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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 19 December 2016
BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
Reference No. MVD 244/2016 (WN) 66
IN THE MATTER of the Motor Vehicle Sales Act 2003
AND
IN THE MATTER of a dispute
BETWEEN GRAHAM IVAN WASTNEY
Purchaser
AND KERRY HARVEY AUTOS LIMITED
Trader
MEMBERS OF TRIBUNAL
J S McHerron, Barrister – Adjudicator
D Binding – Assessor
HEARING at Palmerston North on 13 October 2016
DATE OF DECISION 14 November 2016
APPEARANCES
G I Wastney, Purchaser
K L Harvey, Director of Trader
DECISION
REASONS
Introduction
[1] The purchaser’s low mileage BMW was found to have bent conrods and a broken piston. The trader declined to assist with the purchaser’s costs of repairing the vehicle's engine, as the problem was not identified until more than a year after purchase. The primary issue for the Tribunal to determine is whether the defect causing engine failure was present at the time of purchase. If so, the Tribunal needs to determine whether the trader is liable to meet the purchaser’s repair costs.
[2] The following issues arise:
- (a) Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Consumer Guarantees Act 1993 (“the Act”)?
- (b) Did the purchaser require the trader to remedy the vehicle's defects?
- (c) Did the trader refuse to do so?
- (d) If so, what remedy is the purchaser entitled to?
Background
[3] On 11 April 2015 Mr Wastney purchased a 2006 BMW 320i with 28,950 km on the odometer for $16,995 from Kerry Harvey Autos Limited. For the first 12 months after purchase, the purchaser had no major problems with the vehicle. However, Mr Wastney told the Tribunal that, in hindsight, he observed that the engine had never run particularly smoothly. However, as he had never owned a BMW before, Mr Wastney assumed it was normal for this make and model of car.
[4] On or about 16 April 2016, Mr Wastney noticed a ticking sound from the engine, on deceleration. By 30 April 2016, this noise had turned into a “deep knocking”.
[5] Mr Wastney had the vehicle checked by his local garage, Kelvin Grove Autos, on or about 1 May 2016. Kelvin Grove Autos contacted a motor engineer, B & H Engine Services, which diagnosed a damaged big end bearing. B & H Engine Services recommended Mr Wastney send the vehicle to a BMW specialist repairer, The Engine Room Automotive. The Engine Room told Mr Wastney there was some bottom end damage to the vehicle needing further investigation.
[6] Mr Wastney instructed The Engine Room to further investigate what was wrong with the engine. In the meantime, on 11 May 2016, Mr Wastney visited Kerry Harvey Autos and spoke to its director Mr Harvey about the problem he was experiencing with his vehicle.
[7] Mr Harvey told Mr Wastney that, as a year had passed since his purchase of the vehicle, it was outside its warranty and that Kerry Harvey Autos was not responsible for meeting the costs of any repair. Mr Harvey suggested Mr Wastney go to Elite Automotive to obtain an estimate for a secondhand engine. Mr Harvey said that any repairs would be at Mr Wastney’s own expense, but that he might be able to assist Mr Wastney in getting a cheaper rate from Elite Automotive.
[8] On 25 May 2016, following its investigation of the dismantled engine, The Engine Room reported to Mr Wastney that the conrods for cylinders 3 and 4 were bent and piston number 3 was broken. The Engine Room thought the damaged conrods and piston were very unusual as the car had only travelled 43,273 km. The Engine Room concluded that "hydraulicing" of the engine was the only possible cause. Hydraulicing is where water gets into a cylinder causing a solid block preventing the piston from rising, leading to engine damage.
[9] On close inspection, The Engine Room noted that there were water marks on the cylinder bores consistent with water sitting in the cylinders. The Engine Room reported that the engine had taken in water, possibly during a flood, causing it to "hydraulic", resulting in the conrods becoming slightly bent. The Engine Room concluded that, over time, the conrods had bent to the point where they damaged the engine. The Engine Room took the view that it was more than likely this damage occurred in Japan, prior to the vehicle's importation to New Zealand, although The Engine Room acknowledged it had no clear evidence on that point.
