Billing t/a Quality Tools v Hoffman Motors Limited t/a Hoffman Ford - Reference No. MVD 30/15 (Auckland) [2015] NZMVDT 44 (17 April 2015)

Last Updated: 2 June 2015

Decision No: AK 44/2015
Reference No. MVD 30/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN BEVAN JOHN BILLING T/A QUALITY TOOLS

Purchaser

AND HOFFMAN MOTORS LIMITED T/A HOFFMAN FORD

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator
Mr S D Gregory, Assessor

HEARING at Palmerston North on 14 April 2015

APPEARANCES

Mr B J Billing, the purchaser

Mrs A Billing, wife and witness for purchaser
Mr K Colpus, father-in-law and witness for the purchaser
Mr N Macfarquhar, Managing Director for the trader

DECISION
Background
[1] On 29 May 2013 Mr Billing trading as Quality Tools (“the purchaser”) bought a 2012 Ford Focus Sport registration GGK275 (“the vehicle”) from Hoffman Motors Limited trading as Hoffman Ford (“the trader”) for $33,500. The purchaser says the vehicle’s transmission was faulty from the time the vehicle was supplied to him and that the trader was unable to rectify the fault. The purchaser sold the vehicle back to the trader for $21,500 in November 2014. The purchaser now claims the vehicle’s transmission failure was one of substantial character and he seeks damages of $12,000 being the difference between his cost price and his selling price.

[2] The trader denies that the transmission was faulty when the vehicle was re-purchased by the trader or that the difference between its sale price and its repurchase price was due to any fault with the transmission. The trader says that the purchaser, who was free to sell the vehicle to anyone, approached the trader to repurchase the vehicle and was paid a fair price for it.

[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 the Tribunal 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 Tribunal’s decision was made by the adjudicator.

The issues
[4] The issues requiring consideration are:
[a] Whether the parties agreed to exclude the provisions of the Act and did so in accordance with s43?
[b] If not did the vehicle comply with the guarantee of acceptable quality in s.6 of the Consumer Guarantees Act 1993?
[c] If it did not comply with s6, is the failure of substantial character within the meaning of s21 of the Act?
[d] If so, what damages is the purchaser entitled to receive in compensation for any reduction in value below the price paid by the purchaser for the vehicle?

Issue [a]: Whether the parties agreed to exclude the provisions of the Act and did so in accordance with s43?

Relevant law
[5] Section 43(1) and (2) of the Act, at the time the contract to purchase the vehicle was concluded provided as follows:
43 No contracting out except for business transactions
(1) Subject to this section and to sections 40, 41 and 43A, the provisions of this Act shall have effect notwithstanding any provision to the contrary in any agreement.
(2) Nothing in subsection (1) shall apply to an agreement made between the supplier and a consumer who acquires, or holds himself or herself out as acquiring, under the agreement, goods or services for the purposes of a business provided either—
(a) that the agreement is in writing; or
(b) where it is not possible to conclude an agreement in writing because the supplier is unaware of the acceptance by the consumer of the supplier’s offer at the time of acceptance, that the supplier has clearly displayed the terms and conditions of the service at every place of the supplier’s business.”

[6] In order to show that it had lawfully excluded the Act from applying to the sale of this vehicle the trader must prove, on a balance of probabilities, that the purchaser and the trader agreed to exclude the provisions of the Act because the purchaser was acquiring or had held himself out as acquiring, under the VOSA, the vehicle for the purposes of a business.

[7] In Kerry Stone Ltd v Knowles [2006] NZHC 1289; [2007] DCR 318, (2006) 11 TCLR 768, Venning J held that provisions in standard form contracts which require the consumer to declare that they are acquiring goods or services for business purposes will have evidential value only and are unlikely to be conclusive as to business purpose in the absence of supporting evidence as to business purpose or holding out.

Application of law to facts
[8] The purchaser and the trader completed a Vehicle Offer and Sale Agreement (“VOSA”) recording the purchaser’s agreement to buy the vehicle and the trader’s agreement to sell it which contained clause 7.1 which reads:
“7.1 I agree that if I am acquiring the vehicle for business purposes in terms of section 2 and 43 of the Consumer Guarantees Act 1993 and the provisions of the Act will not apply accordingly.”

[9] The VOSA also contains a block headed:
“THE PURCHASER ACKNOWLEDGES AND CERTIFIES THAT
The goods to be supplied are being acquired for the purposes of the purchasers business and accordingly the parties agree that the provisions of the Consumer Guarantees Act 1993 will not apply:
PURCHASER

“B J Billing”...........................................
IF CLAUSE APPLIES PURCHASER MUST INITIAL”
The purchaser had signed the acknowledgement.

[10] The purchaser and Mrs Billing both gave evidence at the hearing that the vehicle was purchased for Mrs Billing’s use in travelling around Palmerston North and that Mrs Billing was the main driver of the vehicle. It was not used by the purchaser for his business purposes; the purchaser said he had another vehicle he used to make business calls on customers.

