Lay v South Auckland Vehicle (Imports) Limited t/a Papatoetoe Car Wholesale - Reference No. MVD 219/2016 (Auckland) [2016] NZMVDT 127; [2016] NZMVT Auckland 127 (30 August 2016)

Last Updated: 20 September 2016

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2016] NZMVT Auckland 127

Reference No. MVD 219/2016

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN EMILY LAY

Purchaser

AND SOUTH AUCKLAND VEHICLE (IMPORTS) LIMITED t/a PAPATOETOE CAR WHOLESALE

Trader

MEMBERS OF TRIBUNAL

Mr C H Cornwell, Barrister & Solicitor, Adjudicator

Mr S D Gregory, Assessor

HEARING at Auckland on 29 August 2016

DATE OF DECISION 30 August 2016

APPEARANCES

Miss E Lay, the purchaser

Mr J Lay, witness for the purchaser

Mr N Sharma, director of the trader

Ms R Kaur, manager of the trader

DECISION

South Auckland Vehicle (Imports) Limited shall pay Emily Lay $2,034 immediately.

REASONS

Background

[1] On 17 January 2016, Miss Lay (“the purchaser”) agreed to buy a 2007 Honda Civic registration number JPG681 (“the vehicle”) for $8,700 from South Auckland Vehicle (Imports) Limited trading as Papatoetoe Car Wholesale (“the trader”). The vehicle’s odometer reading at the time of sale was 35,347kms. The vehicle has a manual transmission.

[2] The purchaser says the trader represented to her that the vehicle’s clutch was in a good condition but the vehicle’s clutch began to fail after three months and 3,200kms of use. The purchaser claims the trader misled her regarding the condition of the clutch in breach of the provisions of the Fair Trading Act 1986. In the alternative the purchaser says that the vehicle’s clutch was not as durable as a reasonable consumer would regard as acceptable and hence the vehicle failed to comply with the guarantee of acceptable quality in the Consumer Guarantees Act 1993 (“the Act”). The purchaser seeks reimbursement of the costs she incurred in replacing the clutch of $2,517.66 and her costs of travelling from Wellington to Auckland to attend the hearing.

[3] The trader’s defence is that the purchaser test drove the vehicle before she bought it and she could have obtained a pre-purchase inspection of the vehicle but did not do so. The trader also says a clutch is a wear and tear item and that it believes the manner the purchaser drove the vehicle over the three months and 3,200kms after she bought it caused its clutch to fail prematurely.

[4] Pursuant to cl 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 cl 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

[5] The purchaser claimed the trader had misled her regarding the condition of the clutch in breach of the Fair Trading Act 1986. However the Tribunal considers the purchaser bought the vehicle knowing it was a Japanese import, that it had a manual transmission, and that it had previously been used for driver instruction in Japan and the purchaser did not have the vehicle test driven by a mechanical expert before she agreed to buy the vehicle. Under those circumstances, the Tribunal considers that a reasonable person in the purchaser’s situation would not have been likely to have been misled or deceived. Accordingly, the Tribunal considers it unlikely the purchaser would be entitled to have the Tribunal exercise its discretion to award her a remedy under the Fair Trading Act. However, the Tribunal has approached this application as a claim that the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act. Accordingly, it considers the issues to be:

(a) Did the vehicle comply with the guarantee of acceptable quality in s 6 of the Act?
(b) If not, did the purchaser require the trader to rectify the vehicle’s fault and if so, did the trader agree to do so?
(c) If not, what is the reasonable cost of having the clutch replaced in the vehicle?

Issue [a]: Did the vehicle comply with the guarantee of acceptable quality in s 6 of the Act?

Relevant law

[6] The expression "acceptable quality" is defined in s 7 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,—

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.

