Act”)?
[b] If not, does the vehicle comply with the guarantee of acceptable quality in s.6 of the Act?

Issue [a]: Whether the parties agreed to contract out of the provisions of the Act?

Relevant law

[6] Section 43 of the Act deals with contracting out of the Act. Section 43 has recently been amended but the new provisions only apply to contracts entered into after 17 June 2014. The contract for the sale of this vehicle to the purchaser was made on 17 December 2013. Section 43 of the Act in force at the time the Vehicle Offer and Sale Agreement (“VOSA”) was entered into provides as follows:
“ 43 No contracting out except for business transactions
(1) Subject to this section and to sections 40, 41 and 43A, the provisions of this Act shall have effect notwithstanding any provision to the contrary in any agreement.
(2) Nothing in subsection (1) shall apply to an agreement made between the supplier and a consumer who acquires, or holds himself or herself out as acquiring, under the agreement, goods or services for the purposes of a business provided either—
(a) that the agreement is in writing; or
(b) where it is not possible to conclude an agreement in writing because the supplier is unaware of the acceptance by the consumer of the supplier’s offer at the time of acceptance, that the supplier has clearly displayed the terms and conditions of the service at every place of the supplier’s business.”

[7] The VOSA the parties signed contains the following acknowledgment:
“7.2 I am acquiring the vehicle for business purposes, and agree that the Consumer Guarantees Act does not apply.”

[8] In order to show that it had lawfully excluded the Act from applying to the sale of this vehicle the trader must prove, on a balance of probabilities, that the purchaser and the trader agreed to exclude the provisions of the Act because the purchaser was acquiring or had held himself out as acquiring, under the VOSA, the vehicle for the purposes of a business.

[9] In Kerry Stone Ltd v Knowles [2006] NZHC 1289; [2007] DCR 318, (2006) 11 TCLR 768, Venning J held that provisions in standard form contracts which require the consumer to declare that they are acquiring goods or services for business purposes will have evidential value only and are unlikely to be conclusive as to business purpose in the absence of supporting evidence as to business purpose or holding out.

Application of law to facts

[10] Mr Peerbhai told the Tribunal that he is an investor from Malaysia. He says he bought the vehicle for his personal use and to take his daughter to school. He also uses the vehicle to travel to investigate investment opportunities. He says he did not tell the trader’s manager, Mr Tweedie when he bought the vehicle that he was buying it for the purposes of his business. He says that there was no discussion between himself and the trader about his purpose in buying the vehicle at the time he agreed to buy it in December 2013, initially with title to be taken in his name. He says that he signed the VOSA without reading clause 7.2 and was unaware of its contents.

[11] In the Kerry Stone case, there was conflicting evidence as to the purchaser’s purpose in buying the vehicle- the contract was filled out in a way that was contradictory. The purchaser made it clear that he was buying the vehicle for family use but had also indicated an intention to claim a GST deduction. In those circumstances (incomplete and conflicting evidence) the High Court was not prepared to infer business purpose.

[12] Having regard to that case, the Tribunal is not prepared to find that the vehicle was purchased for business use in this case. There was no evidence that the vehicle was sign written with the purchaser’s name or that the purchase price was paid with a business cheque. The vehicle was purchased by Mr Peerbhai initially in his name and only at or immediately prior to its being supplied on 24 January 2014 did Mr Peerbhai inform the trader that he wanted the vehicle registered in the company’s (the purchaser’s) name. Mr Peerbhai gave evidence the vehicle was used for family transport.

Conclusion on issue [a]:
[13] For these reasons the Tribunal concludes that the Act applies to the purchase.

Issue [b]: Did the vehicle comply with the guarantee of acceptable quality in s.6 of the Act?

Legal Principles

[14] The Tribunal only has jurisdiction under s89 of the Motor Vehicle Sales Act 2003 to inquire into and determine applications or claims under the following Acts if that application or claim is in respect of the sale of any motor vehicle: the Sale of Goods Act 1908, the Fair Trading Act 1986, the Consumer Guarantees Act 1993 and the Contractual Remedies Act 1979. The Tribunal does not have jurisdiction to inquire into and determine contract based claims.

[15] 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.”

[16] 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.”

[17] 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.

[18] 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 is of a “substantial character” within the meaning of s 21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser exercised its right to reject the vehicle within a reasonable time.

Application of law to facts

[19] The purchaser bought the vehicle sight unseen. It agreed to pay $15,400 for the vehicle and an additional $300 for on road costs, $800 to have a New Zealand compatible GPS supplied and fitted to the vehicle and $1300 for a Protecta mechanical breakdown insurance policy; a total of $17,800. The parties entered into a VOSA which also included the following special condition:
“replace 3 plastic parts as discussed
expand band range on radio for additional $250 to be paid when done”

