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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 31 March 2015
Decision No. AK 10 /2015
Reference No. MVD 213/2014
IN THE MATTER of the Motor Vehicle Sales Act 2003
AND
IN THE MATTER of a dispute
BETWEEN ISAAC JOHN KOKIRI
Purchaser
AND SOUTHEYS AUTO WORLD LIMITED
Trader
BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S Johnson,
Assessor
HEARING at Wellington on 28 January 2015
APPEARANCES
Mr I J Kokiri, the purchaser
Ms J Matthews, purchaser’s partner and
witness
Mr N Hickland, support person for the purchaser
Mr B R Southey,
Customer Care Manager for the trader
Ms S J McDonald, Sales Person for the
trader
DECISION
Background
[1] On 26 July 2013 Mr Kokiri (“the purchaser”) bought a 2008 Nissan Navara double cab utility vehicle registration EJN655 (“the vehicle”) from Southeys Auto World Limited (“the trader”) for $20,000. The purchaser rejected the vehicle on 26 September 2014 because he says it is has had serious problems since he purchased it. The purchaser also says the trader misrepresented the vehicle to him as having a reconditioned engine whereas it only had a replacement second hand engine.
[2] The trader denies that the purchaser is entitled to reject the vehicle because it says the vehicle was fit for purpose when it was sold to the purchaser, and the purchaser has not serviced the vehicle properly during the period of over 14 months to the date of rejection that he owned and used it to travel some 29,197kms. The trader says the vehicle complied with the guarantee of acceptable quality having regard to its age, mileage type and price.
[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal appointed Mr Johnson as expert assessor to assist in the determination of the complaint. Mr Johnson took the oath required by clause 10(2) of Schedule 1 to that Act. As an assessor Mr Johnson 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 (“the
CGA”)?
[b] Is the purchaser entitled to reject the vehicle under the
CGA?
[c] Did the trader misrepresent the vehicle to the purchaser?
[d] If
so what remedy is the purchaser entitled to under the Fair Trading Act 1986
(“FTA”)?
Issue [a]: Whether the vehicle complied with the guarantee of acceptable quality in s.6 of the CGA
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 FTA , the Contractual Remedies Act 1979 or the CGA, as applicable
to the circumstances of the case. In this
application both the CGA and the FTA
are applicable.
Relevant law- (a) the CGA
[6] Section 6 of the CGA imposes
on a supplier and the manufacturer of consumer goods "a guarantee that the
goods are of acceptable quality." Section 2 of the CGA defines "goods"
as including "vehicles.”
[7] The expression "acceptable quality" is defined in Section 7 of the
CGA at the time of the sale of the vehicle to the purchaser was 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 s7(1)(a) to (e) of the CGA 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.
[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 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
[10] The purchaser bought the
vehicle from the trader on 26 July 2013 for $20,000. Its odometer was then
214,800kms. The trader
sold the vehicle on behalf of the vehicle’s
previous owner, Johnson Brothers Limited. The purchaser and his partner Ms
Matthews
gave evidence to the Tribunal that at the time they inspected the
vehicle on the trader’s premises and before they took the
vehicle for a
test drive, the trader’s salesperson, Ms McDonald, told them the vehicle
had a reconditioned engine. Ms McDonald
denies that she told the purchaser that
the vehicle had a reconditioned engine. The purchaser says he commented to Ms
McDonald after
taking the vehicle for a test drive that the engine blew smoke
and Ms McDonald said that was probably because it had been sitting
on the
trader’s yard for a while. At the conclusion of the purchaser’s test
drive of the vehicle the purchaser says he
telephoned Mr Wayne Johnson of
Johnson Brothers Ltd and made him an offer of $20,000 for the vehicle.
Surprisingly the purchaser,
although aware from his previous conversation with
Ms McDonald that she had told him that the vehicle had a reconditioned engine,
says that he did not ask Mr Johnson as to the reason the vehicle’s engine
had been reconditioned when he spoke to him before
agreeing to buy the
vehicle.
