Singh v New Century Autos Limited - Reference No. MVD 7/2015 (Auckland) [2015] NZMVDT 25 (12 March 2015)

Last Updated: 19 April 2015

Decision No. AK 25 /2015

Reference No. MVD 7/2015

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN RAKESH & NATASHA SINGH

Purchasers

AND NEW CENTURY AUTOS LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S D Gregory, Assessor

HEARING at Auckland on 9 March 2015

APPEARANCES

Mr R and Mrs N Singh, the purchasers

Ms K Xi, director, for the trader

DECISION

Background

[1] On 20 August 2013 Mr & Mrs Singh (“the purchasers”) bought a 2008 Toyota Camry registration GZA453 (“the vehicle”) from New Century Autos Limited (“the trader”) for $15,980. The purchasers have rejected the vehicle because they say it was damaged and de-registered before it was sold to them and that it has not been properly repaired. The purchasers seek the Tribunal’s order upholding their rejection and ordering the trader to refund the purchase price.

[2] The trader says that it has been willing to replace the purchasers’ vehicle for another similar vehicle but the purchasers have not accepted that offer.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has appointed Mr Gregory as expert assessor to assist in the determination of the complaint. Mr Gregory took the oath required by clause 10(2) of Schedule 1 to that Act. As an assessor Mr Gregory assisted the adjudicator but the application was determined by the adjudicator alone.
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, whether the failure(s) are of substantial character within the definition in s21 of the Act?
[c] Are the purchasers entitled to reject the vehicle?

Issue [a]: Whether the vehicle complied with the guarantee of acceptable quality in s.6 of the Consumer Guarantees Act 1993

Legal Principles
[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, as applicable to the circumstances of the case. In this application the Consumer Guarantees Act 1993 (“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 the purchasers bought the vehicle defined in Section 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, 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 to ¾
(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 s7(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 purchasers’ 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 purchasers 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 purchasers exercised their right to reject the vehicle within a reasonable time.

Application of law to facts
[10] The purchasers bought the vehicle from the trader for $15,980 on 20 August 2013 and took delivery of it on 26 August 2013. They paid a deposit of $500 and financed the balance of the purchase price by entering into a collateral credit agreement with Warwick Cashmore Limited trading as MTF-Greenlane. The loan is over a three year term at 13.10% fixed over the term of the loan.

[11] The vehicle’s odometer at the time of sale was 33,750kms. On 13 November 2014 Mr Singh says he took the vehicle to SsangYong in Takanini intending to use it as a deposit on a new car. SsangYong obtained a Motorweb Vehicle Information Report which showed that the vehicle had been first registered as EUB454 to Avis Rent A Car Ltd on 18 December 2008 but that its registration had been cancelled 11 months later on 23 November 2009. They offered the purchasers $8000 for the vehicle as a trade-in on a new SsangYong car. Mr Singh says that was because they had found out that the vehicle had been written off during 2009 because it had been damaged and presumably it was uneconomical for Avis’s insurer to repair it. The vehicle was not re-registered until 1 July 2013. On 31 August 2013 it was transferred into the trader’s name and immediately transferred by the trader to the purchasers. Ms Xi told the Tribunal that the trader bought the vehicle from XY Auto Repairs Ltd and it had been driven by the trader on D-plates for three years, apparently without a warrant of fitness.

[12] On 15 November 2014 Mr Singh went back to the trader and informed it of his findings regarding the vehicle’s history. He asked Ms Xi for a refund of the purchase price. Ms Xi refused a cash refund but a few days later she made contact with Mr Singh’s father-in-law and agreed to exchange the vehicle for a fresh import of the same year and distance travelled. However by 9 December the trader had still not imported and supplied the purchasers with a replacement vehicle and Ms Xi refused Mr Singh’s request that the trader buy a replacement vehicle on the New Zealand market for the purchasers. On 11 December 2014 Ms Xi sent the purchasers a text message saying that the trader had bought them a 2008 Toyota Mark X 4.5 grade vehicle with 64,000kms on its odometer. The purchasers replied to Ms Xi’s email that they did not want a car that had a greater mileage than the vehicle. The trader then offered the purchasers $1000 cash in addition to the Toyota Mark X but that was not acceptable to the purchasers.

[13] The purchasers arranged for Peter Adams of Corporate Prestige Motor Adjusting Specialists to inspect the vehicle and report on the state of repairs done to the vehicle. The Corporate & Prestige Report dated 7 March 2015 contains four photographs said to be of the vehicle in a damaged condition obtained by the purchasers. The report states Mr Adams inspected the vehicle on 6 March when its speedo was 54,967kms and that it was evident from the gaps around the frontal panels and tyre wear that the chassis/frame alignment had not been properly carried out. The report also states that the vehicle’s wheelbase appeared to have up to 14mm difference from one side to another. Mr Adams took the vehicle to Gray & Galpin, Panelbeaters who put the vehicle on a Blackhawk Shark Computerised Vehicle Management System and he attached a report of the measurements made. Mr Adams says this reveals significant alignment defects and the sub-frame and some suspension elements may be still bent. The Report’s summary states that major rectification work is required on the vehicle and questions how the vehicle was able to be certified by a supervising engineer whose sign-off enabled a deregistered vehicle to be re-registered.

[14] The purchasers produced a report dated 30 January 2015 from Car Valuations NZ Ltd which states that in its opinion the vehicle’s retail value as repaired in 2013 was $8,000.

[15] On 2 February 2015 the purchasers delivered a letter rejecting the vehicle to the trader giving as their reason “the serious loss of value brought about by finding the true history of the vehicle.”

