Ashman v 4S Motors Limited Reference No. MVD 213/2015 (Wellington) [2015] NZMVDT 170 (15 December 2015)

Last Updated: 19 January 2016

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Reference No. MVD 213/2015 (WN)16

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN STEVEN GRAHAM ASHMAN

Purchaser

AND 4S MOTORS LIMITED

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator
S Gregory – Assessor

HEARING at Auckland on 10 November 2015
DATE OF DECISION 15 December 2015

APPEARANCES

S G Ashman, Purchaser
G Ashman, Purchaser’s father

Y Lu, Director of Trader
J Qian, Director of Trader

DECISION

4S Motors Limited must pay Steven Ashman $4,193.67 immediately.

REASONS

Introduction

[1] The gearbox of a 2008 Volkswagen Golf required replacement approximately nine months after the purchase of the vehicle. Is the purchaser entitled to a refund from the trader of the cost he incurred in replacing the transmission?
[2] This claim raises the following issues:

(a) Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Consumer Guarantees Act 1993 (“the Act”)?

(b) If so, was the failure of a substantial character?

(c) What remedy is available to the purchaser?

Background

[3] Mr Ashman purchased a 2008 Volkswagen Golf with 55,000 km on the odometer for $11,990 on 18 September 2014 from 4S Motors Limited.
[4] After driving about 10,000 km over about nine months, Mr Ashman heard an unusual noise coming from the gearbox.
[5] On 27 June 2015, Mr Ashman took the vehicle to his local mechanic, Whangaparaoa Autostop, which confirmed the presence of noise from the gearbox and recommended that Mr Ashman take the vehicle to Tristram European, a Volkswagen franchise dealer on the North Shore, which he did on 29 June 2015.
[6] Tristram European found iron filings in the gearbox oil, advising Mr Ashman that this particular model was the subject of a general recall regarding a possible fault in the gearbox’s electronic control box. This check had not been carried out on the vehicle. If it had, the fault in the gearbox may have been detected earlier.
[7] Mr Ashman’s evidence was that, on 27 June 2015, he telephoned 4S Motors and told a staff member who identified himself as Graham that there was a noise in the gearbox. Mr Ashman recalled Graham telling him that this issue was not covered by the Act or the warranty and that he was unable to assist.
[8] The directors of 4S Motors who appeared at the Tribunal hearing denied that this telephone conversation had taken place, but they admitted that one of the two people who usually answered the phone at 4S Motors was called Graham. Neither Graham, nor the other member of the 4S Motors floor team, appeared to give evidence, so I was unable to give the directors’ denial much weight.
[9] On 1 July 2015, Tristram European transferred the vehicle by transporter to Kaspa Transmissions in Glenfield. Mr Ashman’s father spoke with another staff member at 4S Motors (Jason) on 4 July 2015 and told him the vehicle was at Kaspa Transmissions. Jason told Mr Ashman’s father that he would send a mechanic to look at the gearbox when it was open. Jason also asked for a copy of the repair estimate from Kaspa Transmissions.
[10] On 8 July 2015, Mr Ashman (senior) phoned 4S Motors and spoke to Jason again to inform him that the gearbox was ready for inspection at Kaspa Transmissions. Mr Ashman also advised that Kaspa Transmissions’ estimate was available. This time, however, the response from 4S Motors was less enthusiastic, with Jason indicating he would not be sending a mechanic to inspect the vehicle.
[11] At the hearing, 4S Motors’ directors complained that Mr Ashman had not advised 4S Motors of any problems with the transmission until after he had instructed Kaspa Transmissions to dismantle the transmission and diagnose the fault. However, the Assessor pointed out that, at that stage, Kaspa Transmissions would only have stripped the transmission (which was necessary to find out the cause of the problem) and would not have actually carried out the work or completely dismantled it.
[12] Kaspa Transmissions found a worn bearing in the gearbox, making the gearbox a total right-off. Mr Ashman supplied the Tribunal with photographs of the damage, indicating a failed pinion bearing in the transmission. Kaspa Transmissions observed that the hardening had come off the bearing, which was pitted, resulting in significant noise and metal contamination.
[13] Mr Ashman then instructed Kaspa Transmissions to repair the transmission. He was, understandably, under the clear impression that 4S Motors was not prepared to contribute to the cost of the repairs.
[14] On 28 July 2015, Mr Ashman (senior) paid Kaspa Transmissions’ invoice of $4,193.67 for this work. This invoice included 30 hours of labour.
[15] On 1 August 2015, the vehicle was transported back to Tristram Motors for the work required under the recall to be carried out. This was done at no cost to Mr Ashman.

Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Act?

[16] Section 6 of the Act provides a guarantee that goods are of an acceptable quality. According to s 2 of the Act, “goods” includes vehicles.
[17] The meaning of acceptable quality as defined in s 7 of the Act (as far as relevant) is 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.

[18] As is clear from subs (1) of the definition, whether a vehicle is of “acceptable quality” is an objective test. That means the question whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[19] The vehicle in the present case undoubtedly had a defect that caused the transmission to fail. In the Assessor’s view, the fault is likely to have occurred around 2,000 to 3,000 km after Mr Ashman purchased the vehicle. It is likely that he would only have noticed it later, however. It is not possible to determine that the defect was present at the time the vehicle was purchased by Mr Ashman, but it is clear that the vehicle, by reason of its transmission, was not as durable as a reasonable consumer fully acquainted with the state and condition of the vehicle would regard as acceptable, having regard to its age, mileage and price. Nor was it fit for purpose, given the seriousness of the problem with the transmission, and the importance of the transmission as a key component of the vehicle.
[20] Accordingly, in light of my conclusion above, I have found that the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act.

Was the failure of substantial character?

[21] Section 21 of the Act specifies the circumstances in which a failure to comply with the guarantee as to acceptable quality will be regarded as a failure of substantial character for the purposes of s 18(3) of the Act. They include that the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure: s 21(a).
[22] Kaspa Transmissions concluded that the transmission in the vehicle needed to be replaced. 4S Motors did not argue otherwise.
[23] As noted above and as this Tribunal has previously found, a vehicle’s transmission is one of its key components, without which it cannot be used because it will not move.[1] I have no hesitation in concluding that the failure of the transmission was a failure of substantial character in terms of s 21(a) of the Act. In addition, I consider that the vehicle was substantially unfit for purpose, and therefore the failure of the transmission was a failure of a substantial character according to s 21(c) as well.

What remedy is available to the purchaser?

[24] The options available to a purchaser depend on whether the failure itself can be remedied, or whether the failure is of a substantial character according to s 21. Section 18 of the Act provides that where the failure can be remedied, a consumer may require the supplier to remedy the failure within a reasonable time in accordance with s 19.[2] Where a trader who has been required to remedy a failure refuses to do so, then the purchaser may have the failure remedied elsewhere and obtain from the trader all reasonable costs in having the failure remedied.[3]
[25] Mr Ashman gave evidence that he had attempted to inform 4S Motors that there was a problem needing repair by Tristram Motors but that Tristram Motors refused to assist. This was disputed by the directors of 4S Motors who appeared at the hearing, but as I have noted above, they did not make available the two 4S Motors floor team members to give evidence. I consider it likely that the telephone conversations reported by Mr Ashman did occur and that 4S Motors refused to remedy the transmission failure.
[26] In any event, because the failure to comply with the guarantee of acceptable quality was of a substantial character, Mr Ashman was entitled to obtain from 4S Motors damages and compensation for any reduction in the value of the vehicle below the price paid for it.[4] Either option would provide a basis for Mr Ashman to recover the cost of replacing the transmission in the vehicle.
[27] The Assessor asked whether Kaspa Transmissions offered to replace the transmission with a secondhand transmission instead of repairing the existing transmission. Mr Ashman said that Kaspa Transmissions had not offered to do so, but had mentioned that it would cost approximately $10,000 to install a new transmission. Subsequent to the hearing, the Assessor obtained information on the cost of secondhand transmissions for the vehicle involved, concluding that, by the time it was fitted with fluids it would exceed the overhaul cost charged by Kaspa Transmissions.
[28] Accordingly, the cost of the overhaul carried out by Kaspa Transmissions of $4,193.67 was, in the Assessor’s view, reasonable.

Conclusion

[29] 4S Motors Limited must pay Mr Ashman $4,193.67 immediately.

DATED 15 December 2015

J S McHerron
Adjudicator

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[1] See, for example, Shen v DW & T Motor Limited [2015] NZMVDT 76 at [20].

[2] Section 18(2)(a) of the Act.

[3] Section 18(2)(b)(i) of the Act.

[4] Section 18(3)(b) of the Act.