Long Investment Limited v Bluestone Cars Limited t/a Keystone Cars - Reference No. MVD 136/15 (Auckland) [2015] NZMVDT 110 (4 September 2015)

Last Updated: 18 October 2015

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2015] NZMVT Auckland

Reference No. MVD 136/15

Decision No AK110/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN LONG INVESTMENT LIMITED

Purchaser

AND BLUESTONE CARS LIMITED T/A KEYSTONE CARS

Trader

MEMBERS OF TRIBUNAL
Mr C H Cornwell, Barrister & Solicitor - Adjudicator
Mr J McHerron, Barrister, observing Adjudicator
Mr D Binding, Assessor

HEARING at Auckland on 1 September 2015

DATE OF DECISION 4 September 2015

APPEARANCES

Mr L Lin, Director of the purchaser

Mr A Lin, son and support person for purchaser
Ms E Zhao, support person for purchaser
Mr P K Bredenbeck, Director for the trader

DECISION

Background

[1] On 30 January 2015 Long Investment Limited (“the purchaser”) bought a 2007 Toyota Hiace van registration HWN265 (“the vehicle”) for $19,600 from Bluestone Cars Limited trading as Keystone Cars (“the trader”). The purchaser has purported to reject the vehicle on the grounds that it has an oil leak from its turbo assembly which the trader has refused to repair. The purchaser has applied to have the Tribunal uphold its rejection and the trader ordered to refund the purchase price.
[2] The trader says first, that the purchaser contracted out of the Consumer Guarantees Act 1993 (“the Act”) and is not entitled to a remedy under the Act. Second, that the trader has already repaired, at the purchaser’s request, four minor oil leaks in the vehicle’s engine and transmission and that the purchaser’s claim that the turbo charger is now leaking and needs to be replaced is exaggerated given the very minor oil weep which has appeared after seven months of use. Third, the trader says that it is unreasonable to expect it to replace the turbo assembly given the age of the vehicle, its mileage, and the use to which the vehicle has been put since the purchaser bought it. The trader therefore denies that the purchaser was entitled to reject the vehicle.
[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr Binding as expert assessor to assist in the determination of the complaint. Mr Binding took the oath required by clause 10(2) of Schedule 1 to that Act. As an assessor Mr Binding assisted the adjudicator. Mr McHerron participated in the hearing as an observing adjudicator but the Tribunal’s decision was made by Adjudicator Cornwell..

The issues

[4] The issues requiring consideration are:

• (a) Whether the parties lawfully contracted out of the Act?
• (b) Whether the vehicle complied with the guarantee of acceptable quality?
• (c) If it did not, did the trader remedy the failures within a reasonable time?
• (d) Whether the trader should have remedied the oil leak from the turbo assembly?

Issue [a]: Whether the parties lawfully contracted out of the Act?

Relevant law
[5] Section 43 of the Act 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) However, despite subsection (1), parties to an agreement may include a provision in their agreement to the effect that the provisions of this Act will not apply to that agreement, provided that—

(a) the agreement is in writing; and

(b) the goods or services are, or (in connection only with the guarantee of acceptable quality in section 7A) the gas or electricity is, supplied and acquired in trade; and

(c) all parties to the agreement—

(i) are in trade; and

(ii) agree to contract out of the provisions of this Act; and

(d) it is fair and reasonable that the parties are bound by the provision in the agreement.
(2A) If, in any case, a court is required to decide what is fair and reasonable for the purposes of subsection (2)(d), the court must take account of all the circumstances of the agreement, including—

(a) the subject matter of the agreement; and

(b) the value of the goods, services, gas, or electricity (as relevant); and

(c) the respective bargaining power of the parties, including—

(i) the extent to which a party was able to negotiate the terms of the agreement; and

(ii) whether a party was required to either accept or reject the agreement on the terms and conditions presented by another party; and

(d) whether all or any of the parties received advice from, or were represented by, a lawyer, either at the time of the negotiations leading to the agreement or at any other relevant time.
(3) Section 56 of the Sale of Goods Act 1908 shall be read subject to the provisions of this section.
(4) Every supplier and every manufacturer commits an offence against section 13(i) of the Fair Trading Act 1986 who purports to contract out of any provision of this Act other than in accordance with subsection (2) or section 43A.
(5) Where an agreement of the kind described in subsection (2) excludes any provision of this Act, the benefit of the exclusion shall be deemed to be conferred on any manufacturer of the goods supplied under the agreement, as well as on the supplier of those goods.
(6) Nothing in subsection (1) shall limit or affect any term in an agreement in writing between a supplier and a consumer to the extent that the term—

(a) imposes a stricter duty on the supplier than that imposed by this Act; or

(b) provides a remedy more advantageous to the consumer than the remedies provided by this Act.
(7) Nothing in subsection (1) prevents a consumer who has a claim under this Act from agreeing to settle or compromise that claim.”