[16] Ms Xi says the trader bought the vehicle from XY Auto Repairs Ltd and the trader knew that the vehicle had been deregistered but did not disclose that to the purchasers at the time of purchase. Ms Xi says that the trader used the vehicle on D-plates for about three years. Ms Xi says that she had bought a 2008 Toyota March X which had travelled 64,000kms for the purchasers in exchange for the vehicle but they were not satisfied with it. The trader had also offered the purchasers $1000 cash and a one year mechanical warranty but the purchasers would not accept that.

[17] The Tribunal, in deciding whether this vehicle was of acceptable quality at the time of sale has had regard to the criteria specified in s7 of the Act to be taken into account in deciding if goods are of acceptable quality. First, the nature of the goods. In this case the vehicle was, at the time of sale, a five year old New Zealand new Toyota Camry which had travelled 33,750kms. Second, the price. of $15,980. When the purchasers tried to trade the vehicle in on a new SsangYong car they discovered the vehicle had been de-registered and subsequently re-registered and that this was because the vehicle had been accident damaged. The reports they obtained from Corporate & Prestige and Gray & Galpin Panelbeaters show that the vehicle has significant alignment defects and the sub-frame and some suspension elements may still be bent. There is a deviation in the wheel base length of 13mm. The Tribunal accepts the Corporate & Prestige report which says that whoever repaired the vehicle after its accident had a problem with the front chassis alignment so they attempted to resolve it by shifting the upper frame. The RF chassis rail has been repaired and probably should not have been because it is still bent. The vehicle’s chassis and the sub-frame has been badly damaged and not properly repaired. Taking these faults into account the Tribunal is in no doubt that the vehicle supplied to the purchasers failed to comply with the guarantee of acceptable quality because no reasonable consumer would regard this vehicle as being of acceptable quality.

Conclusion on issue [a]:
[18] The vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because it was not free from minor faults, and was not as durable as a reasonable consumer would regard as acceptable.

Issue [b]: Is the failure of “substantial character” within the meaning of s21 of the Act?

Relevant law
[19] Section 21 of the Act defines the circumstances in which a failure to comply with the guarantee as to acceptable quality will be regarded as being a failure of a substantial character for the purposes of s 18(3) of the Act. Section 21 of the Act provides as follows:
“ 21 Failure of substantial character
For the purposes of section 18(3), a failure to comply with a guarantee is of a substantial character in any case where ¾
(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b) the goods depart in 1 or more significant respects from the description by which they were supplied or, where they were supplied by reference to a sample or demonstration model, from the sample or demonstration model; or

(c) the goods are substantially unfit for a purpose for which goods of the type in question are commonly supplied or, where section 8(1) applies, the goods are unfit for a particular purpose made known to the supplier or represented by the supplier to be a purpose for which the goods would be fit, and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose; or

(d) the goods are not of acceptable quality within the meaning of section 7

because they are unsafe."

Application of law to facts
[20] The Tribunal considers that the evidence in this case shows that the vehicle has serious structural faults as a result of the accident in which it was involved during 2009 and that the accident repairs have not been properly undertaken so that substantial remedial work is required to the chassis and subframe. The vehicle is very probably unsafe to be on the road and certainly it would not have been acquired by a reasonable consumer fully aware of the nature and extent of the failure.

Conclusion on issue [b]:
[21] The vehicle’ failure is of substantial character in terms of s21(a) and (d) of the Act.

Issue [c]: Are the purchasers entitled to reject the vehicle?

Relevant law
[22] Section 22(1) of the Act provides as follows:
“(1) The consumer shall exercise the right to reject goods under this Act by notifying the supplier of the decision to reject the goods and of the ground or grounds for rejection.”

Application of law to facts
[23] The purchasers notified the trader on 2 February 2015 of their decision to reject the vehicle as soon as they became aware of the vehicle’s history and saw the photographs of the damage. The trader was unwilling to accept the purchaser’s rejection but promised to provide them with a replacement vehicle of equivalent age and distance travelled. The Tribunal finds the trader failed to honour that promise; its offer of a replacement 2008 Toyota March X whilst not markedly greater in terms of distance travelled was probably not an equivalent vehicle in terms of value to the low mileage New Zealand new Toyota Camry the purchasers had bought from the trader.

Conclusion
[24] The Tribunal will uphold the purchasers’ rejection of the vehicle because the purchasers notified the trader of their decision to reject the vehicle and of the grounds for rejection as they were required to do by s22(1) of the Act. Rejection took place within a reasonable time from the time of supply.

Orders

1. The purchasers’ rejection of the vehicle is upheld with effect from 2 February 2015 .

2. The collateral finance agreement dated 25 August 2013 between the purchasers and Warwick Cashmore Limited trading as MTF Greenlane (“the MTF Agreement”) is vested in the trader with effect from 2 February 2015 and the trader shall be responsible for discharging the purchasers’ obligations under that agreement.

3. The trader shall refund the purchasers with the following sums:
(a) the deposit the purchasers paid the trader of $500;

(b) the capital component of all payments made by the purchasers to Warwick Cashmore Limited under the MTF Agreement from 25 August 2013 to 2 February 2015; and

b) the full amount of all payments (both principal and interest) made by the purchasers after 2 February 2015 to the date of this order under the MTF Agreement; and

c) the purchasers’ consequential costs of $566 calculated as follows:
i) $90 paid to Car Valuations NZ Ltd,
ii) $200 paid to Corporate & Prestige
iii) $276 paid to Gray & Galpin Panelbeaters .

If there is any dispute as to the amounts payable under this order 3(b) or (c) leave is granted to either party to refer that matter to the Tribunal for determination.

4. The trader shall at its cost arrange to collect the vehicle from the purchasers’ home as soon as the trader has made full payment to the purchasers of the sums ordered to be paid in order 3 (above).

DATED at Auckland this 12th day of March 2015.

C H Cornwell
Adjudicator