Pincott v Cheapies Limited Reference No. MVD 241/2015 (Wellington) [2015] NZMVDT 179 (16 December 2015)

Last Updated: 19 January 2016

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Reference No. MVD 241/2015 (WN) 25

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN IAN ANDREW PINCOTT

Purchaser

AND CHEAPIES LIMITED

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator
D Binding – Assessor

HEARING at Wellington on 27 November 2015
DATE OF DECISION 16 December 2015

APPEARANCES

I A Pincott, Purchaser

No appearance by Trader

DECISION

Mr Pincott’s rejection of the vehicle is upheld. Cheapies Limited must immediately pay Mr Pincott $2,146, comprising:

• the cost of the vehicle;
• Mr Pincott’s reasonably foreseeable losses resulting from the breach of s 6 of the Consumer Guarantees Act 1993; and
• Mr Pincott’s reasonable costs in connection with the proceedings.

As soon as Cheapies Limited has paid Mr Pincott $2,146, he must allow Cheapies Limited to collect the vehicle.

Cheapies Limited must also, within 10 days of the date of this order, pay the sum of $500 towards the Tribunal’s reasonable hearing costs by making such payment to the Crown, delivered either in person or via courier, to the Ministry of Justice, Tribunals Unit, Level 1 Chorus House, 41 Federal Street, Auckland.

REASONS

Introduction

[1] A vehicle suffers a blown head gasket immediately after purchase. The likely cost of repairs exceeds the cost of the vehicle. The purchaser wishes to reject it. Is he entitled to do so?
[2] The following issues arise:

(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) If so, is the purchaser’s rejection of the vehicle valid?

Background

[3] On 1 August 2015, Mr Pincott purchased a 2002 Kia Carnival with 112,681 km on the odometer for $1,700 from Cheapies Limited.
[4] Mr Pincott and his wife test-drove the vehicle and it appeared to run satisfactorily. They could not take the car any distance because the fuel gauge was showing empty.
[5] During the negotiation, Mr Pincott’s wife asked specifically if the car was roadworthy and safe, as it would be used for transporting children. The salesman confirmed that it was.
[6] Mr Pincott and his wife took possession of the vehicle and started driving over the Haywards Hill Road towards their home at Raumati Beach. During the journey an engine warning light appeared. Mr Pincott pulled into a petrol station in Pauatahanui to purchase fuel and to check that the oil level was sufficient. He put $20 worth of fuel in the tank and saw that the oil was above the minimum level on the dipstick.
[7] Mr Pincott restarted the vehicle and saw that the engine check light had gone off. He drove towards Plimmerton via Grays Road. After driving a short distance, about 1 km, the engine check light came on again. He pulled off the road to check the meaning of the engine warning light in the owner’s manual. The manual said to have the vehicle inspected by a service agent as soon as possible. Mr Pincott restarted the car and continued slowly to his home in Raumati Beach. The engine check light went off again but returned after a few hundred metres and stayed on for the rest of the journey home. He parked the car on his driveway and did not use it again for the rest of the weekend.
[8] The following Monday, 3 August 2015, Mr Pincott’s wife contacted the local garage, Gordon Motors, and asked them to inspect the car. The following day, Mr Pincott drove the car to Gordon Motors, just over 1 km from his home, and left it there for inspection.
[9] Gordon Motors contacted Mr Pincott later that day to say there was water in the sump and that the diagnostic reading from the computer had indicated a probable blown head gasket. The garage also noted that the thermostat had been disconnected.
[10] The report from Gordon Motors indicated a scan had revealed an oxygen sensor fault. Further investigation revealed the engine had a blown head gasket or related fault. Oil sludge was observed in the coolant, excessive condensation in the breathers from the rocker covers, and the presence of combustion gases in the cooling system. Gordon Motors conducted a TK test which confirmed this assessment.
[11] Gordon Motors estimated that replacement of the head gasket would cost around $2,500 depending on whether there was any damage to the heads.
[12] On 5 August 2015, Mr Pincott picked up the car from Gordon Motors and drove it back home.
[13] On 7 August 2015, Mr Pincott emailed Cheapies with a letter outlining the problem he had experienced with the vehicle and stating that his inclination was to return the car for a refund of the purchase price. Alternatively, if the estimate of repairs was reasonable, Mr Pincott suggested he might be willing to enter into an agreement as to how the costs might be borne. Mr Pincott emailed Cheapies again with the text of the letter on 11 August 2015.
[14] On 14 August 2015, having had no response to his emails, Mr Pincott sent a third email, as well as a paper copy of the letter via a New Zealand Post courier, to the address listed for the dealer on the sale agreement and in the register of motor vehicle dealer traders. Mr Pincott received confirmation that the letter had been delivered to Cheapies’ address for service.
[15] On 1 September 2015, Mr Pincott rang Cheapies and spoke with a man identifying himself as “Vern”. Mr Pincott thinks that this man is probably Mr Vernon T Boyce who has appeared before the Tribunal previously to represent the trader.[1]
[16] Vern claimed Cheapies Limited had ceased trading and would not deal with any queries or provide contact details for the trader.
[17] Mr Pincott has identified links between Mr Boyce and Mr James Croxford, who is listed as a director of Cheapies Limited, and another company, 0800 We Do It Limited. Mr Pincott raised a question over whether the true seller of the vehicle was Cheapies Limited as listed on the sale document or 0800 We Do It Limited. This question arose because, on Mr Pincott’s bank statement, his funds for the purchase price went into an account named “0800 We Do It Limited”.
[18] As I explained in the hearing, however, I do not consider that the trader was 0800 We Do It Limited. Rather, it is clear that the trader in the present case was Cheapies Limited. That was the trader identified in the Trade Me listing for the vehicle, and on the vehicle offer and sale agreement.
[19] Mr Pincott has had no further communication from the trader, which did not attend the hearing.