Application of law to facts
[6] The purchaser and the trader entered into a Vehicle Offer and Sale Agreement (“VOSA”) on 30 January 2015. The trader gave evidence that the purchaser told him it was buying the vehicle for the purposes of its business as a property developer and builder. The trader’s director Mr Bredenbeck told the Tribunal that when he presented the VOSA to the purchaser for its signature he marked the VOSA in three places with a small asterisk and asked the purchaser to sign in each of those places. The first asterisk was alongside a clause which was an acknowledgement that the purchaser would arrange its own insurance as from the date of delivery. The second asterisk was alongside a box in the centre of the VOSA which reads as follows:
“THE PURCHASER ACKNOWLEDGES AND CERTIFIES THAT

The goods to be supplied are being acquired for the purposes of the Purchaser’s business and accordingly the parties agree that the provisions of the Consumer Guarantees Act 1993 will not apply
Signed:-----------------------------------------
IF CLAUSE APPLIES PURCHASER MUST SIGN”

[7] The third asterisk was placed at the foot of the VOSA following ten clauses containing the terms and conditions of the VOSA including a clause in which the purchaser acknowledged that if it was purchasing the vehicle for business purposes in terms of ss 1 and 43 of the Act that the provisions of the Act would not apply. The purchaser’s director, Mr Lin, had signed his signature alongside each of the three asterisks as indicated to him by the trader.

[8] The purchaser acknowledged through a mandarin interpreter that it had bought the vehicle for the purposes of its business as a property developer and builder and that it used the vehicle to carry light materials. The Tribunal accepts that the vehicle was supplied and acquired in trade, that the agreement to do so was in writing, and that both parties to the agreement are in trade and appear to have agreed to contract out of the provisions of the Act.
[9] However the Tribunal is also required to be satisfied by s 43(2)(d) of the Act that “it is fair and reasonable that the parties are bound by the provision in the agreement.” The Tribunal has had regard to the following factors in deciding if it is fair and reasonable for the parties to be bound by the clause excluding the Act. First, the purchaser’s director claimed that he was unable to speak English. Second, the trader told the Tribunal that the purchaser’s director was accompanied by his son and other people at the time he bought the vehicle and that his son translated for the purchaser’s director. Third, the Tribunal asked Mr Bredenbeck if he thought that the purchaser understood that it was agreeing to exclude the provisions of the Act and Mr Bredenbeck said that he could not say. The Tribunal considers, having regard to the value of the goods of $19,600, the absence of legal advice to the purchaser, and in particular the language difficulties that existed between the purchaser and the trader in communicating with each other clearly, that it is fairly unlikely that the purchaser knew and understood the nature and effect of the clause excluding the provisions of the Act. Accordingly, the Tribunal does not consider that it would be fair and reasonable for the parties to be bound by the provision in the agreement excluding the Act.

Conclusion on issue [a]:
[10] The parties did not lawfully contract out of the provisions of the Act. Hence the provisions of the Act apply to this transaction.

Issue [b]: Whether the vehicle complied with the guarantee of acceptable quality in s 6 of the Act?

Relevant law

[11] 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.”
[12] The expression "acceptable quality" is defined in s 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,—

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:

(ha) the nature of the supplier and the context in which the supplier supplies 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) 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) to a defect means any failure of the goods to comply with the guarantee of acceptable quality.

[13] 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 purchaser’s subjective perspective.

[14] 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 s 19 of the Act. If the failure to comply with the guarantee of acceptable quality was 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

[15] The purchaser went to the trader’s premises with his son and an associate. It inspected and test drove two Toyota Hiace vehicles; a blue and a silver one. The trader allowed the purchaser to take both of the vehicles away and have them inspected before the purchaser selected the blue one (the vehicle) and agreed to pay $19,600 for it. The vehicle is a Japanese 2007 model Toyota Hiace and had travelled 96,200kms at the time of sale. The trader says the purchaser telephoned the following day and wanted to swap the vehicle for the silver model but it says that vehicle had been sold to an associate of the purchaser’s. The purchaser asked to have a refund which the trader refused.

[16] In early February the purchaser contacted the trader to say the vehicle was leaking oil. The trader asked the purchaser to take the vehicle to its mechanic; Central Automatics Ltd, who on 3 February removed the transmission and replaced the rear main seal and the transmission front seal. It also serviced the transmission. The cost of repairs of $1,035 was paid by the trader.

[17] Later in February 2015 the purchaser complained of an oil leak from the vehicle’s transmission and on 16 February the trader arranged for Central Automatics Ltd to replace the transmission rear seal and fix an engine oil leak at a cost of $287.50.