[11] The purchaser said that he had signed the VOSA without properly reading the s43 exclusion clause or clause 7.1 of the offer document. The trader’s representative Mr Macfarquhar did not offer any evidence to challenge the evidence given by the purchaser and Mrs Billing and the Tribunal considers it very probable that the purchaser signed the VOSA without reading either clause 7.1 or the s43 exclusion clause described in paragraph [9] above. Applying the authority of the Kerry Stone case the Tribunal is not prepared to find that the vehicle was purchased for business use in this case.

[12] Mr Macfarquhar told the Tribunal that whenever the trader sells a vehicle to a limited liability company or a sole trader it has the purchaser sign an acknowledgement that the provisions of the Act are excluded. The Tribunal considers this is a practice which the trader may wish to take legal advice on because s13(i) of the Fair Trading Act makes it an offence to purport to contract out of the Consumer Guarantees Act so that in circumstances where the purchaser is not buying a vehicle for business use, the trader will be in breach of the Fair Trading Act and could face criminal prosecution and a significant fine.
Conclusion on issue [a]
[13] The Tribunal concludes that the parties did not agree to exclude the Act and the purchaser did not buy the vehicle for business purposes but to provide transport for his wife. Hence the provisions of the Consumer Guarantees Act 1993 apply to the purchase of the vehicle.

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

Relevant law
[14] 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.

[15] 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.”

[16] The expression "acceptable quality" was, at the time of sale of the 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.”

[17] 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.

[18] 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
[19] The purchaser says that when he test drove the vehicle in May 2013 before he agreed to buy it he noticed “severe vibration” and the vehicle hesitated under power when accelerating from a starting position. The purchaser says that the trader’s salesman, Mr Macfarquhar, drove the vehicle with him and experienced the fault. The purchaser says that Mr Macfarquhar told him the vehicle needed a software update to resolve the issue.

[20] The purchaser says he agreed to buy the vehicle on the condition that the transmission issue was resolved by the trader although there is no reference to such a condition in the Vehicle Offer and Sale Agreement; merely an agreement that the trader would “reset the transmission programme”. The vehicle had 10,604kms on its odometer at the time it was sold to the purchaser.

[21] The trader scanned the vehicle for fault codes before it supplied it to the purchaser and no fault codes were evident. The trader reset the transmission; ( the vehicle is fitted with a six speed power shift dual clutch transmission without a torque converter) because it had previously been advised by Ford New Zealand that the transmission software is calibrated to ensure smooth shifting but that if that task has not been performed correctly at the time of manufacture, it may be necessary to re-perform a transmission reset. The vehicle was road tested and delivered to the purchaser on 28 May 2013.

[22] In late June or early July 2013, the purchaser told the trader the transmission was shifting poorly and shuddering at low speed. On 9 August 2013 the vehicle was returned to the trader who found a TCM (transmission control module) programme fault code and did a complete PCM (power control module) and TCM software update. In addition the clutch and adaptive learning procedure and drive cycle procedure were completed, fault codes cleared and the vehicle was road tested and returned to the purchaser. At the same time the satellite navigation maps were updated with a newer version SD card. The odometer was then 14,187kms.

[23] In mid-August 2013 the purchaser told the trader that the transmission was still shifting poorly and shuddering at low speed and there was also a slight metallic grinding noise at low speed while turning to the left. The trader contacted Ford New Zealand who advised that new TCM and PCM software was under development to resolve the shift concern and would be available within about one or two months’ time. They also advised the trader to make an internal inspection of the vehicle’s gearbox to identify the cause of the metallic noise. The vehicle was returned to the trader on 5 September to have that work done. The adaptive learning test was performed again on the vehicle and a test to capture the amount of shudder within the transmission. It was determined that the metallic noise was coming from the gearbox or clutch packs and an order was lodged for replacement clutch packs. Ford New Zealand advised the trader that there were no clutch packs available until October 2013. The vehicle was returned to the purchaser on 6 September and the purchaser expressed his displeasure at the situation.

[24] By October when the software upgrade had not been received by the trader the trader obtained Ford New Zealand’s approval to replace the vehicle’s transmission under the new vehicle warranty and this took place from 20 to 28 November. The cost was $11,493.86. The delay in installing the new transmission in the vehicle was caused by the purchaser’s father-in-law having had an accident in the vehicle in October 2013 resulting in the vehicle’s body work having to be repaired and some repair work done on the ‘A’ Pillar by a panel beater.

[25] On 22 August 2014 Ford New Zealand sent a letter to all customers potentially affected by an issue that Ford had with oil seal failure within the transmission units fitted to Ford Focus vehicles which could lead to transmission shudder at low speed. In that letter Ford extended the warranty on Ford Focus cars to five years from the date of initial registration. The purchaser was sent one of those letters by Ford New Zealand.

