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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 18 April 2015
Decision No: AK 38/2015
Reference No. MVD 36/15
IN THE MATTER of the Motor Vehicle Sales Act 2003
AND
IN THE MATTER of a dispute
BETWEEN FIROZE FALI COOPER
Purchaser
AND 2 CHEAP CARS LIMITED
Trader
BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S D Gregory,
Assessor
HEARING at Auckland on 30 March 2015
APPEARANCES
Mr F F Cooper, the purchaser
Mr G Moore, General Manager for the trader
DECISION
Background
[1] On 9 November 2014 Mr Cooper (“the purchaser”) bought a 2007 Mazda Atenza registration HTJ271 (“the vehicle”) from 2 Cheap Cars Limited (“the trader”) for $8,200 (including on-road costs). The purchaser claims to recover from the trader $2,042.03 he has spent in repairing the vehicle’s transmission and air conditioning system and a further $710 he has been quoted for further work on its air conditioning system.
[2] The trader acknowledges that it should have reimbursed the purchaser with $75.53 he spent in repairing the air conditioning system but it says that further expenditure on the air conditioning system is not necessary. The trader says that it was not given a reasonable opportunity and sufficient time to remedy the transmission fault before the purchaser spent $1,891.75 replacing it and accordingly it should not be responsible for that amount.
[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.
Issues
[4] The following issues require
consideration:
[a] Whether the vehicle sold to the purchaser was of
acceptable quality?
[b] If it was not, was the failure of substantial
character within the meaning of s21 of the Consumer Guarantees Act 1993
(“the Act”).
[c] What damages is the purchaser entitled to
recover from the trader?
Issue [a]: Whether the vehicle sold to the purchaser was of acceptable quality?
Relevant law
[5] 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.”
[6] The expression "acceptable quality" is defined in s 7 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 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:
(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 obtain 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.”
[7] In considering whether or not goods meet the guarantee of acceptable quality in s6 of the Act, 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 s7(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.
[8] 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 right to reject the vehicle within a reasonable time.
Application of law to facts
[9] The purchaser bought the
vehicle from the trader on 9 November 2014 for $8,200. The vehicle had
116,775kms on its odometer at
the time of sale. The purchaser provided the
vehicle for his son to use to drive from Hamilton to his work in Tokoroa.
[10] One month after the vehicle was supplied to the purchaser the vehicle’s air conditioning system ceased to operate. The purchaser’s son took the vehicle to Coolcar Air-Conditioning Centre in Hamilton (“Coolcar”) who traced the fault to the AC relay which they replaced at a cost of $75.53. Coolcar recommended that they service the AC system including fitting a new drier and remove and paint the condenser and the cabin filter for which they quoted $710. The purchaser claimed that he had asked the trader’s sales manager, Michael Yang to repair the air conditioning fault before his son incurred the $75.53 to replace the relay but was unable to produce any evidence of this. However the trader’s General Manager, Mr Moore agreed that the trader should have reimbursed the purchaser with the $75.53 spent in doing this repair and agreed to pay this amount to the purchaser.
[11] Mr Moore does not accept however that the vehicle requires a further $710 spent in removing and painting its condenser and the Tribunal agrees with the trader that this is an unnecessary expense not the result of any fault in the vehicle’s air conditioning system.
[12] On the 13 February 2015 the vehicle’s transmission became faulty
after the vehicle had been driven 9,064kms in the three
months since the vehicle
was sold to the purchaser. The purchaser’s son took the vehicle to
Hamilton East Auto Repairs Ltd
(“HEAR”) who orally quoted him $1500
to $1600 to replace the transmission with a second hand transmission with a
three
months parts warranty. The purchaser says that he and his wife went to
see the trader on the evening of Friday 13 February. He
says he told Sean Yang
a salesman and Michael Yang the trader’s Branch Manager about the
transmission problem and they asked
him to obtain and email the trader with a
quotation for the repair of the transmission. The purchaser says he returned to
the trader’s
premises on Sunday 15 December with an undated tax invoice
#5201 from HEAR, a copy of which he produced, which states:
“Hook
vehicle up to Bosch analyser- scan vehicle check trans fluid (Burnt
smell)
Road test vehicle found vehicle slipping and missing second
gear- over revving
Check service sticker- service due at 126,672 or
4-3-15
Recommend a second hand transmission option one or rebuild
transmission option two.”
The purchaser says that when he took this
tax invoice to the trader Mr Yang asked him to send the trader an email
attaching it and
setting out the cost of repairs.
