Star Drycleaning Limited v West City Auto Group Limited - Reference No. MVD 19/15 (Auckland) [2015] NZMVDT 32 (26 March 2015)

Last Updated: 19 April 2015

Decision No: AK 32/2015
Reference No. MVD 19/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN STAR DRYCLEANING LIMITED

Purchaser

AND WEST CITY AUTO GROUP LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr G Middleton, Assessor

HEARING at Auckland on 23 March 2015

APPEARANCES

Mr T J Lim, representing the purchaser

Mrs N Quinn, After Sales Manager for the trader
Mr J Cummings, Technical Foreman for the trader

DECISION

Background
[1] On 25 June 2014 Star Drycleaning Limited (“the purchaser”) bought a new Holden Captiva registration HLZ433 (“the vehicle”) from West City Auto Group Limited (“the trader”) for $45,700. The purchaser claims that it has experienced a number of faults with the vehicle and wishes to reject it because the vehicle is unreliable, the trader has been unable to fix it within a reasonable time and the vehicle still has a faulty fuel gauge.

[2] The trader says that the vehicle has had a number of faults which it has rectified and it now wants to have the vehicle returned to it to enable it to fix the fuel gauge issue but the purchaser has refused to return the vehicle.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal appointed Mr Middleton as expert assessor to assist in the determination of the complaint. Mr Middleton took the oath required by clause 10(2) of Schedule 1 to that Act. As an assessor Mr Middleton 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 not, did the purchaser require the trader to rectify the fault(s) and, if so, did the trader do so within a reasonable time?
[c] Is the purchaser entitled to have its rejection upheld?

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, 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" is 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:
(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.

(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 s 7(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 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 his/her right to reject the vehicle within a reasonable time.

Facts
[10] The purchaser agreed on 25 June 2014 to buy the vehicle from the trader for the purpose of its business to collect and deliver articles of drycleaning for its customers. On the following day it entered into a lease agreement with Holden Financial Services to lease the vehicle for 48 months. The Vehicle Offer and Sale Agreement (“the VOSA”) paragraph 7.1 provides as follows:
“I agree that if I am acquiring the vehicle for business purposes in terms of section 2 and 43 (sic) the Consumer Guarantees Act 1993, then the provisions of the Act will not apply accordingly.”

[11] The trader did not raise as part of its defence the issue of whether it and the purchaser had contracted out of the Act in terms of paragraph 7.1. The trader told the Adjudicator at the hearing that it did not wish to do so and hence the Tribunal has not addressed the issue of whether, as it would have been required to do by s43(2)(d) of the Act if the trader had raised para 7.1 of the VOSA as a defence, it was fair and reasonable that the parties be bound by the provisions in para 7.1 of the VOSA.

[12] Mr Lim, through a Korean interpreter, told the Tribunal that he did not test drive the vehicle before he bought it and he says he was disappointed after taking delivery of the vehicle and driving it for the first time. His disappointment arose from the following issues:
a) the reversing camera quality was poor- it gave a grey image rather than a colour image as he had experienced when driving his previous vehicle
b) the left indicator did not turn off when the driver had completed a left turn and re-centred the steering wheel
c) the engine was noisy and rattled
d) the vehicle’s fuel consumption was less economical that the 2012 Toyota Highlander 3.5 L he had used previously.

[13] On 2 July 2014 the purchaser returned the vehicle to the trader to have the following issues rectified:
a) the reversing camera’s clarity and quality;
b) the disappearance of trip data and fuel consumption figures from the vehicle’s information system;
c) the left indicator fault;
d) the vehicle’s navigation system being set to display Australian time;
e) the vehicle’s fuel consumption was disappointing and only slightly better than his previous vehicle, a Toyota Highlander.
Mr Lim says that when the vehicle was returned to him its navigation system had not been re-set to NZ time and the trip information issue was not corrected. He says he returned the vehicle to the trader the following day to have those faults fixed.

[14] Mr Lim says the vehicle stopped without warning on the motorway on 12 November 2014 and the AA diagnosed the fault as a fuel gauge problem. The purchaser sent the trader an email on 13 November asking it to fix the vehicle’s fuel gauge, occasional loss of trip information data, the navigation system and an ongoing rattle noise from the engine. His email said:
“If these aren’t fixed by end of this month, I need to get compensation for the poor quality or exchange for another car.
If nothing can be done, I’ll have to take this case to the court.
Hope to hear from you soon.”

[15] The Tribunal understands from Mr Lim that the vehicle was not taken back to the trader until early December 2014 and they fixed the engine noise problem, the trip information issue and reset the navigation system to NZ time. The purchaser asked the trader for a software upgrade for the GPS.

[16] On 8 December 2014 Mr Lim sent the trader an email saying the fuel gauge was faulty; it showed the vehicle as empty after filling the tank with petrol and there was also a strong petrol smell in the vehicle. An engine indicator lamp was also on all the time. In his email Mr Lim claimed that the vehicle was too dangerous to drive and his lawyer would be in contact with the trader.

[17] On Friday 12 December 2014 the purchaser apparently sought legal advice and was advised to give the trader another chance to fix the vehicle’s faults. He sent an email to the trader that day saying he would do so and his lawyers sent the trader a letter dated 22 December saying much the same regarding the fuel gauge and “other issues” not specified. The letter from Schnauer & Co to the trader ended:
“Our client tells us that he has returned the vehicle for the defects to be fixed on six or seven occasions since purchase. This is unacceptable for a new vehicle of this nature.
If a suitable replacement vehicle cannot be found for our client, then our client will be looking at all remedies, one of which will be cancelling the lease contract.”