[18] The trader says he received a copy of the purchaser’s application to the MVDT in June, made contact with the purchaser and arranged for the vehicle to be taken back to Central Automatics Ltd on 20 June. Central Automatics removed the front suspension and sump, cleaned and sealed the sump with three bond and replaced the engine oil at a cost of $822.25 paid by the trader.

[19] The purchaser claims that there is a leak around the vehicle’s turbo assembly. The purchaser produced a set of six colour photographs of the turbo area which it claims show oil leakage. The purchaser also produced an invoice aand service estimate dated 18 August 2015 from Manukau Toyota who recorded the vehicle’s odometer as 113,319kms (17,119kms after sale). Manukau Toyota report having put the vehicle on a hoist, removed the engine undercover and say they noticed an oil leak from the turbo assembly. They recommended the replacement of the turbo unit at a cost of $3,128.79 plus labour of $550 and GST a total of $4,230.61.

[20] Mr Bredenbeck says he telephoned Manukau Toyota to talk to them about the turbo assembly oil leak and says he spoke to the technician who diagnosed the fault. He says the technician says there is some oil around the turbo but he was unsure where it was coming from and that it merely needs cleaning and road testing. The technician was unaware that the purchaser had obtained a quote for the replacement of the turbo assembly.

The Tribunal’s finding on issue [b]

[21] The Tribunal, in determining whether the vehicle supplied by the trader complied with the guarantee of acceptable quality, has had regard first, to the nature of the goods, in this case an eight year old imported Toyota Hiace van which had travelled 96,200kms at the time of sale. Second, to the price for which it was sold of $19,600.

[22] The Tribunal considers the vehicle was probably not free of minor faults or as durable as a reasonable consumer paying $19,600 for an eight year old Toyota Hiace with a moderate mileage would consider acceptable because of the four oil leaks which the purchaser experienced with the front transmission seal, rear transmission seal, rear main seal and the sump. The Tribunal considers the vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because of the presence, and emergence within a short time after sale, of these oil leaks.

[23] The Tribunal’s Assessor has carefully examined the photographs produced by the purchaser (Exhibit 5) which it claims show an oil leak from the turbo assembly. The Assessor has advised the Tribunal first, that he does not consider the photographs show anything more than slight oil weeping and second, that such slight weeping around the turbo assembly is common in a vehicle of this age and mileage and does not merit the replacement of the turbo assembly without further investigation and cleaning down with close monitoring over set distances to determine the exact location of the leakage.. The Tribunal also observes that this issue must have arisen fairly recently for two reasons; first, the purchaser’s mechanic, Dr Diesel, in its tax invoice dated 27 March 2015 reported having checked for oil leak and reported: “non (sic) found.” Second, the vehicle was seen in June 2015 by Central Automatics and they did not record an oil leak from the turbo assembly. The vehicle has now travelled more than 17,000kms in the seven months the purchaser has owned it and the Tribunal considers the vehicle’s faults caused by wear and tear are now the responsibility of the purchaser. The Tribunal therefore does not consider the trader has any responsibility for the repair of the turbo assembly.

Conclusion on issue [b]:

[24] The vehicle failed to comply with the guarantee of acceptable quality because of the oil leaks the purchaser experienced with the front and rear transmission seals, the rear main seal and the sump.

Issue[c]: Did the trader remedy the failures within a reasonable time?

Relevant law

[25] Section 18(1) and (2) of the Act provide 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—

(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,—

(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.”

[26] The regime of the Act provides that where a fault is not one of a substantial character or one which cannot be rectified the purchaser has an obligation under s 18(2)(a) of the Act to “require the supplier to remedy the failure within a reasonable time”. Although the word “may” is used it has been held in Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 that the use of the word “may” does not connote that the procedure in s 18(2) is optional.

Application of law to facts

[27] The Tribunal considers the trader responded promptly to the purchaser’s requests to rectify the vehicle’s oil leaks and had its repairer Central Automatics Ltd do the repair work at the trader’s cost as soon as the purchaser notified it of the presence of the oil leaks.

[28] The trader decided not to accept responsibility for the oil weep from the turbo assembly which was not diagnosed until 18 August and the Tribunal has determined, for the reasons given in paragraph [23] above, that this is not a fault for which the trader should be responsible for repairing.

Conclusion on issue [c]:

[29] The trader remedied the vehicle’s faults for which it ought to be responsible within a reasonable time and as a consequence there is no basis for the Tribunal to uphold the purchaser’s rejection of the vehicle. The purchaser’s claim must be dismissed.

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

DATED at AUCKLAND this 4th day of September 2015

C. H. Cornwell
Adjudicator