[10] On 25 May 2016, Mr Wastney emailed Kerry Harvey Autos to inform it of The Engine Room’s conclusion that the engine had been hydrauliced, causing major damage. Mr Wastney told Kerry Harvey Autos that he had not driven the vehicle near any water. Nor had the car had any break-downs in the year he since had owned it. Mr Wastney told Kerry Harvey Autos that it appeared the damage was done to the engine before he purchased the vehicle.
[11] Mr Wastney told Kerry Harvey Autos that, as the car had only travelled a low mileage, he wanted to repair the engine rather than fit a replacement. He noted that he had purchased the vehicle with a low mileage because he wanted trouble-free motoring for many years. Mr Wastney asked Kerry Harvey Autos whether it would contribute to the repair bill and indicated that repair costs were likely to be $7,000 to $8,000 for the engine to be fully reconditioned.
[12] Kerry Harvey Autos did not reply to Mr Wastney’s 25 May 2016 email.
[13] On 15 June 2016, Mr Wastney made another visit to Kerry Harvey Autos and spoke to Mr Harvey. He discussed the damage and its likely cause with him. He mentioned again that the vehicle was at The Engine Room, and said that Mr Harvey told him he would talk to The Engine Room about its findings (Mr Harvey denied that he had ever agreed to do so).
[14] The vehicle was off the road and under repair by The Engine Room for approximately 10 weeks. Just before the repairs were completed, on 10 July 2016, Mr Wastney emailed Kerry Harvey Autos again. He referred in his email to a promise made by Mr Harvey to visit The Engine Room on 17 June, which would have allowed him to see the damage himself and hear the explanation directly from the mechanic. Mr Wastney recorded that Kerry Harvey Autos had chosen not to respond to his visits and emails since 11 May, but he wanted to make one last appeal to Kerry Harvey Autos to try to resolve the issue. Again, Mr Wastney sought the costs of repairing the engine and said that if Mr Harvey did not make contact and come to an amicable agreement, he would file a complaint with the Tribunal. Kerry Harvey Autos did not reply to Mr Wastney’s second email.
[15] Repairs on the vehicle were completed on or about 13 July 2016, at a final cost of $8,208.34. Mr Wastney produced a report from Richard Dann at The Engine Room confirming his earlier diagnosis that the engine had been hydrauliced prior to importation to New Zealand. The Engine Room noted that, since it had rebuilt the engine and replaced the conrods/piston, "the engine now runs perfectly".
Issue 1: did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Act?
[16] Section 6(1) of the Act provides that where goods are supplied to a consumer there is a guarantee “that the goods are of acceptable quality”. According to s 2 of the Act, “goods” includes vehicles.
[17] The meaning of acceptable quality is defined in s 7 of the Act (as far as is relevant) as follows:
- 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,—
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—
(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.
[18] The question whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[19] The essential issue in this case is whether the vehicle’s engine was damaged prior to Mr Wastney’s purchase and, if so, whether it failed to comply with the guarantee of acceptable quality.
[20] The Tribunal’s Assessor, Mr Binding, considered that it was likely the damage occurred prior to the vehicle’s importation to New Zealand. Mr Binding examined the damaged conrods and piston, which were produced at the Tribunal hearing. Mr Binding observed only minor bending to the conrods, causing minimal effect to the stroke of the piston. That explained, in Mr Binding's view, why it took approximately one year after purchase before Mr Wastney noticed something was wrong with the engine (the ticking in April 2016).
[21] Mr Binding also noticed the water marks on the bore that had been observed by The Engine Room. Mr Binding agreed with The Engine Room’s assessment that this staining was consistent with water sitting in the cylinder bores.
[22] In Mr Binding’s view, to get to the point where water would come into the cylinders in this way, a substantial body of water must have been sucked into the engine, perhaps a foot or two of water in a bow wave. Mr Binding thought that for such a large amount of water to enter the engine, the engine would have to be running and the driver would almost certainly be aware of it happening. Mr Wastney’s evidence was that nothing of this nature had occurred while he owned the vehicle. He told the Tribunal that he had insurance that would have covered such an eventuality if it had occurred.
[23] Kerry Harvey Autos produced a report by Tania Gooch of Elite Automotive 2015 Ltd, which referred to several major flooding incidents in Palmerston North in the past two years. In Ms Gooch’s view, the vehicle would not have been able to travel some 14,000 km with damaged conrods.