[11] The purchaser says he discovered some time later that the vehicle was not fitted with a reconditioned engine but with a replacement second hand engine which the trader had bought on 1 March 2013 from Nissin King Parts World for $7,000 plus GST and had fitted to the vehicle during March 2013 at a total cost of $13,111.90. The vehicle’s odometer was then 209,707kms. Between 15 March 2013 when the trader replaced the engine and 26 July 2013 when the vehicle was sold to the purchaser the vehicle was used by Johnson Brothers Ltd to travel a further 5,093kms. The trader did not service the vehicle before selling it to the purchaser and the purchaser says he cannot recall if there was a service sticker on the vehicle’s windscreen when he bought it.
[12] The purchaser says that about two weeks after buying the vehicle he noticed it was still emitting black smoke from its exhaust. Without making an appointment he took the vehicle back to the trader and he says the trader’s mechanic gave him some additive to put in the fuel tank to clean the injectors.
[13] On 22 September 2013 the purchaser took the vehicle to Auto Spares and Service in Greytown to check the reason for the vehicle continuing to smoke. They changed the air and fuel filters and the engine oil. The purchaser produced a poor photocopy of what appears to be a carbon copy of an invoice for this work which shows the vehicle’s odometer was 220,317kms at the time.
[14] On 15 October 2013 the purchaser took the vehicle back to the trader to check the brakes and the engine operation. The odometer was then 221,719kms. The trader replaced the front brake pads which it found were heat cracked and cleaned and adjusted the rear brakes. It also replaced the injectors with the injectors from the original engine and replaced the injector ‘O’ rings and gaskets. The trader did not charge the purchaser for that work or the parts it replaced.
[15] On 30 January 2014 the trader serviced the vehicle at 234,686kms which was about 4,300kms overdue the 10,000km service interval recommended by Nissan. The trader noted that the SRS light was flashing and recommended the purchaser have the air bag module checked noting that the clock spring may require replacement.
[16] On 27 May 2014 when the vehicle’s odometer was 238,322kms (23,522kms after sale) the purchaser returned the vehicle to the trader because he noticed an abnormal noise from the engine. The trader removed the front grille, bumper, radiator, air conditioning, steering rack, front sway bar and differential assembly and removed the bottom sump plate and EGR assembly, fans belts, chain guides and replaced the timing chain, the engine oil and differential oil. The trader also repaired the SRS system. The total cost of this work was $2,298.05.
[17] On 13 August 2014 the purchaser had Auto Spares and Service replace the alternator clutch bearings and issue the vehicle with a warrant of fitness. The invoice the purchaser produced is illegible and does not record the vehicle’s odometer at that time.
[18] On 16 August 2014 when the vehicle’s odometer was 243,804kms the purchaser says the engine died. The purchaser contacted the trader on 22 August and instructed it to salvage and repair the engine. The trader did so on 26 August and the purchaser gave a written authority to the trader on 29 August to repair the vehicle so that it could be sold. The trader stripped the engine and found the inlet camshaft was broken in two pieces at No 4 cylinder. This indicated a problem had arisen in the No 4 cylinder area and resulted in damage to the cam gear and tensioner for the top chain. All the engine’s valves were damaged and two valve guides as well as all lifters. Wairarapa Automotive & Engineering Ltd’s owner/director Mr Hyde inspected the engine at the trader’s premises and wrote an undated letter saying in his opinion the cause of the failure and internal damage was a result of the cam breaking “caused by an undetermined failure in number 4 cylinder”.
[19] On 9 and 18 September the trader left messages on the purchaser’s cell phone informing him of the diagnosis and likely cost to repair the vehicle’s engine of $4,000. On 23 September the purchaser sent the trader an email authorising the trader to supply Neil Hickland with any information he requested and the job card for the work currently under action including the document the purchaser signed agreeing to continue the work.
