Harris v Ford Motor Company of New Zealand Limited - Reference No. MVD 48/15 (Auckland) [2015] NZMVDT 53 (6 May 2015)

Last Updated: 17 June 2015

Decision No: AK 53/2015
Reference No. MVD 48/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN MURRAY JAMES HARRIS

Purchaser

AND FORD MOTOR COMPANY OF NEW ZEALAND LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 4 May 2015

APPEARANCES

Mr M J Harris, the purchaser

Mr T Kung, Field Service Engineer, for the trader

DECISION

Background

[1] On 20 November 2004 Mr Harris (“the purchaser”) had his former employer, BT Financial Group (NZ) Limited, buy him a six month old 2004 Ford Territory Ghia demonstrator registration number CGM449 (“the vehicle”) from Courtesy Motors Limited of Palmerston North for $56,000. The vehicle was transferred into the purchaser’s name in March 2006. In June 2014 corrosion was discovered in the vehicle during a routine warrant of fitness inspection. The purchaser has applied to the Tribunal for an order that Ford Motor Company of New Zealand Limited (“FNZ”), as the manufacturer’s representative in New Zealand, should pay the cost of removing the corrosion at an estimated cost of $2,282.18. The purchaser claims the vehicle does not comply with the guarantee of acceptable quality in s6 of the Consumer Guarantees Act 1993 (“the Act”).

[2] FNZ says that there has been no failure to comply with the Act because the vehicle was over 10 years old and had travelled 104,152kms when the corrosion issue was brought to its attention. Further, FNZ says the vehicle has been as free from defects and as durable as a reasonable consumer would regard as acceptable and thus the purchaser has no right of redress under Part 3 of the Act. Finally, FNZ says the guarantee of acceptable quality does not amount to a guarantee the vehicle will be free of defects for the life of the vehicle.

[3] The purchaser’s application to the Tribunal named Auckland Auto Collection Limited trading as John Andrew Ford (“JAF”) as a respondent but it became evident before the hearing that the purchaser’s claim against JAF was one founded either on breach of contract or negligence neither of which cause of action the Tribunal has jurisdiction to hear. The Tribunal therefore ordered JAF to be struck out of these proceedings as a respondent.

[4] 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 cl 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
[5] The following two issues require consideration:
[a] Whether the vehicle was of acceptable quality at the time of sale?
[b] If it was not, what damages may the purchaser obtain from FNZ for any loss or damage that was reasonably foreseeable as liable to result from the failure?

Issue [a]: Whether the vehicle was of acceptable quality at the time of sale?

The relevant law
[6] Section 6 of the Consumer Guarantees Act 1993 (“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 of sale of the vehicle to the purchaser, 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:
(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 June 2014 the purchaser’s wife took the vehicle to the AA for a warrant of fitness which the vehicle passed. However the purchaser says the AA said that the vehicle might not pass any further WOF inspections because of rust on the chassis rails and front wheel arches. The purchaser contacted JAF and took the vehicle in for inspection. JAF put the vehicle on a hoist and told the purchaser that there might be rust around the vehicle’s tailgate. They removed a rubber seal around the tailgate and found rust in the tailgate.

[9] The purchaser produced colour photographs showing what the Assessor considers to be surface corrosion in the chassis rails, wheel arches and behind the rear bumper. The photographs showed rust in the tailgate area which, in the Assessor’s opinion, requires prompt treatment.

[10] The purchaser approached JAF and requested they carry out the corrosion repair at no cost to him because he believed JAF were negligent in not picking up the presence of corrosion during previous servicing and during a WOF inspection JAF carried out on 16 December 2013. JAF in conjunction with FNZ declined to cover the cost of repairing corrosion in the vehicle because they considered it was outside the perforation warranty by five years. Nevertheless they requested Wakefield Panelbeaters Ltd to inspect the vehicle and provide a repair estimate. The vehicle was taken to Wakefield Panelbeaters Ltd on 25 June 2014 who estimated the cost of repairing and refinishing the corrosion affected areas at $1,949.25. From July to November 2014 the purchaser had discussions and exchanged emails with JAF to attempt to have them review their decision and JAF offered, on a good will basis, in view of the purchaser’s loyalty to JAF, to contribute $500 towards the corrosion repairs. The purchaser rejected that offer and wanted the repair cost to be split three ways: the customer, JAF and FNZ each paying one third. That proposal was unacceptable to JAF and FNZ and was rejected by them in January 2015.

[11] The purchaser filed an application with the Tribunal on 2 March 2015 and he had Wakefield Panelbeaters Ltd review their June 2014 estimate on 29 April 2015 which has increased to $2,282.18 inclusive of GST, to include the cost of a new rear panel of $289 plus GST.

[12] FNZ’s defence to the purchaser’s claim is summarised in paragraph 2 (above).

[13] The Tribunal in deciding whether the vehicle sold to the purchaser complied with the guarantee of acceptable quality in s6 of the Act has to decide whether the vehicle was as durable as a reasonable consumer would regard as acceptable for a 10 year old Ford Territory which had travelled 105,152kms in June 2014 when the corrosion issue first arose. The Tribunal, on the advice of its Assessor who has seen 23 colour photographs of the corrosion in the vehicle provided by the purchaser considers that that the corrosion on the suspension strut towers, the seams on the inner guards, the underfloor chassis components and cross members is surface corrosion only and would probably be expected to occur by a reasonable consumer in a ten year old vehicle. These items require no structural repair, but simply maintenance to extend the life of the vehicle. The rust in the tailgate is however of greater concern. The Tribunal does not think that a reasonable consumer would expect rust in the tailgate of a $56,000 vehicle within ten years of the date of supply in the absence of any contact with salt water.

Conclusion on issue [a]
[14] The vehicle was not as durable and free of rust in its tailgate area as a reasonable consumer would regard as acceptable for a vehicle of this age, price and type even allowing for the fact that the vehicle was 10 years old and had travelled 105,000kms at the time the rust in the tailgate was detected. Hence the Tribunal finds the vehicle did not comply with the guarantee of acceptable quality in s6 of the Act.

Issue [b]: What damages may the purchaser obtain from FNZ?

Relevant law
[15] Section 27 of the Act sets out the options against manufacturers where goods do not comply with guarantees. Section 27(1) is relevant. It provides as follows:
“(1) Subject to subsection (3), where a consumer has a right of redress against a manufacturer in accordance with this Part, the consumer, or any person who acquires the goods from or through the consumer , may obtain damages from the manufacturer-

(a) subject to subsection (2), for any reduction in the value of the goods, resulting from the failure-

• (i) below the price paid or payable by the consumer for the goods; or
• (ii) below the average retail price of the goods at the time of supply,-

whichever price is lower:

(b) for any loss or damage to the consumer or that other person resulting from the failure (other than loss or damage through a reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.”

Application of law to facts
[16] The Tribunal considers the loss that will result to the purchaser from the failure of the vehicle to comply with the guarantee of acceptable quality and which was reasonably foreseeable will be the cost of repairing rust in the vehicle’s tailgate.

[17] The Tribunal has calculated the cost of repairing the tailgate based on the Wakefield Panelbeaters Ltd estimate no 28440 dated 29 April 2015 will be $1,080 inclusive of GST.

Conclusion on issue [b]
[18] The Tribunal will order FNZ to reimburse the purchaser with $1,080 for the completion of rust repair work on the vehicle’s tailgate.

Order

Ford Motor Company of New Zealand Limited shall pay Murray James Harris $1,080 immediately.

DATED at AUCKLAND this 6th May 2015.

C.H Cornwell
Adjudicator