(a) Duplicate key
[20] Mr Peerbhai says that at the time he collected the vehicle he asked the trader to provide him with a spare or duplicate key for the vehicle. Mr Tweedie says he does not recall any discussion about a duplicate key at the time of sale. He says that it was not until Mr Peerbhai had a problem getting into the vehicle one Sunday that he contacted Mrs Tweedie and demanded that a locksmith be sent out to unlock the vehicle. Mr Tweedie says that the next day Mr Peerbhai dropped the key to the vehicle at the trader’s premises and Mr Tweedie says he went out to where the vehicle was parked and without any difficulty unlocked the vehicle and drove it back to the trader’s premises. Mr Tweedie says he explained to Mr Peerbhai that when the trader bought the vehicle in Japan at auction it had only received one key for the vehicle, not two. Apparently this is common for vehicles sold at auction in Japan. Mr Tweedie told the Tribunal that he had agreed that the trader would contact the Japanese auction house and see if they could obtain the duplicate key from the previous owner of the vehicle. Mrs Tweedie gave evidence that she had attempted to do so. Mr Tweedie also says he told Mr Peerbhai at that time that if the trader was unable to get a duplicate key from Japan from the previous owner it would see if its supplier, a firm named Prestige Autos, could make a duplicate key for the vehicle and would pay the cost of making a duplicate key for which Prestige would charge $200 plus GST. Mr Tweedie gave evidence that a duplicate key could not be obtained from Japan and that Prestige Autos were unable to make a key for a 2010 Volvo V50. The trader therefore considered it had discharged its promise to the purchaser.

[21] Mr Peerbhai produced a quote from Archibald & Shorter of $779.87 for a new remote key for the vehicle which he considers the trader should pay.

(b) Untidy cables
[22] Mr Peerbhai says that when he had a band expander installed in the vehicle the installer pointed out that several cables from the GPS were not properly tied up with ties. He produced a quote of $380 to $450 to have that done. He says the cables cannot be seen from the vehicle’s cabin.

(c) Transmission Fault
[23] Mr Peerbhai says that the vehicle’s transmission was noisy when he engaged reverse gear. He returned the vehicle to the trader to have this investigated. He says the trader had the transmission fixed without his consent. The trader agrees that the vehicle was returned to it on 17 April 2014 by Mr Peerbhai who claimed the transmission was noisy. The trader sent the vehicle to Prestige Motors who were unable to fault it. They subsequently sent the vehicle to Newdane Motors (2007) Ltd (presumably for a second opinion) who, in turn sent the vehicle, without the trader’s knowledge, on 10 June to Kaspa Transmissions Otahuhu 2005 Ltd. The trader says it was unaware the vehicle had been seen by Kaspa until it received the purchaser’s application. It says it has subsequently obtained a copy of an invoice sent by Kaspa to Newdane Motors which states that Kaspa scanned the vehicle’s computers and found two fault codes logged in the transmission control module and the configuration software. Kaspa reset the computers and performed readaption, road tested and checked for fault codes and report no fault codes were logged. They charged Newdane Motors $97.75 on 10 June 2014 who in turn charged that amount to Prestige Motors who charged the trader $100.63 on 11 June 2014.

[24] The purchaser was requested by the Tribunal prior to the hearing to obtain a transmission specialist’s report on the vehicle to prove the existence, nature and cost to repair any fault with the vehicle’s transmission. Mr Peerbhai told the Tribunal he had not done so because there was nothing wrong with the transmission at the present time.

[25] The Tribunal in deciding if the vehicle was of acceptable quality at the time of sale has had regard to the following factors:
First, the vehicle’s age of three years at the date of sale, second the relatively high mileage of 102,146kms and third, the price paid for the vehicle of $15,400. The vehicle had a minor fault with its transmission which in the Assessor’s view may have been caused by the vehicle’s battery going flat at some time which can cause fault codes to be logged in the vehicle’s transmission computers. That fault was rectified by the trader at its expense when the purchaser returned the vehicle to the trader and asked it to investigate and rectify the transmission fault. The cables, which the purchaser says are untidy do not amount to a fault particularly as the cables are not visible unless the radio or the GPS is removed. Apart from the minor transmission fault the vehicle appears to the Tribunal to have complied with the guarantee of acceptable quality and the purchaser has no basis to reject the vehicle.

Conclusion on issue [b]:

[26] The vehicle complied with the guarantee of acceptable quality in s6 of the Act. There was no evidence the transmission is faulty and hence there is no basis on which the purchaser’s claim to reject the vehicle can be granted. Accordingly the purchaser’s application will be dismissed.

[27] The Tribunal does not have jurisdiction to inquire into and determine the purchaser’s claim that after it bought the vehicle the trader promised to provide a duplicate key because the Tribunal does not have jurisdiction to hear contract based claims. The purchaser can persue that matter in the Disputes Tribunal if it wishes to do so but in the Tribunal’s view the purchaser gave no consideration for that promise and hence is unlikely to be successful.

Costs

[28] 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.”

[29] The purchaser claimed in its application that the main focus of its complaint was the transmission. On 29 August 2014 the Tribunal sent the purchaser a written direction to obtain a transmission specialist report as to what faults the transmission has and the cost to remedy them. The purchaser did not do so. It failed to produce any evidence whatsoever that there was anything wrong with the transmission. The Tribunal considers the purchaser’s claim was vexatious and ought not to have been brought. The Tribunal considers the purchaser wasted the Tribunal’s time and it has therefore decided to order the purchaser to pay the reasonable costs of the Tribunal’s hearing of $500.

Orders
1. The purchaser’s application to reject the vehicle is dismissed.

2. The purchaser shall, within 14 days of the date of this order pay The Crown the reasonable costs of the Tribunal’s hearing of $500 by making payment to The Ministry of Justice, Tribunals Unit, Chorus House, Level 1, 41 Federal Street, Auckland City 1010.

DATED at Auckland this 15th day of September 2014.

C H Cornwell
Adjudicator