[20] On 26 September the purchaser sent the trader an email rejecting the vehicle. He gave as his grounds for doing so the work done on the vehicle by the previous owner and the faults he had experienced. Mr Brendon Southey contacted the purchaser when the trader received his email and asked if the purchaser wanted the trader to continue to repair the vehicle as he had already requested by signing the job card on 27 August. The purchaser told Mr Southey he did want the trader to continue to repair the vehicle. The trader confirmed this in an email sent to the purchaser on 30 September 2014.
[21] On 10 October 2014 the trader raised an invoice for $4,262.13 for the cost of repairing the broken inlet camshaft, replacement of valves and seals and the replacement of the timing chain and tensioner assembly, the cylinder head parts, head repair, and valve guides. The trader also invoiced the purchaser on 30 October for the cost of obtaining a warrant of fitness which involved replacing both worn front bottom ball joints. . Subsequently the trader agreed to give the purchaser a 30% discount on the cost of labour for the October repair and the warrant of fitness work which cost $300.45 and this, with the unpaid invoice for the work done by the trader in August 2014, was settled by Mr Hickland paying the trader $5,941.41 on 13 November 2014 at which time the trader released the vehicle to the purchaser. Mr Hickland’s payment was made on a without prejudice basis that the vehicle was not of acceptable quality.
[22] The purchaser, in reply to questions from the Assessor told the Tribunal that the vehicle’s engine did not consume oil and he had checked the engine oil level regularly every three weeks. He told the Tribunal the engine oil was black but always at the correct level and he had not had to top it up.
[23] The trader’s defence to the purchaser claim was first, that the vehicle was fit for purpose at the time it sold to him. Second, that the work which had been done on the vehicle before the purchaser bought it is irrelevant. Third that the purchaser had failed to adhere to the precise servicing interval recommended by Nissan of 10,000kms or 12 months whichever first occurs or 7500kms in harsh conditions. Fourth, from the condition of the vehicle at the times it has been returned to the trader, the vehicle appears to have been driven off road. Finally, having regard to the age of the vehicle and its mileage at the time of sale and the distance the purchaser has since travelled in the vehicle in the 14 months from the date of supply to his rejection of it, the vehicle has performed in accordance with what a reasonable consumer would expect. In reply to the Adjudicator Mr Southey said he probably would have expected the vehicle to be a little more reliable than it was.
[24] The Tribunal, in deciding whether this vehicle was of acceptable quality at the time of sale has had regard to the criteria specified in s7 of the Act to be taken into account in deciding if goods are of acceptable quality. First, the nature of the goods. In this case the vehicle was, at the time of sale, a five year old Nissan Navara double cab utility vehicle which had travelled 214,800kms. Second, it was sold for $20,000. The vehicle’s engine, which had been replaced by the trader for the previous owner at 209,707kms had worn injectors which caused the exhaust to blow black unburnt fuel until the injectors were replaced by the trader at its expense in mid-October 2013. The front brake pads, normally considered by the Tribunal to be an owner maintenance item, were also replaced by the trader free of charge in October 2013 after the purchaser had driven 6,919kms in the three months he had owned the vehicle. The vehicle was serviced by the purchaser, first using Auto Spares and Services at 220,317kms and then, by the trader on 30 January 2014 at 234,686kms which was about 4,300kms after the recommended service interval. The first real fault the vehicle had was at the end of May 2014, ten months and 23,522kms after the vehicle was sold to the purchaser when the vehicle’s timing chain had to be replaced. The odometer was then 238,322kms. The second major fault the vehicle had was in August 2014 with the breakage of the inlet cam and destruction of the valves. That occurred after the vehicle had done 243,850kms and was 13 months and 29,050kms after sale to the purchaser. The purchaser authorised the trader to repair the timing chain in May 2014. He also authorised the trader on 27 August 2014, at his cost, to repair the broken inlet cam and consequent damage and it was only after the trader had started to do so that the purchaser purported to reject the vehicle on 26 September 2014.
