Jenkins v Edwards - Reference No. MVD 125/15 (Wellington) [2015] NZMVDT 124 (24 September 2015)

Last updated: 15 December 2015

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL


[2015] NZMVDT Wellington 2

Reference No. MVD 125/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN ROBERT KARL JENKINS

Purchaser

AND TONY EDWARDS

Trader



MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator
D Binding – Assessor

HEARING at Christchurch on 15 September 2015
DATE OF DECISION 24 September 2015

APPEARANCES

R K Jenkins, Purchaser
V Jenkins, Witness/Wife of Purchaser
T Edwards, Trader
G French, Witness/Partner of Trader

ORDER

Tony Edwards is ordered to pay Robert Jenkins $4,130.43 immediately.

REASONS

Introduction

[1] A 12 year old Volkswagen Touareg develops various problems soon after purchase. Its purchaser wishes to reject it. Did he buy it from a motor vehicle trader and did the vehicle comply with the guarantee of acceptable quality?

[2] This claim raises the following issues:

[a] Issue 1: is Mr Edwards a motor vehicle trader?

[b] Issue 2: does the Consumer Guarantees Act 1993 (“the Act”) apply?

[c] Issue 3: does the vehicle comply with the guarantee of acceptable quality in s 6 of the Act?

[d] Issue 4: did Mr Jenkins require Mr Edwards to remedy the transmission fault?

[e] Issue 5: does Mr Jenkins have a right to reject the vehicle?

[f] Issue 6: what remedy is available?

Background

[3] On 3 February 2015, the purchaser (“Mr Jenkins”) bought a 2003 VW Touareg V8 for $16,000 from Mr Edwards. The Touareg’s odometer reading was 137,895 km on the date of purchase. The vehicle had been advertised on Trade Me as follows:

Volkswagen Touareg Luxury V8 2003 – 832164597

Hi spec’d Luxury model in beautiful condition, popular silver metallic, 6 speed paddle shift auto, black leather trim with heated seats, locking diff, height adjustment, extras include 22” alloys, adjustable roof racks, towbar, side steps, a top example, priced to sell.

[4] Mr Jenkins and his wife viewed the vehicle at Mr Edwards’ private residence. Mr Edwards did not provide a Consumer Information Notice with the vehicle. They went for a test drive, with Mr Edwards present. Mr and Mrs Jenkins say he talked throughout the drive, however, preventing them from hearing noisy heating/AC flaps that would later prove costly to fix. The test drive was in rush hour traffic, so they did not notice any problems with the transmission.

[5] The sale invoice is dated 3 February 2015. The price was $16,000 (a $1,000 deposit was paid on 2 February 2015). The invoice also contains the words “No warranty implied or given”. It is signed by Mr Edwards as vendor and by Mr Jenkins as purchaser.

[6] The day after purchasing the Touareg, Mr and Mrs Jenkins began to find faults with it. The most serious fault related to the transmission. There was also a running gear warning light signifying a possible “air bag suspension fault”. It has been estimated to cost more than $10,000 to fix these two faults. Mr and Mrs Jenkins have already spent approximately $3,200 fixing the vehicle.

[7] Mr Jenkins seeks a full refund of the price paid for the Touareg as well as reimbursement for the repairs he has had to pay for to date. He also seeks damages relating to costs associated with obtaining another car to drive, and a $1,150 bill for legal advice.

[8] On 4 February 2015, the next day after purchase, Mr and Mrs Jenkins heard noises from the dashboard and saw a warning that the drive gear needed a mechanic. They also noticed that the transmission seemed to slip, revving for a second, when it changed from 5th to 6th at approximately 95-100 km/h.

[9] On 25 February 2015, with the odometer at 138,775 km, Mr and Mrs Jenkins took the vehicle to R E Sinclair Limited, which:

[a] replaced several motors associated with the air conditioning system as well as a pollen filter and an air quality sensor;

[b] scanned the vehicle for codes relating to the transmission problem but found no codes;

[c] could not get the transmission fault to occur in a test drive despite driving the vehicle in various conditions;

[d] repaired the rear door gas struts as the rear door was not staying open;

[e] observed the running gear warning light, noted that it appeared to relate to air suspension, but did not attempt to fix that problem; and

[f] issued an invoice for $2,468.22 including GST.

