Lotz v Al-Hayader t/a Cheap Cars 2015 - Reference No. MVD 247/2016 (Auckland) [2016] NZMVDT 135; [2016] NZMVT Auckland 135 (30 September 2016)

Last Updated: 18 October 2016

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2016] NZMVT Auckland 135

Reference No. MVD 247/2016

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN SUSANNE HELENE LOTZ

Purchaser

AND YOUSIF AL-HAYADER T/A CHEAP CARS 2015

Trader

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

HEARING at Hastings on 27 September 2016

DATE OF DECISION 30 September 2016

APPEARANCES

Miss S H Lotz, the purchaser

Mr Y Al-Hayader, the trader
Mr S Gupta, support person for trader

DECISION

Yousif Al-Hayader shall pay Susanne Helene Lotz $2,700 immediately and when he has done so he is to collect the vehicle, at his expense, from Miss Lotz.

REASONS

Background

[1] On 21 July 2016, Miss Lotz (“the purchaser”) bought a 1994 Nissan Largo registration BNE660 (“the vehicle”) from Yousif Al-Hayader trading as Cheap Cars 2015 (“the trader”) for $2,700. The purchaser claims the vehicle was not of acceptable quality because it overheated and its cylinder head gasket failed after only 379kms of use. The purchaser seeks to recover her full purchase price from the trader.
[2] The trader’s defence is that he sold the vehicle “as is where is” to the purchaser and recorded that as a term of sale in the Vehicle Offer and Sale Agreement (“VOSA”) signed by the purchaser and he believes that condition relieves him of any responsibility to the purchaser for the vehicle’s condition.
[3] Pursuant to clause 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 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 it did not, is the failure of substantial character and if so is the purchaser entitled to reject the vehicle?

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" 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.

[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)-(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.
[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 s 19 of the Act. If the failure to comply with the guarantee of acceptable quality was 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 her right to reject the vehicle within a reasonable time.
[10] Section 43(1) of the Act provides that subject to some sections which do not apply in this application, the provisions of the Act shall have effect notwithstanding any provision to the contrary in any agreement. In short, it is not lawful for a supplier to contract out of the provisions in the Act unless the supplier is selling to a consumer who is in trade and the provisions of s 43 (2) of the Act are satisfied.
[11] Section 43(4) of the Act makes it an offence against s 13(i) of the Fair Trading Act 1986 for a supplier to purport to contract out of any provision of the Act other than in accordance with s 43(2) or s 43A, neither of which apply in this application.

Application of law to facts

[12] The purchaser bought the vehicle on 21 July 2016 from the trader (M295451), a registered motor vehicle trader, at 2 Austin Street, Onekawa, Napier, for $2,700. The vehicle had travelled 176,283km at the time of sale. The trader inserted the following as a special condition in the VOSA:

“At (sic) is where is No garantae (sic)”

[13] The trader did not supply the purchaser with a signed Consumer Information Notice (“CIN”) and he admits that he did not obtain the purchaser’s signature on a CIN, which appears to breach the provisions of the Consumer Information Standards (Used Motor Vehicles) Regulations 2008. Those regulations are enforced by the Commerce Commission.

[14] The purchaser says she used the vehicle for two weeks after buying it to travel short distances from Napier but in early August 2016 she and her partner drove the vehicle from Napier to Mahia. When they stopped the vehicle they heard its radiator boiling, they let it cool, and added water to the radiator. The purchaser had used the vehicle to travel 150kms at that time.

[15] On the return journey to Napier the vehicle’s engine again overheated and the purchaser says she stopped to let it cool. The vehicle was towed back to Napier and taken to Taradale Auto Repairs Ltd who, on 11 August 2016, carried out a check of the engine and found it was pumping water out and possibly had a blown head gasket. They estimated the cost to repair the vehicle’s engine at that time as $2,000 to $3,000.