[13] On Tuesday 17 February 2015 the purchasers sent the trader an email referring to his discussion with the trader on 15 February and attaching a copy of invoice #5201. His email states that HEAR have quoted $1500 to $1700 to replace the transmission and asks the trader to reimburse him with the sum of $1500 for the transmission repair, $75.53 for the air conditioning relay repair and $74.75 paid for the transmission estimate; a total of $1,650.28.
[14] The purchaser says that on 18 February, not having heard from the trader, he authorised HEAR to replace the transmission in the vehicle and at 5-34pm that evening HEAR sent him a facsimile copy of their invoice #5208 for the replacement of the transmission amounting to $1,891.75. The purchaser seeks reimbursement of that sum from the trader.
[15] On 19 February 2015 the purchaser says that Mr Michael Yang the trader’s Branch Manager telephoned him and told him that the trader would not reimburse him for the cost of replacing the vehicle’s transmission because “the one month warranty period had expired”.
[16] Mr Moore for the trader says that Mr Michael Yang fully understands that there is no such thing as a one month warranty period under the Act and that he would not have told the purchaser that. However the Tribunal notes that this is not the first occasion that staff of the trader have misled members of the public concerning their rights under the Act and points out that if, as seems very likely to the Tribunal, Mr Yang did tell the purchaser that he only had a one month warranty under the Act, Mr Yang and the trader as his employer probably breached s13(i) of the Fair Trading Act 1986. The Tribunal recommends the trader undertake comprehensive training of its employees of the trader’s obligations under the Act to avoid the risk of prosecution.
[17] In determining whether the vehicle complied with the guarantee of acceptable quality in s6 of the Act the Tribunal has had regard to the age of the vehicle of seven years at the time of sale, its odometer reading of 116,775kms and the price paid of $8,200. After a month there was a minor fault with the air conditioning relay which was quickly and cheaply repaired. After three months the vehicle’s transmission failed to the extent that it required replacement at a cost of $1,891.75. The vehicle’s odometer was then 125,852kms so that the vehicle had travelled 9,077kms in the three month period of the purchaser’s ownership. The Tribunal considers that this vehicle would probably not be regarded by a reasonable consumer as being acceptable with such a major fault occurring relatively soon after purchase. Accordingly, the Tribunal has decided that the vehicle failed to comply with the guarantee of acceptable quality in the Act because it was not as durable as a reasonable consumer would regard as acceptable.
Conclusion on issue [a]
[18] The vehicle did not comply with
the guarantee of acceptable quality in s6 of the Act first, because it is not as
durable as a
reasonable consumer would regard as acceptable for a vehicle of
this age, mileage and price.
Issue [b]: Was 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
a failure of a vehicle’s transmission system is in most circumstances a
failure of substantial
character because without a working transmission system a
vehicle is unable to move as designed. In this application the evidence
of
HEAR in its invoice #5201 was that the transmission fluid had a burnt smell, the
vehicle was slipping and missing second gear
and it was over- revving. A second
hand transmission was supplied and fitted to the vehicle. The cost of the
replacement transmission
was $1,891.75 or a little more than 23% of the cost
price of the vehicle. Under those circumstances the Tribunal finds the failure
was one of substantial character as defined in s21(a) of the Act because the
vehicle would not have been acquired by a reasonable
consumer fully acquainted
with the nature and extent of the failure.
Conclusion on issue [b]:
[21] The failure being one of
substantial character it was not necessary for the purchaser to comply with
s18(2) of the Act and require
the trader to remedy the fault and give it a
reasonable time in which to do so. The purchaser was entitled under s18(3) of
the Act,
because the failure was of a substantial character, to either reject
the goods or to obtain from the trader damages in compensation
for the reduction
in value of the vehicle. The purchaser in this application chose to replace the
vehicle’s transmission.
Issue [c]: What damages is the purchaser entitled to recover from the trader?
Relevant law
[22] Sections 18(3) and (4) of the Act provide
as follows:
“(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
[23] The Tribunal, having found
that the failure of the vehicle’s transmission was one of substantial
character, it must consider
what damages in compensation the purchaser should
obtain for the reduction in value of the goods below the price paid for them.
In this application the Tribunal is satisfied that the purchaser’s
reduction in value is the cost he paid to have the transmission
replaced of
$1,891.75. In addition, the purchaser is entitled under s18(4)of the Act to
recover the reasonably foreseeable loss
he incurred of having the transmission
assessed of $74.75 as well as the sum of $75.53 paid to Coolcar for the air
conditioning relay;
a total of $2,042.03.
Conclusion on issue [c]
[24] The purchaser is entitled to
recover a total of $2,042.03 from the trader and the Tribunal will order it to
pay that sum to the
purchaser immediately
Order
The trader shall pay the purchaser $2,042.03 immediately.
C.H Cornwell
Adjudicator
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2015/38.html