[25] The Tribunal considers that a reasonable consumer who had paid $20,000 for a heavy duty vehicle of this type, age and mileage might be disappointed that the vehicle had cost him $5,941 in repairs over 29,000kms and 13 months of use. However the Tribunal does not think that a reasonable consumer would consider the faults unacceptable; the test under the CGA. Accordingly, the Tribunal does not think that the vehicle failed to comply with the guarantee of acceptable quality.
Conclusion
[26] The vehicle complied with the guarantee of
acceptable quality in s6 of the Act and hence the Tribunal concludes that the
purchaser
did not have grounds to reject the vehicle under the CGA on 26
September 2014.
Issue [b]: Did the trader misrepresent the vehicle to the purchaser?
Relevant law: The FTA
[27] The Fair Trading Act 1986 s 9
reads as follows:
“9 Misleading and deceptive conduct generally
No
person shall, in trade, engage in conduct that is misleading or deceptive or is
likely to mislead or deceive.”
[28] The appropriate approach to determining whether conduct is misleading
and deceptive has been considered by the Supreme Court
in Red Eagle
Corporation Ltd v Ellis [2010] NZLR 492. The judgement of the Court was
delivered by Blanchard J:
“It is, to begin with, necessary to decide
whether the claimant has proved a breach of s 9. That section is directed to
promoting
fair dealing in trade by proscribing conduct which, examined
objectively, is deceptive or misleading in the particular circumstances.
Naturally that will depend upon the context, including the characteristics of
the person or persons likely to be affected. Conduct
towards a sophisticated
businessman may, for instance be less likely to be objectively regarded as
capable of misleading or deceiving
such a person than similar conduct directed
towards a consumer or, to take an extreme case, towards an individual known by
the defendant
to have intellectual difficulties ... The question to be answered
in relation to s 9 in a case of this kind is accordingly whether
a reasonable
person in the claimant’s situation – that is, with the
characteristics known to the defendant or of which
the defendant ought to have
been aware – would likely have been misled or deceived. If so, a breach
of s 9 has been established.
It is not necessary under s 9 to prove that the
defendant’s conduct actually misled or deceived the particular plaintiff
or
anyone else. If the conduct objectively had the capacity to mislead or
deceive the hypothetical reasonable person, there has been
a breach of s 9. If
it is likely to do so, it has the capacity to do so. Of course the fact that
someone was actually misled or
deceived may well be enough to show that the
requisite capacity existed.”
Application of law to facts
[29] The purchaser’s claim
is that the trader’s salesperson, Ms McDonald, represented that the
vehicle had a reconditioned
engine prior to selling the vehicle. The trader
acknowledges that the vehicle did not have a reconditioned engine fitted but
that
it had a second hand engine. Ms McDonald denies that she told the
purchaser that the vehicle had a reconditioned engine and says
the purchaser
must have been told that by the previous owner.
[30] The Tribunal questioned the purchaser and his witness separately during the hearing and also took the evidence of the trader’s salesperson Ms McDonald. Both the purchaser and his partner Ms Matthews told the Tribunal that they were sure that Ms McDonald had told them prior to their taking the vehicle for a test drive that the vehicle had a reconditioned engine. Ms Matthews says that the reason she recalls Ms McDonald making that claim is because she was concerned about the vehicle’s high mileage when she first saw it at the trader’s premises. She says that when Ms McDonald told the purchaser that the vehicle’s engine had been reconditioned she says she did not know what a reconditioned engine was. She says that she asked the purchaser who explained to her, in Ms McDonald’s presence, that a reconditioned engine was almost “like a new engine.” Both the purchaser and Ms Matthews gave evidence that the purchaser, when he telephoned Mr Wayne Johnson to offer to buy the vehicle for $20,000 did not ask Mr Johnson why the engine had been reconditioned. The Tribunal finds that aspect of the purchaser’s evidence odd. When Ms McDonald gave evidence she told the Tribunal that she was unable to recall very much of the conversation between herself and the purchaser although she said that she was “100% sure” that she had not told him the engine was reconditioned. The Tribunal was concerned that whilst Ms McDonald said she was certain she had not said the engine was reconditioned she was incapable of recalling any of the other details of the conversation between herself and the purchaser. The Tribunal were left with the impression after listening to Ms McDonald that she was not a reliable witness and that it was probable that Ms McDonald told the purchaser that the vehicle had a reconditioned engine.
