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Moody v Supreme Vehicle Imports Limited - Reference No. MVD 20/15 (Auckland) [2015] NZMVDT 34 (27 March 2015)

Last Updated: 19 April 2015


Decision No: AK 34/2015 Reference No. MVD 20/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN SAMARA CHONTELLE MOODY

Purchaser

AND SUPREME VEHICLE IMPORTS 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

Miss S C Moody, the purchaser

Mr E Tahere, support person for purchaser
Mr S Dham, Director representing the trader

DECISION

Background
[1] On 3 January 2015 Miss Moody (“the purchaser”) bought a 2007 Suzuki Swift registration number HWK40 (“the vehicle”) from Supreme Vehicle Imports Limited (“the trader”) for $8,750. The purchaser rejected the vehicle by email to the trader on 30 January 2015 because she says the vehicle’s transmission has a serious fault. She has applied to have the Tribunal uphold her rejection of the vehicle and the trader ordered to refund her purchase price as well as the cost of transporting the vehicle from Kerikeri back to the trader in Auckland.

[2] The trader says that it wanted to get an independent transmission specialist’s assessment of the fault before refunding the purchaser with the purchase price and does not accept that the purchaser is entitled to reject the vehicle.
[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal has 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 (“the Act”)?
[b] If it did not, is the failure of substantial character within the meaning of s21 of the Act?
[c] If so, was the purchaser entitled to reject the vehicle?

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

Application of law to facts
[10] The purchaser test drove the vehicle for 10-15 minutes before buying it from the trader for $8,750. This included the benefit of a 12 month mechanical breakdown insurance cover provided by Mainstream Insurance a division of DPL Insurance Limited. The vehicle’s odometer reading at the time of sale was 85,143kms. The purchaser and her partner collected the vehicle on 4 January 2015 and drove it, without noticing any problems, to Kerikeri where they live.

[11] The purchaser gave evidence that on 22 January 2015 after using the vehicle to drive about 1,200kms the vehicle’s transmission made what the purchaser says was “a loud thumping sound, and shuddered and shook”. The purchaser rang the trader’s salesman who suggested she make a claim under the Mainstream Insurance mechanical breakdown insurance cover. The purchaser did not want to do so. Instead she took the vehicle on 29 January 2015 to Auto One 1 Kerikeri who test drove it and placed it on the hoist. They reported a noise in the differential area of the transmission. They advised that the transmission will need to be removed to quote for repairs which they said could take two weeks and involve a cost of $1500 to $2000 to diagnose. Their tax invoice notes the noise will get louder if not addressed.

[12] The purchaser immediately telephoned the trader and spoke to Mr Dham who promised to get that problem resolved and offered to pay the insurance excess under the Mainstream policy. On the afternoon of 29 January 2015 the purchaser telephoned the trader and asked for a refund of her purchase price. The trader insisted that it was entitled to repair the vehicle whilst the purchaser insisted that the failure was of substantial character and she was entitled to reject the vehicle. A stand-off developed. The trader promised to “explore the Act” on the afternoon of 29 January but clearly failed to do so because the following day it asked the purchaser to have the vehicle assessed.

[13] On 30 January 2015 the purchaser sent the trader an email rejecting the vehicle for a serious fault in the transmission which was making a very abnormal noise and shuddered when driving. She sent the trader a mechanic’s report (the Auto One report). The purchaser asked for a refund of the purchase price under the Act and to have the trader collect the vehicle. The trader still insisted that it wanted to get an independent transmission specialist to assess the vehicle and sent an email to the purchaser on 30 January asking what it could do to have this done as soon as possible. The purchaser replied reminding the trader that as the fault was serious she claimed to have a refund and not have the vehicle repaired.

[14] The purchaser, at the suggestion of the Tribunal, obtained another assessment of the vehicle’s transmission from Pacific Motor Group Ltd (“PMG”) the Suzuki franchised dealer in Kerikeri on 25 February 2015. PMG quoted her $1,437.50 to remove and diagnose the transmission fault. Their invoice notes that the cost of getting the transmission repaired is “to be quoted” and the $1,437.50 quoted by PMG was simply to remove the transmission from the vehicle and open it and then put the gearbox back in the vehicle once it was repaired.

[15] The Tribunal took the sworn evidence of Samuel Green the Service Manager of PMG who said that the fault sounded to him like it was coming from within the torque convertor and there may also be an issue from the transmission valve body. Mr Green said that the cost of transmission repairs (excluding the cost of removing the transmission from the vehicle and putting it back) ranged from $900 to $5000. A second hand transmission for the vehicle would cost $900 to $1000 in addition to the labour cost and transmission oil costs of $950 so that the total cost to replace the transmission with a second hand unit would be $1,950 plus GST.

