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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 17 November 2016
BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
[2016] NZMVT Auckland 138
Reference No. MVD 204/2016
IN THE MATTER of the Motor Vehicle Sales Act 2003
AND
IN THE MATTER of a dispute
BETWEEN ALLAN PETER HEENEY & JANET KAREN HEENEY
Purchasers
AND BAYSWATER VEHICLES LIMITED
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 4 October 2016
APPEARANCES
Mr A P Heeney, joint purchaser with J K Heeney
Mrs J K Heeney, joint purchaser with A P Heeney
Mr M Chan, Director of the trader
DECISION
The Tribunal makes the following orders:
REASONS
Background
[1] On 28 September 2015, Mr and Mrs Heeney (“the purchasers”) bought a new 2015 Hyundai Sonata 2.0T Elite A6 Limited vehicle registration number JHR916 (“the vehicle”) for $57,585 from Bayswater Vehicles Limited (“the trader”).
[2] The purchasers bought the vehicle after they were provided with a description of its features and technical specifications in a sales brochure entitled “All-New Sonata” (“the sales brochure”) published by the manufacturer’s New Zealand distributor, Hyundai NZ Ltd, a copy of which was given to the purchasers by the trader.
[3] As soon as the vehicle was supplied to the purchasers they discovered that three of the features described in the sales brochure as being fitted or supplied as part of the vehicle, were missing. The three features are: glovebox cooling, a speed limiter function as part of the cruise control, and fog lights.
[4] The purchasers required the trader to supply and fit the three missing features but the trader was unable to do so because the first two features (glovebox cooling and speed limiter) cannot be retrofitted to the vehicle and the purchasers did not want the vehicle retrofitted with after-market fog lights because they say after-market fog lights will look out of place on the vehicle.
[5] The purchasers say they bought the vehicle on the basis of the specification described in the sales brochure and that the vehicle fails to correspond with that description, in breach of s 9 of the Consumer Guarantees Act 1993 (“the Act”). They rejected the vehicle on 28 June 2016 but the trader has not accepted their rejection. They seek the Tribunal’s order upholding their rejection and ordering the trader to refund the purchase price.
[6] The purchasers also say that the vehicle has a number of faults which the trader, after being required to do so, has failed to rectify within a reasonable time. They also seek to reject the vehicle on the ground of the trader’s failure to remedy those faults within a reasonable time of being required to do so.
[7] The trader’s defence is first, that the sales brochure contains a form of disclaimer at the bottom of its last page which provides that “specifications, features, equipment and colours shown in this brochure are subject to change without notice or obligation.” It says that disclaimed excludes the trader’s liability to the purchasers for failing to supply the three features. Second, that although the trader accepts the three features were not supplied with the vehicle, it says that they are only three of 105 features the vehicle has. It says that the purchasers are being unreasonable in rejecting the vehicle for the absence of those three features. Third, the trader says it is willing to supply a small refrigerator unit which could be fitted into the vehicle’s boot and that it is also willing to supply and fit after-market fog lights to the vehicle although it says they may affect the operation of the daytime running lights fitted to the vehicle. These offers have been rejected by the purchasers. Fourth, the trader admits the speed limiter cannot be retrofitted but says it is willing to negotiate compensation for the unavailability of that feature. Finally, the trader says it is willing to remedy the other faults the purchasers have found with the vehicle.
[8] 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
[9] The issues requiring consideration are:
(a) Does the disclaimer clause at the end of the brochure, or clause 7.3 of the Terms and Conditions of sale exclude the trader’s liability to comply with s 9 of the Act?
(b) Did the vehicle correspond with the description in the sales brochure?
(c) If not, did the purchasers require the trader to supply and fit the missing features, and if so, has the trader done so within a reasonable time?
(d) Was the vehicle of acceptable quality at the time of supply as provided by s 6 of the Act and if not, did the purchasers require the trader to remedy the faults and, if so, has the trader done so within a reasonable time?
(e) Are the purchasers entitled to reject the vehicle?
Issue [a]: Does the disclaimer clause at the end of the brochure, or clause 7.3 of the Terms and Conditions of sale exclude the trader’s liability to comply with s 9 of the Act?
Relevant law
[10] Section 43(1) and (4) of the Act provide as follows:
(1) Subject to this section and to sections 40, 41, and 43A, the provisions of this Act shall have effect notwithstanding any provision to the contrary in any agreement.