[24] Mr Binding had regard to Ms Gooch’s report, but maintained his view that, because the conrods were only slightly bent, the damage would initially have been undetectable.
[25] In Mr Binding’s view, once Mr Wastney heard the initial ticking noises in April 2016, significant damage to the engine would already have been done; there was nothing that could have been done at this point to avoid the need for the repairs that were eventually carried out by The Engine Room.
[26] In Mr Binding’s view, which I share, a reasonable consumer would regard the engine of a vehicle of this age, low mileage, and price to last substantially longer than 12 months before having a catastrophic failure as occurred in respect of Mr Wastney’s vehicle. Accordingly, the effect of the bent conrods eventually causing number 3 piston to break, was that the vehicle was not as durable as a reasonable consumer would regard as acceptable in terms of s 7(1)(e) of the Act. For this reason, the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act.
Issue 2: did Mr Wastney require Kerry Harvey Autos to remedy the vehicle’s defects?
[27] Section 18 of the Act provides the options for purchasers whose vehicles do not comply with the guarantees in the Act. It provides, as far as is relevant:
- 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—
(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,—
(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.
[28] Where a defect can be remedied and is not of a substantial character, a purchaser must follow the requirement in s 18(2) to allow the trader an opportunity to remedy the failure within a reasonable time.[1] In the present case, the evidence is that Mr Wastney visited Kerry Harvey Autos on 11 May and 15 June 2016 to discuss the problem with the vehicle and to ask for Kerry Harvey Autos to assist and/or contribute to the cost of repairs.
[29] Mr Wastney also emailed Kerry Harvey Autos on 25 May 2016 and 10 July 2016 describing in detail the fault with the vehicle and providing information on the cost of repairs. Mr Harvey did not reply to Mr Wastney’s emails.
Issue 3: did the trader refuse to remedy the failure?
[30] The undisputed evidence was that Mr Harvey refused to assist Mr Wastney by remedying the failure with the vehicle.
[31] Moreover, even after Mr Wastney filed his application to the Tribunal, Kerry Harvey Autos made no effort to contact Mr Wastney to discuss his application with the view to settling the dispute.[2] Nor did Kerry Harvey Autos provide a written report to the Tribunal on the outcome of any discussions, despite being requested on two occasions to do so.[3] This has implications for Kerry Harvey Autos in terms of a costs award against it, to be discussed further below.
[32] I conclude, based on the foregoing, that Kerry Harvey Autos refused to remedy Mr Wastney’s vehicle’s defect.
Issue 4: what remedy is the purchaser entitled to?
[33] As set out above, s 18(2)(b) of the Act provides that where a trader has been required to remedy a failure but refuses to do so, the purchaser is entitled to have the failure remedied elsewhere and obtain from the trader all reasonable costs incurred. In the present case, Mr Wastney produced his actual invoice for the repairs necessary to the vehicle, which amounted to $8,208.34, slightly more than the quoted sum. In Mr Binding’s view, this amounts to a reasonable charge for having the engine reconditioned. Mr Binding considers, and I agree, that Mr Wastney has a reasonable basis for preferring to have the engine reconditioned, rather than have a replacement engine fitted to the vehicle, namely that it was important to him to have a low-mileage engine in the vehicle and that this was a particular reason why he had purchased this vehicle in the first place.
[34] Accordingly, I conclude that Mr Wastney is entitled to recover the full amount of The Engine Room invoice of 13 July 2016: $8,208.34.
[35] I also consider that this is an appropriate case for an award of costs against Kerry Harvey Autos Ltd. This matter ought reasonably to have been settled before proceeding to a hearing but Kerry Harvey Autos refused without reasonable excuse to take part in the discussions required by cl 5(1)(b) of Schedule 1 to the Motor Vehicle Sales Act 2003. Accordingly, I order Kerry Harvey Autos to pay the reasonable costs of the Tribunal hearing, namely $500.
J S McHerron
Adjudicator
[1] Acquired Holdings Limited v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 (HC) at [11].
[2] As is required by the Motor Vehicle Sales Act 2003, Schedule 1, cl 5.
[3] Contrary to the Motor Vehicle Sales Act 2003, Schedule 1, cl 5(1)(b).
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