Kensair Limited v Wholesale Autos Direct Limited - Reference No. MVD 130/15 (Auckland) [2015] NZMVDT 99 (12 August 2015)

Last Updated: 20 September 2015

Decision No: AK 99/2015
Reference No. MVD 130/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN KENSAIR LIMITED

Purchaser

AND WHOLESALE AUTOS DIRECT LIMITED

Trader

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

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

HEARING at Auckland on 10 August 2015

APPEARANCES

Mr G K Thomas, Salesman, representing the purchaser

Mr D G Gibbons, Director, representing the trader

DECISION

Background
[1] On 3 April 2014 Kensair Limited (“the purchaser”) bought a 2008 Mazda Premacy registration HJT859 (“the vehicle”) from Wholesale Autos Direct Limited (“the trader”) for $8,500. The purchaser claims the vehicle’s transmission was faulty and the trader has failed to remedy it. The purchaser rejected the vehicle on 26 May 2015 and has applied to have the Tribunal uphold his rejection of the vehicle and the trader ordered to refund his purchase price.

[2] The trader says it believes the vehicle has a fault with its ECU and has offered to provide the purchaser with $300 towards the cost of purchasing and fitting a second hand ECU to the vehicle but has stipulated the vehicle needs to be returned from Hawera to Auckland to have the work done.

[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 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 and, if so, did the trader do so within a reasonable time?
[c] Is the purchaser entitled to have his 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" was at the time of the 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.”

[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.

Application of facts to relevant law

[10] The purchaser bought the vehicle sight unseen on 3 April 2014 for $8,500. Its odometer was 119,292kms at the time of sale. The vehicle had a transmission fault which became evident a few days after the purchaser received it in Hawera. The vehicle would slip between second and third gear. The purchaser notified the trader of the fault and the trader arranged with the purchaser’s mechanic, Advanced Automotive to replace a shift solenoid in the transmission. This did not cure the fault and the vehicle’s transmission was removed and returned to the trader for repair in June 2014. The transmission was worked on by the trader’s mechanic, Dr Trans Ltd, and sent back to Advanced Automotive for installation in the vehicle about 1 July. Advanced Automotive reported that the transmission fault was worse than ever and the vehicle regularly went into limp home mode.

[11] The purchaser says that between 2 and 15 July 2014 (he cannot recall the date) the vehicle was transported back to the trader to have the transmission repaired with the trader paying the cost of the transporter. When the vehicle came back to the purchaser in late July 2014 its transmission faulted within a day or two; the transmission light lit up and the vehicle went into limp home mode.

[12] The purchaser appears to have accepted the vehicle in that unsatisfactory condition and continued to use it. It had Advanced Automotive fit a fault clearing device to the vehicle so that when the vehicle went into limp home mode, which the purchaser says it did approximately every two weeks, the driver could stop the vehicle, clear the fault code and the vehicle’s transmission would operate normally for a while. The purchaser endured the fault for some ten months from July 2014 until finally on 26 May 2015 the purchaser sent the trader a letter rejecting the vehicle citing as the reason that it had been trying to get the fault with the vehicle repaired and that its mechanic Advanced Automotive had been informed by Dr Trans that the vehicle has to be returned to Auckland to get the transmission computer replaced.

[13] The trader did not deny that the vehicle’s transmission had been faulty from shortly after the vehicle was supplied but Mr Gibbons for the trader says he believes the fault is with the ECU which he has obtained a quote to replace with a second hand ECU for $224.25 from Mazspare Parts World and he says it will cost about $80 to $100 to have it fitted to the vehicle. The purchaser’s mechanic, Advanced Automotive do not have the necessary scanning tool to do this but the installation of the ECU can be done by a Mazda franchised repairer of which there is one in Hawera.

[14] The Tribunal is in little doubt that the vehicle supplied to the purchaser failed to comply with the guarantee of acceptable quality at the time of sale because the vehicle had a faulty transmission and probably a faulty ECU. The vehicle was thus neither free of minor faults nor as durable as a reasonable consumer paying $8,500 for a six year old Japanese imported Mazda Premacy with 119,292kms on its odometer would regard as acceptable.

Conclusion on issue [a]

[15] 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
[16] 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
[17] The purchaser gave evidence of the approximate dates and times it had contacted the trader and attempted to have it rectify the vehicle’s transmission faults. The Tribunal considers that the purchaser gave the trader more than adequate notice of its requirement that the fault be rectified. Unfortunately the trader procrastinated and failed to rectify the fault and has still failed to rectify the fault 16 months after selling the purchaser the vehicle.

Conclusion on issue [b]:
[18] The purchaser made repeated requests of the trader to remedy the vehicle’s transmission fault but the trader has failed to do so within a reasonable period of time.