[16] The purchaser returned the vehicle to the trader and asked for her purchase price to be returned to her. The trader had its mechanic check the engine and she says the trader told her it simply needed a thermostat which he charged her $70 to supply and fit. The purchaser drove the vehicle a short distance only before it overheated again and she returned it to the trader who offered her half of her purchase price for the vehicle.

[17] On 11 August 2016 the purchaser gave the trader a letter rejecting the vehicle claiming it had a serious fault; a broken head gasket.

[18] The purchaser produced a second invoice from Taradale Auto Repairs Ltd dated 8 September in which they state that the repair cost could be $2,500 or more depending on the condition of the cylinder head. Their invoice records the odometer as 176,662kms showing the vehicle has travelled only 379kms since it was supplied to the purchaser.

[19] The trader had no defence to the purchaser’s claim other than the special condition of sale which he claimed meant that the purchaser had bought the vehicle without a guarantee. The Tribunal pointed out to the trader that he could not lawfully contract out of the guarantees in the Act and indeed it is an offence to attempt to do so. The trader was invited to say why the Tribunal should not refund the purchaser with her full purchase price but was unable to suggest any reason. The trader then offered, at the hearing, to repair the engine.

The Tribunal’s finding on issue [a]

[20] 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 22-year-old Japanese imported Nissan Largo which the trader represented had travelled 176,283kms at the time of sale (although the VOSA does not record the odometer reading and the copy of an unsigned CIN produced by the trader incorrectly record its odometer as 177,700kms). Second, to the vehicle’s sale price of only $2,700. The vehicle was thus a very old, high mileage, cheap van of which no sensible purchaser would reasonably have expected more than a few months of use.

[21] Within 20 days and 379kms of use the vehicle’s engine overheated and its cylinder head gasket has probably failed. The Tribunal considers that even allowing for the age, high mileage and low selling price, this vehicle was not as durable as a reasonable consumer would regard as acceptable.

[22] The trader purported to sell the vehicle “as is where is with no guarantee”. The trader either does not know, or has chosen to deliberately flout New Zealand consumer law. The insertion of the special condition in the VOSA amounts, in my view, to an attempt to contract out of the Act which is unlawful and breaches s 43(4) of the Act which provides as follows:

“(4) Every supplier and every manufacturer commits an offence against section 13(i) of the Fair Trading Act 1986 who purports to contract out of any provision of this Act other than in accordance with subsection (2) or section 43A.”

[23] The contracting out did not take place in accordance with either s 43(2) or s 43A of the Act. The Commerce Commission may wish to investigate the trader’s conduct in detail. A copy of this decision and the VOSA and unsigned CIN will be sent to the Commission so that it may investigate and decide whether to prosecute the trader. The trader also appears to be using the wrong trader number on its printed CIN form and the form fails to comply with the provisions of the regulations.

Conclusion on issue [a]

[24] The vehicle did not comply with the guarantee of acceptable quality at the time of sale because its engine was not as durable as a reasonable consumer would regard as acceptable - even for a vehicle of this age mileage and price.

Issue [b]: Is the failure of substantial character and if so is the purchaser entitled to reject the vehicle?

[25] 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—

(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

[26] I accept the evidence given by the purchaser’s mechanic, Taradale Auto Repairs Ltd, in its second written quote to the purchaser that the cost of repairing the engine will be $2,500 or more. I do not think any reasonable consumer would have bought this vehicle if they had known that it would only last for 20 days and 379kms of travel before requiring repairs costing $2,500 or more.

Conclusion

[27] I am satisfied the vehicle’s engine failure is of substantial character within the meaning of s 21(a) of the Act. I also consider the purchaser complied with her obligation under s 22(1) of the Act to notify the trader that she was rejecting the vehicle and gave her grounds for doing so in her rejection letter of 11 August 2016. The trader will be ordered to refund the purchaser with $2,700 immediately and as soon as it has done so, to collect the vehicle from the purchaser, at his expense.

DATED at AUCKLAND this 30th day of September 2016

C. H. Cornwell
Adjudicator