[10] Mr Jenkins did not require Mr Edwards to fix these problems before getting R E Sinclair Ltd to make repairs. At that stage, he and Mrs Jenkins believed Mr Edwards was a private seller and thus that they had no recourse against him.

[11] On 10 March 2015, with the vehicle’s odometer now at 139,645 km, Mrs Jenkins returned the vehicle to R E Sinclair Ltd, for the replacement of two more tailgate struts on the vehicle, as well as a faulty trailer plug. For that work, R E Sinclair Ltd invoiced Mrs Jenkins $804.10. There is no mention of the transmission or running gear issues on this invoice. Again, Mr and Mrs Jenkins did not require Mr Edwards to fix these problems.

[12] On or about 25 March 2015, Mrs and Mr Jenkins observed that the transmission was slipping between 4^th and 5^th gear as well, at approximately 70 km/h. They also formed the view about this time that the cam belt was overdue for replacement.

[13] On 2 April 2015, Mrs and Mr Jenkins emailed Mr Edwards with a list of the issues they had experienced with the Touareg since purchasing it. They advised Mr Edwards that they considered the vehicle was not of a reasonable standard. They noted that they had obtained legal advice as to their position. They had discovered that Mr Edwards was registered as a motor vehicle trader, but had not displayed a Consumer Information Notice with the vehicle as is required under the Motor Vehicle Sales Act.

[14] In their 2 April letter, Mrs and Mr Jenkins requested Mr Edwards to repair the vehicle, provided repairs could be completed within the next three weeks. They also sought reimbursement of the $3,272.32 repair costs they had incurred to date. Alternatively, they indicated they would accept a full refund of the purchase price, plus the $3,272.32 incurred.

[15] On 22 April 2015, with the vehicle’s odometer now at 142,428 km, Mrs Jenkins took the vehicle to Acton Automotive for a post purchase inspection. That inspection revealed a variety of issues with the vehicle, as recorded on Acton Automotive’s invoice:

Rocker covers leaking oil. Oil leak at rear of engine between transmission and engine (possibly from rocker covers or rear of the engine). Front brake pads and rotors worn. Rear headrests missing. Coating coming off window and headlamp switches. Cover missing from left hand bonnet strut. Clear coat coming off roof rack brackets. Covers missing on wiper nuts. Drivers door adjustment required. Left rear tyre worn. Knock at left front suspension. Intermittent tail light fault. Whine from under bonnet. Airbag suspension faults logged in ECU (see below), possible airbag compressor replacement required. Independent transmission specialist reports shift issues, recommends valve body be removed, checked and likely replaced. Possible heater flap motor fault. Spark plugs worn. No obvious cambelt history. Carry out compression test, all cylinders within spec.

Fault codes: 01772 signal from level control pressure sensor. G291 short circuit to another value. 01400 suspension level control value of resistance too small.

Further investigation required on faults.

[16] The reference to an “independent transmission specialist” was to Aceomatic Transmission Services Ltd, which assessed the vehicle on 22 April 2015. Aceomatic’s report stated:

ASSESS & REPORT – SLIPS 4-5 / 5-6 (100KMPH)

SHOWS GEAR SELECTION BUT CAN NOT FEEL CHANGE

...

SCAN VEHICLE FOR CODES. ROAD TEST VEHICLE CHECKING LIVE DATA WITH SCAN TOOL. CHECK FLUID CONDITION.

VEHICLE WILL SLIP/FLARE FOR THE 4/5 SHIFT UNDER MODERATE POWER. TRANSMISSION VALVE BODY WOULD NEED TO BE REMOVED/CHECKED AND LIKELY REPLACED.

[17] On 5 May 2015, Mrs Jenkins emailed Mr Edwards copying him the report from Acton Automotive, and stating that she and Mr Jenkins rejected the vehicle.

[18] On 14 May 2015, Mrs Jenkins obtained a repair estimate from Acton Automotive, which stated as follows:

It is very difficult to price repairs because further investigation into exact causes would be necessary but from what we do know, we can say the following. The transmission repair alone is likely to be above $4000. The airbag suspension faults could be anywhere from $1000 to $8000: Front brakes approximately $600: Rocker cover leaks approximately $600. Other faults noted, i.e. knock in suspension, whine from under bonnet, intermittent tail light fault and possible heater flap motor fault would all require further investigation.