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

Relevant law
[19] Section 20(1) of the Act provides as follows:
“20 Loss of right to reject goods
(1) The right to reject goods conferred by this Act shall not apply if-
(a) the right is not exercised within a reasonable time within the meaning of subsection (2); or
(b) the goods have been disposed of by the consumer, or have been lost or destroyed while in the possession of a person other than the supplier or an agent of the supplier; or
(c) the goods were damaged after delivery to the consumer for reasons not related to their state or condition at the time of supply; or
(d) the goods have been attached to or incorporated in any real or personal property and they cannot be detached or isolated without damaging them.”

(2) In subsection (1)(a), the term reasonable time means a period from the time of supply of the goods in which it would be reasonable to expect the defect to become apparent having regard to—
(a) the type of goods:
(b) the use to which a consumer is likely to put them:
(c) the length of time for which it is reasonable for them to be used:
(d) the amount of use to which it is reasonable for them to be put before the defect becomes apparent.
(3) This section applies notwithstanding section 37 of the Sale of Goods Act 1908.”

[20] The period of time within which rejection must occur runs from the date of supply (here about 10 April 2014), not from the date any defect was, or ought to have been, detected. The purchaser did not reject the vehicle until 26 May 2015, some 13 months and 16 days after the date of supply.

[21] The Court of Appeal in Nesbit v Porter [2000] NZCA 288; (2000) 9 TCLR 395 in considering s20 and what was a “reasonable time” under the Act in respect of an 11 year old Nissan Navarra sold for $10,990 and rejected because of rust nine months after purchase said:
“In many, if not most, cases the period will be longer for new goods, which a buyer is entitled to expect to be defect free when first used, than it will be for second hand goods of the same type. As a general rule, the older the goods, the shorter is likely to be the reasonable time.” The Court in Nesbit also said:
“Another factor which will influence the period to be allowed for exercise of the right of rejection is whether regular inspections of the goods for defects are customary or, as in the case of motor vehicles, required by law. But for defects which cannot be expected to be revealed by such inspections the reasonable time may be longer.” And later in the same decision the Court said:
“A reasonable time under s20 must accordingly be one which suffices to enable the consumer to become fully acquainted with the nature of the defects, which, where the cause of a breakage or malfunction is not apparent the consumer can be expected to do by taking the goods to someone, usually and preferably the supplier, for inspection. In this context therefore, a defect is not “apparent” until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial.”

[22] In Nesbit the Court of Appeal held that the right to reject the vehicle for rust had been lost when it was not exercised seven months after the date of supply of the vehicle.

Application of law to facts

[23] In this application the purchaser was aware soon after it took delivery of the vehicle that its transmission was faulty. Reasonably it required the trader to fix the transmission and returned the transmission on one occasion and the vehicle at a later date from Hawera to Auckland to facilitate the trader rectifying the transmission fault.

[24] However the Tribunal believes that it must have become glaring obvious to the purchaser by July 2014 that the trader was unable to diagnose and repair the fault with the transmission and the Tribunal considers the purchaser should have rejected the vehicle by the end of July 2014. It did not do so but continued to use the vehicle and return it to its mechanic to have the fault codes cleared so that it could continue to use the vehicle and the purchaser had travelled over 10,000kms by the time it rejected the vehicle in May 2015. Accordingly the Tribunal considers that the purchaser has lost the right under s18(2)(b)(ii) of the Act to reject the vehicle by not rejecting it within a reasonable time of the date of supply.

[25] However although the Tribunal is unable to order rejection, it is able to make an order under s18(3) of the Act to order the trader to pay the purchaser damages in compensation for the reduction in value of the vehicle below the price paid by the purchaser for the vehicle. The Tribunal considers that as a first step the ECU should be replaced and that this can be done in Hawera by the local Mazda agent using a second hand ECU obtained and supplied to the purchaser by the trader. The Tribunal’s Assessor agrees with the trader that the ECU can be fitted within half an hour at a labour cost of $80 to $100.

Conclusion on issue [c]
[26] The Tribunal has therefore decided that the purchaser has lost the right to reject the vehicle by not exercising the right within a reasonable time but it is entitled to damages in compensation which the Tribunal fixes at $300. It maybe that the replacement of the ECU does not cure the vehicle going into limp home mode and further orders may be necessary to have the vehicle fixed. Therefore the Tribunal will grant the purchaser leave within one month of the date of this order to have this application brought back before the Tribunal for further repair orders should that prove necessary.

Orders

1.The trader shall pay to the purchaser $320 immediately towards the cost of a second hand ECU and the cost of fitting it to the vehicle.

2.In the event that the replacement of the vehicle’s transmission ECU does not cure the vehicle’s transmission fault, the purchaser is granted leave for a period of one month from the date of this order to apply to the Tribunal for further orders to remedy the vehicle’s transmission fault.

DATED this 12th day of August 2015

C.H Cornwell
Adjudicator