(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) 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) 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 the Tribunal must consider the quality elements as set out in s 7(1)(a)-(e) of the Act as modified by the factors set out in s 7(1)(f)-(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 s 19 of the Act. If the failure to comply with the guarantee of acceptable quality is of a “substantial character” within the meaning of s 21, 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 law to facts

[9] The purchaser agreed to buy the vehicle from the trader on 17 January 2016, after taking it for a short test drive. Before she agreed to buy the vehicle the trader’s manager told her that the vehicle had been used for driver instruction in Japan. The trader agreed to install a stereo and sell the vehicle to the purchaser for $8,700. The purchaser says she specifically asked the trader’s manager, Ms Ruby Kaur, if there were any issues with the vehicle or its clutch and Ms Kaur assured her there were not but that any faults would be covered by the Act for the first three months of the purchaser’s ownership. Mr Sharma, the trader’s director, also confirmed to the purchaser that there were no problems with the vehicle’s clutch. The purchaser says she has had about 12 years of experience in driving manual transmission cars and her two previous cars; a 1987 Honda Civic and a 1997 Nissan Sunny both had manual transmissions. This was the purchaser’s first vehicle purchase from a motor vehicle trader.

[10] When the purchaser went to collect the vehicle on 19 January 2016, she told the trader that she wanted to have it checked out by a mechanic. She says she had some concerns about the vehicle’s clutch. The manager would not allow her to take the vehicle to her mechanic claiming that the vehicle had already been registered in the purchaser’s name and the trader was not willing to release it without full payment. The trader’s manager also claimed that because the vehicle had been registered in the purchaser’s name it was no longer insured by the trader’s insurers. The purchaser tried to arrange a mobile mechanic to inspect the vehicle but this was not possible on the day and the purchaser says she paid the trader the balance of the purchase price and took delivery of the vehicle. The vehicle’s odometer at the time of sale was 35,347kms rather than the 35,000kms recorded on the Consumer Information Notice and Vehicle Offer and Sale Agreement, both of which she signed.

[11] The purchaser says that after two months she noticed a delay in the vehicle’s gear changes, the duration of which increased over time. On 4 April 2016 she had the AA inspect the vehicle. Its odometer was then 38,572kms or 3,230kms after sale. The AA report records the vehicle’s transmission was slipping. The purchaser then had the vehicle inspected on 18 April 2016 by Honda North Shore who told her the vehicle’s clutch was worn and would degenerate quite quickly if the vehicle was driven.

[12] On 18 April the purchaser sent the trader an email telling it the clutch was worn and needed replacement. The purchaser sent the trader a quote she obtained from Honda and asked it if the trader would prefer to take the vehicle to the trader’s mechanic to have the work done. Her email said that if she did not hear from the trader by 20 April she would book the vehicle in with Honda North Shore to fix, and have the invoice forwarded to the trader. The trader did not respond to that email so on 21 April the purchaser sent another email asking the trader where it would like her to take the vehicle to be inspected and repaired by the trader’s mechanics. The purchaser informed the trader by email the same day that she would not be paying for the repair because the vehicle had only been bought in January 2016 and that the trader would need to be responsible for payment of the repairs. The trader replied saying that as she had driven more than 4,000kms no dealer would take responsibility but that the trader would help her get the repair done cheaply.

[13] The purchaser then had Honda North Shore replace the vehicle’s clutch which Honda reported was found badly burnt, and the clutch plate was found to be worn down to the rivets, the flywheel also being reported as damaged. The cost of replacing the clutch and flywheel, with labour and GST was $2,517.66.

[14] The trader’s position is that the clutch was not faulty at the time of sale. The trader says a clutch is a wear and tear item and its rate of wear depends on the manner the vehicle is driven. The trader claimed the purchaser did not know how to drive a manual transmission vehicle and had caused the wear in the three months she had owned and driven the vehicle.

[15] In determining whether the vehicle supplied by the trader complied with the guarantee of acceptable quality, I have had regard first, to the nature of the goods; in this case a nine-year-old Japanese imported Honda Civic with manual transmission which had 35,347kms on its odometer at the time it was sold to the purchaser for $8,700. Although the trader disclosed to the purchaser that the vehicle had been used to teach drivers in Japan the trader represented that the vehicle’s clutch was sound and the vehicle had no faults.