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

[20] 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.
[21] The meaning of acceptable quality is defined in s 7 of the Act, as far as is relevant, 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.

[22] As is clear from subs (1) of the definition, whether a vehicle is of “acceptable quality” is an objective test. This 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.
[23] In the present case, it is clear that the vehicle failed to comply with the guarantee of acceptable quality. The vehicle was not as durable as a reasonable consumer would regard as acceptable, having regard to its age, mileage and price. As Mr Pincott pointed out, the vehicle lasted less than half an hour before the engine warning light appeared on the journey home. This does not correspond with the Trade Me listing of the vehicle, which described it as “runs and drives very well. Engine and trans all seem in good working order”.
[24] Accordingly, I conclude that the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act.

Was the failure of a substantial character?

[25] A failure to comply with a guarantee will be of a substantial character in any case where one or more of the criteria in paragraphs (a) to (d) of s 21 apply. In the present case, and having regard to the advice of the Assessor, I consider that paragraphs (a), (b) and (c) all apply.
[26] First, I do not consider that the vehicle would have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure. In particular, the vehicle could only be driven for approximately half an hour before having a head gasket failure and requiring repairs costing more than the vehicle’s purchase price. No reasonable consumer would purchase such a vehicle.
[27] Second, I consider that the vehicle departed in significant respects from the description by which it was supplied, namely that it runs and drives very well and that the engine and transmission all seem in good working order.
[28] And third, the vehicle is substantially unfit for the purpose for which vehicles are commonly supplied, namely to be driven. The vehicle is clearly not currently in a drivable condition.
[29] Accordingly, for these reasons, the failure of the vehicle to comply with the guarantee of acceptable quality is of a substantial character in the present case.

Is the purchaser’s rejection valid?

[30] For a rejection to be valid, it must comply with the requirements of s 22 of the Act. That section requires the consumer to notify the supplier of the decision to reject the goods and the ground or grounds for rejection. Mr Pincott wrote a letter indicating that his inclination was to return the car for a refund, but opening the door to an agreement for the trader to contribute to the costs of repair. I do not consider that this letter was an unequivocal letter of rejection. I have some doubt therefore whether it complies with the requirements of s 22.
[31] Subsequent events have left Mr Pincott in the position where rejection is the only valid option, however. That is because the estimated cost of repair for this defect, $2,500, is higher than the cost of the vehicle itself. Cheapies has, by not responding to any of Mr Pincott’s communications, refused or neglected to remedy the failure of the vehicle to comply with the guarantee of acceptable quality. Under the Act, Mr Pincott is entitled to choose whether he wants the failure to be remedied elsewhere at the trader’s expense, or to reject the vehicle.[2] In his submission to the Tribunal, Mr Pincott made it clear that he does wish to reject the vehicle. This submission was provided to the trader and so, in my view, rejection is the appropriate remedy.
[32] Mr Pincott also seeks to recover his reasonably foreseeable losses arising from the failure. These include the cost of the independent vehicle assessment from Gordon Motors of $70, as well as the cost of fuelling the car of $20 and postage of $6.[3]
[33] In addition, as the trader failed to attend the hearing without good cause, the Tribunal will order Cheapies Limited to pay Mr Pincott’s reasonable costs in connection with the proceedings, as well as the Tribunal’s reasonable costs of its hearing.[4]

Conclusion

[34] Mr Pincott’s rejection of the vehicle is upheld with effect from the date of his Tribunal application, 16 October 2015. Cheapies Limited must refund the purchaser with the full purchase price of $1,700 immediately. Cheapies Limited must also pay Mr Pincott’s reasonably foreseeable losses resulting from the failure in the sum of $96. Cheapies Limited must pay Mr Pincott’s reasonable costs in connection with the proceedings. These include his filing fee of $50 and a reasonable contribution to the costs of his attendance at the hearing, which I assess to be $300. The total Cheapies Limited must pay Mr Pincott is $2,146.
[35] Cheapies Limited must also, within 10 days of the date of this order, pay the sum of $500 towards the Tribunal’s reasonable hearing costs to the Crown, by delivering this sum in person or by courier to the Ministry of Justice, Tribunals Unit, Level 1, Chorus House, 41 Federal Street, Auckland.

DATED 16 December 2015

J S McHerron
Adjudicator

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[1] Schroder v Cheapies Limited [2015] NZMVDT 9.

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

[3] Recoverable under s 18(4) of the Act.

[4] Motor Vehicle Sales Act 2003, Schedule 1, cl 14.