[19] Mr Jenkins applied to the Tribunal on 20 May 2015. His application form stated that the vehicle’s mileage was 143,574 km at that date. Mr and Mrs Jenkins advised that the vehicle has not been used since then.

[20] Mr Edwards submitted that he was not carrying on business as a motor vehicle trader at the time and for the purpose of the sale of the vehicle. If that submission is correct, then the Tribunal would have no jurisdiction to hear and determine Mr Jenkins’ application.

Issue 1: is Mr Edwards a motor vehicle trader?

[21] While acknowledging he has a background in motor vehicle sales, Mr Edwards told the Tribunal that he has only sold one vehicle in his personal capacity since returning to New Zealand in 2014 after living overseas for the last six years. That vehicle was the Touareg that is the subject of the present application, which was Mr Edwards’ personal vehicle for a few weeks over the summer of 2014-2015, and which he and his partner drove from Auckland to Christchurch. Mr Edwards sold the vehicle because his circumstances had changed. He had decided to stay in Christchurch and look for work and so he decided he needed to replace it with a vehicle that was more suitable for carrying equipment and transporting his dog.

[22] Mr Edwards advertised the vehicle on Trade Me on 10 January 2015. Subsequently, he applied for registration as a motor vehicle trader (as well as applying or renewing his real estate sales licence and heavy duty transport licence) to make sure he was in a position to consider any work opportunities arising. Mr Edwards became registered as a motor vehicle trader on 23 January 2015, 11 days before Mr Jenkins purchased the Touareg. While Mr Edwards was showing Mr and Mrs Jenkins the vehicle, he made them aware that he had previously worked in the car industry, but not for many years, and that he was looking for work.

[23] Since May or June 2015, Mr Edwards has been associated with another registered motor vehicle trader, Waimak Cars Limited, of which he is the Chief Executive. A search of the Motor Vehicle Traders Register for Mr Edwards brings up both:

[a] his personal registration, in the name of Tony Edwards, with the trading name “Tony Edwards Cars” and an occupation listed as “Licensed motor vehicle traders”; and

[b] his listing as an individual associated with Waimak Cars.

[24] Section 7(1) of the Motor Vehicle Sales Act 2003 provides that “motor vehicle trader means any person who carries on the business of motor vehicle trading (whether or not that person carries on any other business)”.

[25] Section 8 specifies who is treated as carrying on the business of a motor vehicle trader. Someone who “holds out that the person is carrying on the business of a motor vehicle trader” is included (s 8(1)(a)), as is a person who sells or imports more than a certain number of vehicles in a year for the primary purpose of gain (ss 8(1)(b) and (c)).

[26] The further definition of holding oneself out as carrying on the business of a motor vehicle trader” in s 8(2) seems carefully designed to include those who have just commenced, or are merely preparing to commence the actual business of trading:

(2) For the purposes of subsection (1)(a), a person holds out that the person is carrying on the business of motor vehicle trading if that person—

(a) advertises or notifies or states that the person carries on the business of motor vehicle trading; or

(b) in any way represents that the person is ready to carry, or is carrying, on the business of motor vehicle trading.

[27] In my view, Mr Edwards was caught by s 8(2)(b). A consequence of his being a registered motor vehicle trader was that he was listed on the register of motor vehicle traders. Being registered is a prerequisite of carrying on the business of motor vehicle trading: s 10. One of the purposes of registration is to enable the public to know how to contact a motor vehicle trader for the purpose of seeking redress in connection with a contract for the sale of a motor vehicle: s 53(a)(ii). His listing on the register is a “way” by which he “represents” that he “is ready to carry, or is carrying, on the business of motor vehicle trading.”

[28] The fact that the Touareg is Mr Edwards’ only vehicle sale to date is immaterial. The relevant statutory definitions are broad enough to capture a single sale by someone who is representing, by being listed on a public register, that he is ready to carry on the business of motor vehicle trading. This conclusion is consistent with the plain meaning of the provisions, and is reinforced by their consumer protection purpose.

[29] Mr Jenkins correctly submitted that there is no “grace period” for traders such as Mr Edwards in the present case. Even though Mr Edwards had only been representing he was ready to carry on the business of motor vehicle trading for 11 days prior to the sale, I conclude that he was a motor vehicle trader for the purposes of the sale of the Touareg and Mr Jenkins’ application to the Tribunal.