[18] Mr Lim did not return the vehicle to the trader after 22 December 2014. He says he decided not to use it. However the Tribunal understands from questions it asked Mr Lim at the hearing that he is still using the vehicle and it has now travelled about 16,700kms (almost 4,000kms more than the odometer reading provided by the purchaser at the time the purchaser filed its application on 30 January 2015). Mr Lim said he had a firm named Speedy Service fit a replacement aftermarket tail lamp which he imported from Korea after the rear tail lamp was broken and he also had Speedy Service do an oil change on the vehicle for which he says he paid $260. He says the current faults are the fuel gauge and the trader has not supplied an upgrade of the navigation system. He also says he has had to top the vehicle’s engine up with oil; he thinks this may have been one litre. Neither Mr Lim nor his solicitors have sent a letter of rejection to the trader; Mr Lim says he believes his email of 13 November 2014 indicated he wanted to reject the vehicle.

[19] Mrs Quinn for the trader says the vehicle was returned to the trader on 2 July concerning an engine noise. She says a salesman with Korean language skill spoke to Mr Lim at that time. On 31 July the noise from the engine was still present and Mr Lim was asked to monitor the vehicle. On 10 September 2014 the vehicle was returned to the trader who after a week “logged the fault” with the engine noise with Holden Australia. The Tribunal understands this means that the trader could not fix the fault and sought help from Holden Australia to do so. After spending almost 16 hours trying to diagnose the fault, it was diagnosed as caused by a $310 fuel feed line which was swapped out of the vehicle. In the course of doing that work Mrs Quinn says that one of the fuel level sensors was likely to have been incorrectly fitted and needs to be refitted to resolve the issue with the fuel gauge. However Mr Lim has refused to return the vehicle to the trader to allow this to be done; he wants a replacement vehicle or cancellation of the lease.

Application of facts to relevant law
[20] The new vehicle the trader supplied to the purchaser in June 2014 has not been as free of minor faults as a reasonable consumer would expect for $45,700. The Tribunal considers that some of the items the purchaser complained of may have been more readily fixed by the trader than appears to have been done, for example the Tribunal considers that a new vehicle should not have been supplied to the purchaser in New Zealand with its navigation system showing Australian time. That indicates to the Tribunal a lack of care by the trader in its pre-delivery preparation of the vehicle. The manufacturing fault with the fuel feed line appears to have taken the trader from July to September 2014 to identify and fix. That is far too long. The Tribunal has therefore decided that at the time of sale the vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because it was not free from minor faults or as durable as a reasonable consumer paying $45,700 for a new vehicle Holden Captiva would regard as acceptable.

Conclusion on issue [a]
[21] The vehicle did not comply with the guarantee of acceptable quality at the time of sale.

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

Relevant law
[22] Where goods do not meet the guarantee of acceptable quality Part 2 of the Act gives the consumer a right of redress against the supplier of the goods. 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."
Facts
[23] Mr Lim attempted to provide the Tribunal evidence of the dates and times he contacted the trader and returned the vehicle to have the engine noise and other minor faults repaired. The Tribunal accepts that he did this on a number of occasions but much of the detail of the dates and times this happened was either non-existent or lost in translation but the Tribunal believes that the engine rattle noise and the other minor faults have now been fixed. However, the Tribunal thinks that the purchaser has not given the trader a reasonable time to fix the fuel gauge problem and that the trader has been willing to do so.

Conclusion on issue [b]
[24] The purchaser should give the trader one further opportunity, as the purchaser’s solicitor stated in its letter of 22 December 2014 to the trader would be given, to fix the fuel gauge issue.

Issue [c]: Is the purchaser entitled to have his rejection upheld?

Relevant law
[25] Section 22 (1) of the Act provides as follows:
“22 Manner of rejecting goods
(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 grounds for rejection.”

Application of law to facts
[26] Mr Lim claimed that his email dated 13 November 2014 sent to the trader amounted to a rejection of the vehicle. The purchaser’s email of 13 November:
a) identifies some faults the purchaser has experienced with the vehicle; and
b) says that if the faults are not fixed by the end of November the purchaser will “need to get compensation for the poor quality or exchange for another car”; and
c) threatens taking his dispute to the court.
The Tribunal has carefully read and considered the purchaser’s email and does not accept that it meets the legislative requirement of s22(1) because it does not say the purchaser wants to reject the vehicle nor does it give the grounds for its desire to do so.

[27] The Tribunal has also considered if the letter of Schnauer & Co of 22 December 2014 meets the requirements of s22(1) of the Act and could be considered to be a letter of rejection. It has decided that it is not because the letter specifically says the solicitors have advised their client to give the trader one final opportunity to get the vehicle into proper working order and specifically mentions the fuel gauge issue.

Conclusion on issue [c]
[28] The Tribunal has therefore decided that the purchaser is not entitled to reject the vehicle for two reasons; first because he has not given the trader a reasonable time to rectify the fuel gauge issue and second because he has not complied with the requirements of s22(1) of the Act and given the trader notice of rejection. The purchaser should now arrange to return the vehicle to the trader to give it an opportunity to fix the fuel gauge fault at the trader’s expense.

Order

The purchaser’s application is dismissed

DATED this 26th March 2015

C.H Cornwell
Adjudicator