Conclusion
[31] The Tribunal is satisfied that the
trader’s salesperson told the purchaser before he bought the vehicle that
it had a reconditioned
engine when in fact it did not and, in doing so, it
breached s9 of the FTA.
Issue [c]: What remedy is appropriate?
Relevant law
[32] The remedies available for a breach of the FTA are discretionary. They are set out in section 43 of the FTA:
"43 Other orders
(2) For the purposes of subsection (1)
of this section, the Court may make the following orders—
(a) An order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct referred to in subsection (1) of this section or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date, before the date on which the order is made, as is specified in the order:
(b) An order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date, before the date on which the order is made, as is so specified:
(c) An order directing the person who engaged in the conduct, referred to in subsection (1) of this section to refund money or return property to the person who suffered the loss or damage:
(d) An order directing the person who engaged in the conduct, referred to in subsection (1) of this section to pay to the person who suffered the loss or damage the amount of the loss or damage:
(e) An order directing the person who engaged in the conduct, referred to in subsection (1) of this section at that person's own expense, to repair, or provide parts for, goods that had been supplied by the person who engaged in the conduct to the person who suffered, or is likely to suffer, the loss or damage:
(f) An order directing the person who engaged in the conduct, referred to in subsection (1) of this section at that person's own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage."
[33] The Supreme Court in Red Eagle sets out the approach to be taken
in applying s 43. The Tribunal must consider whether:
[a] the purchaser was
in fact misled or deceived; and
[b] If so, was the trader’s conduct the
effective cause or an effective cause of the purchaser’s loss or
damage?
[34] The Tribunal is satisfied that the purchaser was misled and that the trader’s salesperson’s conduct was the effective cause of the purchaser’s loss or damage.
[35] In order for the Tribunal to consider making an order pursuant to s 43, the person in whose favour the order is contemplated must have suffered or be likely to suffer loss or damage as a result of the misleading conduct. The misleading conduct need not be the sole cause of loss Phyllis Gale Ltd v Ellicott (1997) 8 TCLR 57). It is sufficient that there is a clear nexus between the misleading conduct and the purchaser’s decision to proceed with the purchase of the vehicle. The purchaser in this application did not have any evidence as to the difference in value between a reconditioned YD25DDT1 engine and a second hand engine. When Mr Southey was asked at the hearing what the difference in value between a reconditioned and a second hand engine of the type fitted to the vehicle Mr Southey did not know but suggested it might be as much as $15,000. The Tribunal was not satisfied with the information and asked its Assessor to investigate the difference in value between the two engines. The Assessor has reported that three reputable high volume engine reconditioners who had each rebuild a number of YD25DDT1 engines were asked the cost of rebuilding such an engine and gave prices which ranged from $4,850 to $6,850. The Tribunal understands from the invoice which the trader produced that it had paid $7,000 plus GST for a second hand exchange YD25DDT1 engine and thus it appears to the Tribunal that the purchaser has not suffered any loss as a result of the trader not fitting a reconditioned engine. Accordingly, in the absence of proof of loss the Tribunal considers that it is unable to give the purchaser a remedy under the FTA.
Conclusion
[36] With regret the purchaser’s claim under the FTA must be dismissed.
ORDER
The purchaser’s application is dismissed.
DATED at Auckland this 2nd day of February 2015.
C H Cornwell
Adjudicator
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