[30] I hasten to add I do not consider Mr Edwards was deliberately trying to evade his obligations as a motor vehicle trader. To the contrary, my impression was that he genuinely believed that this transaction was in his personal capacity only and, as such, lay outside the regime in the Motor Vehicle Sales Act 2003.

[31] The consequence of this conclusion is that the Tribunal has jurisdiction to consider Mr Jenkins’ application.

Issue 2: does the Consumer Guarantees Act 1993 apply?

[32] I can deal with this issue briefly. The sale invoice dated 3 February 2015, which was signed by Mr Edwards and Mr Jenkins, states “No warranty implied or given”. This provision does not, in my view, suffice to exclude the application of the Act, according to the requirements in s 43.

[33] For a start, there is only limited evidence that the vehicle was acquired by Mr and Mrs Jenkins “in trade” as is required by s 43(2)(b). Mr Edwards’ evidence was that Mr and Mrs Jenkins told him they were buying the vehicle for Mrs Jenkins’ business, but I would be reluctant to find, on the basis of this evidence alone, that all parties to the agreement were “in trade”.

[34] Second, I do not think that the statement in the invoice suffices to indicate that both parties to the agreement agree to contract out of the provisions of the Act: s 43(2)(c)(ii). Ordinarily, as Mr Edwards acknowledged, that would involve a provision expressly recording the parties’ agreement to contract out of the Act. There was no such agreement in the present case.

[35] Finally, and if necessary, I would conclude in all of the circumstances of the agreement that it was not fair and reasonable that the parties were bound by such a provision, were the exclusion clause in the invoice to be interpreted so broadly as to exclude the Act: s 43(2)(d).

Issue 3: does the Touareg comply with the guarantee of acceptable quality in s 6 of the Act?

[36] When Mr Edwards sold the Touareg to Mr Jenkins it was subject to a guarantee that it was of acceptable quality: s 6 of the Act.

[37] “Acceptable quality” is defined in s 7(1) 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,—

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.

[38] Mr Jenkins did not have the vehicle inspected when he bought it from Mr Edwards. It was supplied with a warrant of fitness which expires on 21 November 2015. The vehicle’s odometer stated it had travelled 137,895 km. It was described in the Trade Me listing as being in “beautiful condition...a top example”.

[39] Soon after Mr Jenkins purchased the vehicle, he and his wife experienced numerous problems with the vehicle, as described above at [6]-[18]. None of these problems have prevented the Jenkins from being able to drive the vehicle. Indeed, they have driven the vehicle nearly 6000 km since purchasing it. Putting the transmission issue and the suspension issue to one side, all of the other issues are relatively minor defects that would be expected from a vehicle of this age and mileage (such as the issues with air conditioning motors, oil leaks, rear door gas struts and the trailer plug) service issues (such as the cam belt and spark plugs and brake and tyre wear) or noises and whines which are not clearly identifiable as specific defects.

[40] Taking into account the age and fairly high mileage of this vehicle, as well as its low price relative to what its new price would have been, I consider that a reasonable consumer would expect to find these other issues in a vehicle of this age and mileage. These issues do not amount to breaches of the guarantee of acceptable quality because a reasonable consumer would find such a vehicle acceptable with such defects.

[41] In any event, Mr Jenkins would have no right of recovery in relation to the matters that were repaired on 25 February 2015 and 10 March 2015 because he did not require Mr Edwards to remedy those matters first.^[1]

[42] As the transmission and suspension issues are the most serious problems that have been identified with the vehicle, I will address them separately.

Transmission issue

[43] In the Assessor’s experience, a heavy, relatively old and high mileage vehicle such as the Touareg is likely to experience some transmission wear. And the slipping problem that has been identified has not so far prevented the vehicle from being driven. This problem is likely to worsen, however, and the slipping that has been experienced to date indicates that the transmission is beginning to fail. In my view, having taken into account the Assessor’s technical advice, a reasonable consumer fully acquainted with the state and condition of its transmission would not regard the Touareg as being as durable as is acceptable for a vehicle of its age, mileage and price, especially in light of Mr Edwards’ advertisement that it was a “top example”.

Suspension problem

[44] It is difficult to be certain about exactly what is the problem with the suspension, as Mr Jenkins and those responsible for servicing the vehicle have not been able to identify the problem or its solution specifically. Nevertheless, the Assessor’s view is that the suspension problems are likely to be factors resulting from the age and mileage of the vehicle. At present, the suspension issue is not preventing the vehicle from being driven normally.