........
(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.
Application of law to facts
[11] The trader’s director, Mr Chan, drew the Tribunal’s attention to what he referred to as a disclaimer clause at the end of the sales brochure which he claimed applied to bind the purchasers (presumably contractually) to accept changes to the vehicle’s specification. Mr Chan referred to the sales brochures of other vehicle manufacturers which he claimed contained similar clauses. The relevant clause in the sales brochure reads as follows:
“Specifications, features, equipment and colours shown in this brochure are subject to change without notice or obligation.”
[12] Although Mr Chan did not refer to it at the hearing, I note that the trader’s New Vehicle Offer & Sale Agreement (which the purchasers did not sign but which they have performed by paying the purchase price and accepting delivery of the vehicle), contains the following clause under the heading:
“7. CONDITIONS RELATING TO NEW VEHICLES
7.3 Alterations in Specification: In the event of any alteration by the manufacturer or assembler in the design or specification of any model the Trader shall be entitled but not bound to deliver goods conforming to the altered design or specification in fulfilment of any order.”
[13] The disclaimer clause in the sales brochure and clause 7.3 in the New Vehicle Offer & Sale Agreement both raise the same issue: do either or both of them override the provisions of the Act and in particular, s 9 of the Act which provides consumers with a statutory guarantee that where consumer goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description.
[14] My view is that the wording of s 43(1) of the Act was intended by Parliament to trump any exclusion or disclaimer clause in a contract which has the effect of negating the guarantees in the Act. Were it not so, the Act would be hollow and there would be no need for s 43(4) which makes it an offence against the Fair Trading Act to purport to contract out of the provisions in the Act, other than in accordance with s 43(2) or s 43A.
Conclusion on issue [a]
[15] I find that both the disclaimer clause in the sales brochure and clause 7.3 of the trader’s New Vehicle Offer & Sale Agreement purport to contract out of the provisions in s 9 of the Act and hence they are both unlawful and have no effect. The trader is probably breaching s 43(4) of the Act by inserting them in those documents, but that is a matter the Commerce Commission may need to determine and decide whether it commences a prosecution against the trader and Hyundai NZ Ltd for breaching s 13(j) of the Fair Trading Act 1986. A copy of this decision will be sent to the Commerce Commission so that it may consider that issue.
Issue [b]: Did the vehicle correspond with the description in the sales brochure?
Relevant law
[16] Section 9 of the Act provides as follows:
(1) Subject to section 41, where goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description.
(2) A supply of goods is not prevented from being a supply by description by reason only that, being exposed for sale or hire, they are selected by a consumer.
(3) If the goods are supplied by reference to a sample or demonstration model as well as by description, the guarantees in this section and in section 10 will both apply.
(4) Where the goods fail to comply with the guarantee in this section,—
(a) Part 2 gives the consumer a right of redress against the supplier; and
(b) Part 3 may give the consumer a right of redress against the manufacturer.
[17] The purchasers say that the trader did not have a 2015 Hyundai Sonata 2.0T Elite A6 Limited model for them to test drive before they agreed to buy the vehicle, but provided them with a test drive in a different model Hyundai Sonata vehicle. The trader’s salesman also gave them the sales brochure to take away. The purchasers say they made their decision to buy the vehicle on the basis of what they read in the sales brochure. However they say the vehicle they were supplied with did not have three features which were described in the sales brochure. The three features and the description of each in the sales brochure are as follows:
(a) Fog Lights
The purchasers say the sales brochure (page 8) describes the vehicle they bought as having fog lights as follows:
“...fog lights that mirror the flowing shape of the Sonata’s front grille, which is set in chrome in all models.”
The sales brochure also states on page 8:
“Another safety feature is the cornering light control. When you flick the indicator on, an extra light from Sonata’s fog lights illuminates the space to the side you’re turning to, so that you can see exactly where you are heading (Elite Limited models only)”
and
“See the road more clearly and be more easily spotted by other drivers. This feature not only looks good - it also provides additional visibility. You can drive more confidently and safely in foggy conditions.”