[16] The Tribunal, in determining whether the goods supplied by the trader complied with the guarantee of acceptable quality, has had regard to the nature of the goods, in this case a seven year old Japanese imported Suzuki Swift with 85,143kms on its odometer at the time of sale, and also to the price paid for it of $8,750. According to the evidence given by the purchaser the vehicle developed a serious transmission noise and shudder within 18 days of being supplied and after only 1,200kms of use by the purchaser. Quite obviously the vehicle lacked durability because it now needs repairs to its transmission or, probably more economically, a replacement second hand transmission. There was no suggestion that the purchaser had caused or contributed to the transmission’s damaged condition.

Conclusion on issue [a]
[17] The Tribunal has no hesitation in finding that the vehicle did not comply with the guarantee of acceptable quality in s6 of the Act because it was not as durable as a reasonable consumer would regard as acceptable for a vehicle of this age, type and price.

Issue [b]: Is the failure of “substantial character” within the meaning of s21 of the Act?
Relevant law
[18] 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
[19] The evidence produced by the purchaser of the reports of Auto One and PMG as well as Mr Green’s evidence shows that the vehicle has a transmission fault which is likely to cost about $2,000 as a minimum to remove the transmission and send it to a transmission specialist for repair. The Tribunal accepts that this fault makes the vehicle one which would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of that failure because no reasonable consumer would pay $8,750 for a vehicle in the knowledge that within a month it would need some $2,000 spent in replacing its transmission.

Conclusion on issue [b]
[20] The Tribunal considers that the failure to comply with the guarantee of acceptable quality is of substantial character in terms of s21(a) of the Act.

Issue [c]: Was the purchaser entitled to reject the vehicle?

Relevant law
[21]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."

Application of law to facts
[22] The purchaser, as soon as she became aware of the nature of the fault and the likely cost to repair the vehicle from the information supplied to her by Auto One elected to reject the vehicle. She did so promptly in writing and gave her grounds for doing so as required by s22(1). Rejection took place within one month of the date of supply.

Conclusion on issue [c]
[23] The purchaser was entitled to reject the vehicle and did so within a reasonable time and in accordance with s22(1) of the Act. The Tribunal will therefore uphold the purchaser’s rejection of the vehicle.

Costs
[24] The Tribunal has limited power to make an award of costs to or against a party to any proceedings under clause 14(1) of Schedule 1 to the Motor Vehicle Sales Act 2003. The relevant provision is as follows:
“14 Disputes Tribunal may award costs in certain circumstances
(1)The Disputes Tribunal may award costs to or against a party to any proceedings before it only if,-
(a) in the opinion of the Disputes Tribunal,-
(i) the proceedings are frivolous or vexatious or ought not to have been brought:
(ii) the matter ought reasonably to have been settled before proceeding to a hearing but that the party against whom an award of costs is to be made refused, without reasonable excuse, to take part in the discussions referred to in clause 5(1)(b) or acted in a contemptuous or improper manner during those discussions; or
(b) any party after receiving notice of a hearing, fails to attend the hearing without good cause.
(2) In any case to which subclause (1) applies, the Disputes Tribunal may order a party to pay---
(a) to the Crown all, or any part of either or both of the following:

(i) the reasonable costs of the Disputes Tribunal hearing:
(ii) the fees and expenses of any witness that have been paid or are payable by the Crown; or

(b) to another party all, or any part of the reasonable costs of that other party in connection with the proceedings.”

[25] The Tribunal thinks the trader whom it notes has been trading since 2012 should have a better understanding of its obligation under the Act and thus should have settled this matter before proceeding to a hearing. It should have been obvious to the trader as soon as it saw the Auto One and PMG quotes to remove the transmission that the fault was serious and the purchaser was entitled under s18(3) of the Act to reject the vehicle. The Tribunal will therefore order the trader to pay to the purchaser her costs of her return motoring from Kerikeri to the hearing in Auckland, a total distance of 766kms calculated at 65 cents per kilometer of $497.90 as well as the $25 she paid for the Auto One report.

[26] The vehicle cannot be returned to the trader by the purchaser without incurring significant cost so the Tribunal will also order the trader, as soon as it has refunded the purchaser with her purchase price of $8,750 and her costs of $497.90 and $25 to uplift the vehicle at the trader’s cost from the purchaser in Kerikeri. The purchaser is to notify the trader where the vehicle may be collected from.

Orders

1. The purchaser’s rejection of the vehicle is upheld.

2. The trader shall immediately pay to the purchaser $9,272.90 comprising the following amounts:
[a] the purchase price of $8,750; and
[b] the purchaser’s travelling costs to the hearing of $497.90; and
[c] the cost of the Auto One report of $25.

3. The trader shall as soon as it has paid the purchaser $9,272.90 in terms of Order 2 (above) arrange at its expense to transport the vehicle back to Auckland.

DATED this 27th day of March 2015

2015_3400.jpg
C.H Cornwell
Adjudicator


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