Valdez v Enterprise Traders (NZ) Limited - Reference No. MVD 219/14 (Auckland) [2015] NZMVDT 20 (4 March 2015)

Last Updated: 18 April 2015

Decision No: AK 20/2015 Reference No. MVD 219/14

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN RICHEL DUENAS VALDEZ

Purchaser

AND ENTERPRISE TRADERS (NZ) LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr D Clough, Assessor

HEARING at Hamilton on 2 March 2015

APPEARANCES

Miss R D Valdez, the purchaser

Mr G Singh, witness for the purchaser
Mr M Hassan, accountant for the trader

DECISION

Background
[1] On 6 March 2014 Miss Valdez (“the purchaser”) bought a 2004 Nissan March registration number HHU238 (“the vehicle”) from Enterprise Traders (NZ) Limited (“the trader”) for $5,500. The purchaser purported to reject the vehicle by email to the trader on 17 February 2015 on the grounds that the trader had failed to repair the vehicle’s central door locking system within a reasonable time. She has applied to the Tribunal to uphold her rejection and order the trader to refund the purchase price.

[2] The trader acknowledges that the vehicle’s central locking system probably lacked durability but it says that it has offered to repair the vehicle’s central locking system at the trader’s cost but the purchaser has rejected that offer because she says it was made by the trader too late.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr Clough as expert assessor to assist in the determination of the complaint. Mr Clough took the oath required by clause 10(2) of Schedule 1 to that Act. As an assessor Mr Clough assisted the adjudicator but the Tribunal’s decision was made by the adjudicator.

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?
[b] If it did not comply, did the purchaser require the trader to remedy the fault, and if so, did the trader remedy the fault within a reasonable time?
[c] If the trader did not remedy the fault within a reasonable time, was the purchaser entitled to reject the vehicle and if not what remedy is she entitled to?

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

Relevant law
[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 Fair Trading Act 1986, the Contractual Remedies Act 1979 or the Consumer Guarantees Act 1993 (“the Act”), as applicable to the circumstances of the case. In this application the Act is applicable.

[6] 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.”

[7] The expression "acceptable quality" was, at the time of the sale of this vehicle, defined in s7 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, 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 to¾
(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 section 7(1)(a) to (e) of the Act as modified by the factors set out in section 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.

[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 her right to reject the vehicle within a reasonable time.

Application of law
[10] The purchaser told the Tribunal that she bought the vehicle from the trader on 7 March 2014 for $5,500 and that its odometer at the time of sale was 34,396kms. The Vehicle Offer and Sale Agreement records as a special condition that the vehicle was sold with a six month mechanical warranty.

[11] The purchaser says that about two months after she bought the vehicle its central locking system became faulty and would not lock the left hand passenger door. She says she returned to the trader’s premises to discuss the problem with the salesman who sold her the vehicle, a man named Arpit, but was told he was on holiday in India and she left without having anyone else at the trader’s premises fix the fault. A month or two later (the purchaser was unable to recall the date) the purchaser says she returned to the see if Arpit was back and was told he was away in Wellington. Once again the purchaser left without requiring the trader to fix the fault with the central locking system which by that time had extended to the offside rear door.

[12] In early September 2014 the purchaser went back to the trader because she says she wanted the fault fixed before the expiry of the six month mechanical warranty on 7 September 2014. The purchaser says she met a man who told her he owned the trader’s business and that she showed him the fault. The trader told the purchaser that it would fix the fault but that if it cost more than $150 then the purchaser would have to pay the excess cost over $150. The purchaser refused to agree to pay the excess cost. A week or two later the purchaser says she returned to the trader’s premises and agreed to pay the excess and it was agreed that the repair of the central locking system would be done on a Saturday when the trader had a mechanic at the yard. The trader promised to call the purchaser to arrange the repair but failed to do so and when the purchaser’s partner telephoned the trader the trader denied all knowledge of the purchaser or the problem with the vehicle.

[13] In September the purchaser went to Community Law Waikato for advice. On 3 October 2014 Community Law Waikato sent the trader a letter reciting the facts of the dispute and requiring the trader to remedy the central locking fault at no cost to the purchaser and to contact the purchaser to arrange to do so. Community Law Waikato received no response to its letter to the trader and sent a further letter to the trader on 20 October 2104 asking for a response. On 12 November, not having received a response Community Law Waikato wrote to the purchaser advising her to make an application to the MVDT. The purchaser filed her application with the Tribunal on 2 December 2014 in which she sought the cost of repairing the central locking system quoted to her by AZ Autos Ltd of $517.50 and $1000 to cover the time and cost spent in travelling to obtain legal advice.