[16] The Tribunal’s assessor considers, on the basis first, of the photographs of the clutch plate provided by the purchaser, and second by the purchaser’s account of the gradual slipping of the clutch after about 3,200kms of use, that the clutch was probably about 90% to 95% worn at the time of sale. The Tribunal understands that, providing a clutch is not abused, it should function satisfactorily in a 2007 Honda Civic for up to 100,000kms.

[17] The Tribunal were not provided with any reliable evidence to show, as the trader claimed, that the purchaser had misused the vehicle’s clutch. The Tribunal believes that after 12 years’ experience driving manual transmission cars the purchaser would have become skilled in operating a manual transmission in a vehicle of this type. Accordingly, the Tribunal finds first, that the clutch was very probably badly worn at the time of sale, and that such wear was probably caused by trainee drivers learning to drive a manual transmission vehicle in Japan. Second, that the purchaser did not cause the clutch to fail by misuse or abuse of the vehicle or ineptitude in operating the vehicle’s manual transmission. Third, that the clutch failed because it lacked the durability that a reasonable consumer would expect of a low mileage Honda Civic sold for $8,700.

Conclusion on issue [a]

[18] This vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act at the time of sale, because its clutch was not as durable as a reasonable consumer would regard as acceptable.

Issue [b]: Did the purchaser require the trader to remedy the vehicle’s fault, and if so, did the trader do so within a reasonable time?

Relevant law

[19] 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—

(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.

(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21, the consumer may—

(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

[20] The purchaser required the trader to repair the worn clutch by email sent to the trader on 18 April 2016, but the trader refused to do so at its cost by email sent to the purchaser on 21 April 2016. At the hearing the trader did not deny that it refused to replace the vehicle’s clutch at its cost.

Conclusion on issue [b]

[21] I find as a fact that the trader was required to repair the vehicle’s clutch by the purchaser on 18 April 2016 but refused to do so on 21 April. I therefore find that the purchaser became entitled, by s 18(2)(b)(i) of the Act, to have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in doing so. The purchaser had the clutch replaced by Honda North Shore on 1 June 2016 at a cost of $2,517.66.

Issue [c]: What is the reasonable cost of having the clutch replaced?

Relevant law

[22] Section 18(2)(b)(i) of the Act, which is reproduced in [19] (above) provides that a consumer is able to recover from the supplier all reasonable costs incurred in having a failure remedied where the trader refuses, after being required to remedy a failure, to do so.

Application of law to facts

[23] The purchaser incurred $2,517.66 to Honda North Shore for parts, labour and GST to replace the clutch. The purchaser recognises that she has obtained some betterment in getting a new clutch for one that had been used to drive the vehicle 40,354kms at the time the clutch was replaced. The Tribunal thinks that a reduction of 30% of the repair costs should be made to reflect the betterment the purchaser will receive from having a vehicle with a new clutch. The trader will therefore be ordered to pay $1,678 towards the clutch replacement.

Costs

[24] The Tribunal has power to award costs under cl 14(1)(b) of the Schedule to the Motor Vehicle Sales Act 2003, where it considers that the matter ought reasonably to have been settled before proceeding to a hearing but that the party against whom an award of costs is to be made refused, without reasonable excuse, to take part in the discussions referred to in cl 5(1)(b). I am satisfied that the trader in this case failed without reasonable excuse to take part in mediation discussions without good cause. The trader will therefore be ordered to pay the purchaser’s costs of $356 of travelling from Wellington to Auckland to attend the hearing.

Conclusion on issue [c]

[25] The trader will be ordered to pay the purchaser $1,678 towards the cost of the clutch replacement and a further $356 for the purchaser’s costs in travelling from Wellington to Auckland for the hearing; a total of $2,034, immediately.

DATED at AUCKLAND this 30th day of August 2016
C. H. Cornwell
Adjudicator