[26] The vehicle’s transmission was successful in eliminating the previous faults identified by the purchaser. Mr Macfarquhar says he did not hear from the purchaser until mid-November 2014 when the purchaser telephoned him to advise that the vehicle’s transmission was “doing it again” (the vehicle’s transmission was shuddering) and that he and Mrs Billing had lost all confidence in the vehicle. Mr Macfarquhar says he told the purchaser that merely losing confidence in the vehicle was not grounds to reject it without validation of the existence of a serious fault being present.

[27] The only evidence the purchaser was able to offer the Tribunal that the vehicle’s transmission was faulty following its replacement was a comment on a service invoice from Transpec Services Ltd dated 14 July 2014 when they carried out the 20,000km service on the vehicle which reads:
“Check and report on shudder under acceleration,
Roadtest vehicle and advise fault in transmission.”

[28] Unfortunately the purchaser did not get confirmation of the existence of a fault in the transmission from a transmission specialist or even return the vehicle to the trader to have it assessed which the Tribunal finds surprising because the vehicle was still covered by the manufacturer’s warranty. In the period from November 2013 when the new transmission was installed until November 2014 the purchaser had not returned the vehicle to the trader. Mr Macfarquhar says that the purchaser visited the trader’s premises on a regular basis during 2014 to sell/supply tools to the trader’s mechanics but did not on any of those occasions speak to him regarding his dissatisfaction with the vehicle’s transmission.

[29] In late November 2014 the purchaser made contact with the trader and asked it to buy the vehicle. The trader gave the purchaser a price of $21,500 subject to inspection. On 2 December 2104 the purchaser took the vehicle to the trader for appraisal; the figure of $21,500 was confirmed as the agreed sale price and the trader’s cheque drawn in the purchaser’s favor for that sum. The vehicle’s odometer was then 22,500kms showing the purchaser and his wife had travelled some 12,000kms in the vehicle in the 18 months he had owned it. When the trader received the vehicle it did a pre-sale check, WOF and a diagnostic check. No fault codes were evident and after minor exterior rectification costing $600 the vehicle was sold to a Wellington purchaser for $24,650. The new purchaser is, according to evidence given by Mr Macfarquhar, very satisfied with the vehicle and no further claims on the Ford new vehicle warranty have been logged since the vehicle was sold to the new owner.

The Tribunal’s findings
[30] The Tribunal, in determining 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 14 month old New Zealand new Ford Focus Sport with only 10,604kms on its odometer at the time of sale that was sold for $33,500 in May 2013. The purchaser says the vehicle’s transmission had a “severe vibration” at the time of sale but he agreed to buy it from the trader on the trader’s promise to fix the vibration under the new car warranty. The trader had the vehicle’s transmission re-set and had it back to attempt to cure the transmission fault with software applications twice in the months of August and September 2013 before replacing the vehicle’s transmission with a new transmission in November 2013. The purchaser claims the replacement of the transmission did not give a permanent cure for the vehicle’s vibration and this fault re-appeared in July 2014.

Conclusion on issue [a]
[31] On the basis of the evidence given by the trader, which the Tribunal found to be more reliable and detailed than that given by the purchaser, the Tribunal finds that the vehicle certainly did not comply with the guarantee of acceptable quality in s6 of the Act because it was not as free from minor faults or as durable as a reasonable consumer would regard as acceptable for a near new low mileage vehicle of this type and price.

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

Relevant law
[32] 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
[33] The essence of the purchaser’s claim is that in December 2014 when he sold the vehicle to the trader for $12,000 less than he paid for it the vehicle’s transmission could not be repaired or the failure of the transmission to comply with the guarantee of acceptable quality was of substantial character because it is on that basis that he seeks an order for damages under s18(3)(b) of the Act. This purchaser had to prove to the Tribunal, on a balance of probabilities, ie more likely than not,- that the vehicle’s transmission was in December 2014 irreparable, or that its failure was of substantial character as those words are defined by s21 of the Act. Unfortunately the purchaser did not do so. He did not have any evidence to show the transmission was irreparable or that the failure to comply was of substantial character in December 2014. The trader on the other hand claimed that when it received the vehicle back from the purchaser it had scanned the vehicle and there were no fault codes present and that it had resold the vehicle and that a subsequent purchaser of the vehicle was happy with it and has not made any warranty claim in respect of the transmission.

Conclusion on issue [b]
[34] The Tribunal has concluded that it does not consider that the vehicle’s transmission was irreparable or a failure of substantial character in terms of s21 of the Act and hence the Tribunal is not satisfied that the purchaser has established grounds on which to claim for damages under s18(3)(b) of the Act. The purchaser’s application must therefore be dismissed.

Order

The purchaser’s application for an order for damages is dismissed.

DATED this 17th day of April 2015

C.H Cornwell
Adjudicator