[14] On 19 December 2014 the trader sent the purchaser a document headed “REPRORT” (sic) in which it claimed it had agreed on an unspecified date to rectify the problem or provide the purchaser with a full refund. The letter also claimed that on 8 December Mr Hassan who described himself in that email as the trader’s “Legal Executive” had spoken to Mr Gopal the purchaser’s partner and had offered to repair the vehicle’s central locking system without any cost to the purchaser and that if the repairs took more than a day the trader would provide a “curtsey (sic) car” for the purchaser and also offered “to refund the money in full and take the car back”.

[15] On 17 February 2015 the purchaser sent the trader an email purporting to reject the vehicle because the trader took too long to repair the fault with the central locking system.

[16] The Tribunal, in determining the first issue: whether the vehicle supplied by the trader complied with the guarantee of acceptable quality, has had regard to the nature of the goods, in this case a ten year old Japanese imported Nissan March with 34,396kms on its odometer and its purchase price of $5,500. The Tribunal has also had regard to the fact that the vehicle was sold with a six month mechanical warranty provided by the trader. Within two months of sale the vehicle’s central locking system started to fault; at first affecting the off-side passenger’s door but a couple of months later also affecting the off-side rear passenger’s door.

Conclusion on issue [a]
[17] The trader did not offer any evidence to show that the central locking system was not faulty, as the purchaser claimed, and the Tribunal accepts that the issue of whether or not the central locking system was as durable as a reasonable consumer would regard as acceptable for a vehicle of this type is not in dispute. The Tribunal considers that a reasonable consumer of a vehicle of this type, age, mileage and price sold with a six month vendor’s mechanical warranty would probably expect more durability from the vehicle’s locking system. Accordingly, the Tribunal finds as a fact that the vehicle did not comply with the guarantee of acceptable quality because its central locking system lacked durability.

Issue [b]: Did the purchaser require the trader to remedy the fault, and if so, did the trader remedy the fault within a reasonable time?

Relevant law
[18] Section 18 of the Act provides 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 ¾
(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, ¾
(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.

(3) Where the failure cannot be remedied or is of a substantial character within the meaning of Section 21, the consumer may ¾
(a) subject to section 20, reject the goods in accordance with section 22; or
(b) obtain from the supplier damages in compensation for any reduction in
value of the goods below the price paid or payable by the consumer for the
goods.

(4) In addition to the remedies set out in subsection (2) and subsection (3), the
consumer may obtain from the supplier damages for any loss or damage to the
consumer resulting from the failure (other than loss or damage through
reduction in value of the goods) which was reasonably foreseeable as liable to
result from the failure."

[19] The purchaser told the Tribunal that when the fault with the central locking system first occurred in May 2014 instead of taking the vehicle back to the trader and immediately requiring it to remedy the fault she tried on two occasions two months apart to speak to the trader’s salesman who sold her the vehicle. That was a hopelessly ineffective way of addressing the issue because the salesman was not present and the fault with the vehicle was thus not drawn to the trader’s attention until early September 2014 when the purchaser says she confronted the trader and required it to remedy the fault. The trader failed to do so and the reasons for its failing to do so given by Mr Hassan lacked all credibility. In October 2014 the purchaser had a solicitor at Waikato Community Law send two letters to the trader; the first on 3 October and the second on 20 October requiring it to fix the vehicle. These were also ignored by the trader. It was not until the purchaser filed her application with the Tribunal on 2 December 2014 that the trader was moved to respond. The Tribunal accepts that the trader then offered to either refund the purchase price or repair the vehicle at its costs. However the purchaser by then had decided that she wanted $1000 compensation from the trader and her refusal to allow the trader to remedy the vehicle’s central locking system appears to have been founded on her belief that if she took the matter to a hearing before the MVDT she would get some or all of the $1000 and the cost she had estimated by AZ Autos Ltd of Papatoetoe of $517.50 to install two second hand central locking modules in the vehicle.

Conclusion on issue [b]
[20] The trader, after being required by the purchaser in early September 2014 and again by Waikato Community Law in its letter of 3 October 2014 failed to remedy the vehicle’s faulty central locking system within a reasonable time of being required to do so. The trader’s offer to repair or refund the purchase price was not made until mid-December 2014 after the purchaser filed her application with the Tribunal on 2 December and a copy of it was sent to the trader. The trader did not rectify the fault within a reasonable time of being required to do so.

Issue [c]: Was the purchaser entitled to reject the vehicle and if not what remedy is she entitled to?

Relevant law
[21] Section 20 of the Act provides that a consumer will lose his or her right to reject goods under the Act if the right to reject is not exercised within a reasonable time of the time of supply. What is a reasonable time is defined in s 20(2) and requires consideration of several factors such as the type of goods, their use, the length of time it is reasonable for the goods to be used and the amount of use it is reasonable for them to be put before the defect becomes apparent. The relevant section is as follows:
“20 Loss of right to reject goods
(1) The right to reject goods conferred by this Act shall not apply if-
(a) the right is not exercised within a reasonable time within the meaning of subsection (2); or
(b) the goods have been disposed of by the consumer, or have been lost or destroyed while in the possession of a person other than the supplier or an agent of the supplier; or
(c) the goods were damaged after delivery to the consumer for reasons not related to their state or condition at the time of supply; or
(d) the goods have been attached to or incorporated in any real or personal property and they cannot be detached or isolated without damaging them.”