[45] Mrs Jenkins said sometimes at the lights the vehicle’s suspension seemed to make unexpected adjustments without driver input. This, in the Assessor’s experience, is not abnormal, as suspension systems such as those in the Touareg do correct themselves from time to time. And this issue does not appear to have affected the vehicle’s driveability. Indeed, Mr and Mrs Jenkins accepted that the suspension warning light may be being triggered by a faulty sensor. In my view, the suspension issue is not a matter that a reasonable consumer would regard as unacceptable, having regard to the age, mileage and price of the vehicle.

[46] In conclusion, the Touareg did not comply with the guarantee as to acceptable quality, because of the problem with its slipping transmission.

Issue 4: did Mr Jenkins require Mr Edwards to remedy the transmission fault?

[47] In their email of 2 April 2015 and in subsequent correspondence Mr and Mrs Jenkins required Mr Edwards to remedy the faults with the vehicle (apart from those faults they had already had repaired by R E Sinclair Ltd). Mr Edwards made a constructive and reasonable offer to settle the matter, but that offer was rejected as inadequate to cover the repair of all matters identified (including repairs that the Jenkins had arranged unilaterally).

Issue 5: does Mr Jenkins have a right to reject the vehicle?

[48] In light of his settlement offer, Mr Edwards cannot be considered to have refused or neglected to remedy the failure of the Touareg to comply with the guarantee of acceptable quality (in relation to its transmission), for the purposes of s 18(2)(b) of the Act. Accordingly, Mr Jenkins does not have a right to reject the vehicle under s 18(2). The only basis now remaining for rejecting the vehicle would be if the failure to comply with the guarantee of acceptable quality in relation to the transmission was a failure of substantial character according to ss 18(3) and 21.

[49] In my view, having regard to the Assessor’s advice, the problems with the Touareg’s transmission are not of a substantial character. A reasonable consumer may well have simply negotiated a lower price if fully acquainted with the slipping gearbox, as insurance against a likely need to repair the transmission in future, as the vehicle remains driveable even with the problem. Or a reasonable consumer may have required the seller to overhaul or repair the transmission prior to purchase. Either way, I do not consider that the problem is sufficiently serious that it can be said that the vehicle would not be acquired at all by a reasonable consumer, as is required under s 21(a) of the Act. Nor does the vehicle depart in a significant respect from the description by which it was supplied: s 21(b). Nor does the transmission problem mean that the vehicle is substantially unfit for purpose under s 21(c) or unsafe under s 21(d).

[50] Accordingly, I conclude that Mr Jenkins does not have a right to reject the vehicle.

Issue 6: what remedy is available?

[51] Where a failure of a vehicle to comply with the guarantee of acceptable quality can be remedied, the consumer can require the trader to do so. Under s 19 of the Act, a trader may comply with a requirement to remedy a failure of a vehicle to comply with a guarantee by repairing the vehicle or, where the supplier cannot reasonably be expected to do so, by providing a refund of any money paid in respect of the goods: s 19(1)(c). That, in my view, is the appropriate remedy in the present case as Mr Edwards cannot be expected to repair the transmission himself. Instead, I will order him to pay the amount estimated by Acton Automotive as a minimum for repairing the transmission, $4,000. That, in the Assessor’s view, is a reasonable contribution towards the repair of the faulty transmission, reflecting the fact that repair is not urgent, and could be carried out in a variety of ways, such as by replacing the transmission valve body, as Aceomatic Transmission Services suggest, or alternatively replacing the entire transmission with an overhauled second-hand transmission.

[52] Damages for loss or damage that was reasonably foreseeable to result from the failure of the vehicle to comply with the guarantee of acceptable quality are also recoverable under s 18(4) of the Act. I order that Mr Jenkins is also entitled to recover the cost of the transmission check by Aceomatic Transmission Services Ltd, $130.43. I reject Mr Jenkins’ other claims for damages, including in relation to his legal expenses and in relation to finding an alternative vehicle, because they are not reasonably foreseeable as liable to result from the transmission problems.

[53] Accordingly, I order Mr Edwards to pay Mr Jenkins $4,130.43 immediately.

DATED 24 September 2015

J S McHerron
Adjudicator

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^[1] As is required by s 18 of the Act: Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 (HC) at [11].