(2) In subsection (1)(a), the term reasonable time means a period from the time of supply of the goods in which it would be reasonable to expect the defect to become apparent having regard to—
(a) the type of goods:
(b) the use to which a consumer is likely to put them:
(c) the length of time for which it is reasonable for them to be used:
(d) the amount of use to which it is reasonable for them to be put before the defect becomes apparent.
(3) This section applies notwithstanding section 37 of the Sale of Goods Act 1908.”

[22] The Court of Appeal in Nesbit v Porter [2000] NZCA 288; (2000) 9 TCLR 395 in considering s20 and what was a “reasonable time” under the Act in respect of an 11 year old Nissan Navarra sold for $10,990 and rejected because of rust nine months after purchase said:
“In many, if not most cases the period will be longer for new goods, which a buyer is entitled to expect to be defect free when first used, than it will be for second hand goods of the same type. As a general rule, the older the goods, the shorter is likely to be the reasonable time.” The Court in Nesbit also said:
“Another factor which will influence the period to be allowed for exercise of the right of rejection is whether regular inspections of the goods for defects are customary or, as in the case of motor vehicles, required by law. But for defects which cannot be expected to be revealed by such inspections the reasonable time may be longer.” And later in the same decision the Court said:
“A reasonable time under s20 must accordingly be one which suffices to enable the consumer to become fully acquainted with the nature of the defects, which, where the cause of a breakage or malfunction is not apparent the consumer can be expected to do by taking the goods to someone, usually and preferably the supplier, for inspection. In this context therefore, a defect is not “apparent” until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial.” Finally and probably most relevantly to the present fact situation the Court said:
“We consider that in a vehicle the age and type of this Navara it is reasonable to expect defects of the kind actually encountered by the Nesbits, latent at the time
of the supply, to become apparent relatively soon after the supply. (We do not understand there to have been an allegation that there was any concealment on the part of Porter Motors.) In our view the motor vehicle dealer should generally be freed from the burden of having to accept rejection of a vehicle of this age and pedigree after the time of the next mandatory six monthly Warrant of Fitness check has passed. If, at the latest, a defect of the kind found in the Navara has not manifested itself on such an inspection, it would be an unfair burden upon the supplier if a buyer of such a vehicle, which must be assumed to have been in daily use, sometimes in rough conditions, should thereafter be able to reject it. Bearing in mind, however, that most people do not have their vehicles tested until the six month period is expiring; there is a need for some latitude to give time to decide whether to exercise that right.”

Application of law to facts
[23] The period of time within which rejection must occur runs from the date of supply; in this application the vehicle was supplied to the purchaser on 7 March 2014. The purchaser became aware that the vehicle had a fault with its central locking system two months later in May 2014.

[24] The Tribunal takes the view that this fault was probably “apparent” to the purchaser in May 2014 but she did not properly confront the trader and require it to remedy the fault until September 2014 and did not purport to reject the vehicle because of the trader’s failure to remedy the fault for a further five months. The Tribunal considers that the purchaser’s rejection of the vehicle 11 months after she purchased it for a fault which was evident to her two months after she received the vehicle was too late.

Conclusion on issue [c]
[25] The purchaser lost her right to reject the vehicle by 17 February 2015 because she did not exercise rejection within a reasonable time of the date of supply. However she is still entitled to recover the reasonable costs of repairing the central locking system from the trader. The purchaser produced two quotations for this; one from AZ Autos Ltd of Papatoetoe dated 19 November 2014 of $517.50 and one from Jim Wright Nissan of Hamilton dated 26 February 2015 of $750.84. The Tribunal considers the Jim Wright Nissan quote to be the more reasonable because it avoids the cost of the purchaser having to drive the vehicle to Papatoetoe with a consequent cost in terms of fuel, her time and loss of wages. Accordingly, the Tribunal will order the trader to pay the purchaser $750.84 immediately together with the cost she incurred in obtaining the quote from Jim Wright Nissan of $103.50. The Tribunal is not satisfied that the purchaser incurred any other material costs as a result of the trader’s failure to remedy the vehicle’s central locking fault apart from her filing fee of $50. The purchaser’s claim for $1,000 compensation was unsupported with any evidence of loss and this is therefore dismissed.

Orders
1. The purchaser’s application to reject the vehicle is dismissed as well as her claim for $1000 compensation.

2. The trader shall immediately pay to the purchaser $904.34 being the estimated repair costs of $750.84, the cost the purchaser paid for the quote of $103.50 and her filing fee of $50.

DATED this 4th March 2015

C.H Cornwell
Adjudicator