(b) Speed limiter function
The sales brochure (page 15) describes the vehicle as having cruise control and states:
“Cruise control means you can relax while maintaining a constant speed. It’s ideal for open road driving. The all new Sonata also has a speed limiter function. This allows you to set a speed limit that the vehicle will refuse to accelerate beyond. It’s great for safe speed areas, and for avoiding speeding fines. Both these features are controlled from your steering wheel.”
(c) Glovebox cooling
The sales brochure (page 26) lists the technical specifications of the vehicle (as well as two other Hyundai Sonata models) and under the heading “Comfort and Convenience” lists one of the features in all three models as “Glovebox cooling.”
[18] The purchasers say the vehicle cannot be retrofitted with fog lights, a speed limiter function, or glovebox cooling. Mr Chan agreed that these three features could not be retrofitted to the vehicle but claimed that they were only three of 105 features promised in the sales brochure and that the purchasers were being unreasonable in rejecting the vehicle because they were not present in the vehicle supplied to them. Mr Chan offered to supply and fit after-market fog lamps but said that these might affect the functionality of the daylight running lights fitted to the vehicle. He also said that the trader could supply an electric refrigerator which could be put in the boot and connected to the vehicle’s electrical system. The purchasers rejected those offers on the basis that the after-market fog lights would detract from the vehicle’s appearance and the electric refrigerator would take up a substantial volume of boot space. The trader agrees that the speed limiter function cannot be retrofitted to the vehicle.
[19] I consider the purchasers proved that three of the features described in the sales brochure; the fog lights, speed limiter function and glovebox cooling had not been supplied by the trader in the vehicle they were sold.
Conclusion on issue [b]
[20] I find that the vehicle supplied to the purchasers did not comply with the description given to the purchasers in the sales brochure. The trader thus failed to comply with the guarantee in s 9 of the Act. I do not accept as relevant the trader’s submission that because there were only three of 105 features missing the purchasers are being unreasonable in rejecting the vehicle because s 9 of the Act does not require the purchasers to be reasonable or for the failure to comply with the description to be of a substantial nature or degree.
Issue [c]: Did the purchasers require the trader to supply and fit the missing features, and if so, has the trader done so within a reasonable time?
Relevant law
[21] Section 18 of the Act provide 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.”
[22] The regime of the Act requires that where the fault can be remedied and is not of substantial character, the consumer must require the supplier to remedy the fault and the trader must do so within a reasonable time (see s 18(2)(a) of the Act).
Application of law to facts
[23] The purchasers collected the vehicle on 28 September 2015 and immediately enquired how the cooler box in the glovebox worked. They say that several members of the trader’s staff looked at the vehicle and concluded that it did not seem to have one. In November 2015 the purchasers returned the vehicle to the trader for its 1,000km check and again asked about the glovebox cooler, the fog lights which were not on the vehicle, and the driver’s seat padding which Mr Heeney found did not give him adequate comfort. The trader promised the purchasers it would look into those matters and get back to them.
[24] In March 2016 the purchasers received a recall notice for a recall of the vehicle to repair the door locks. When they booked the vehicle in for the recall work the trader’s salesman, Mr Elston, when asked about the cooler box, missing fog lights and speed limiter functions recommended the purchasers contact a Mr Daniel Page of Hyundai NZ Ltd.
[25] The trader’s director, Mr Chan, acknowledged at the hearing that the vehicle supplied to the purchasers did not have fog lights, a speed limiter function and a glovebox cooler and that the trader was unable to retrofit those three features. Mr Chan says it is impossible to fit a speed limiter to the vehicle but it is possible to fit after-market fog lights to the vehicle but this may prevent the daytime running lights being operated. Mr Chan says a small refrigerator unit can be supplied and placed in the vehicle’s boot and connected to its battery. The purchasers are unwilling to accept after-market fog lights or a refrigeration unit in the boot.
Conclusion on issue [c]:
[26] I am satisfied the purchasers required the trader from very soon after they bought the vehicle in September 2015 to fit fog lights, a speed limiter and glovebox cooling to the vehicle but the trader is unable to do so.
Issue [d]: Was the vehicle of acceptable quality at the time of supply as provided by s 6 of the Act and if not, did the purchasers require the trader to remedy the faults, and if so, has the trader done so within a reasonable time?
Relevant law
[27] 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.”
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.”
[28] 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.
[29] 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
[30] In April 2016 the purchaser say they had problems with the vehicle’s headlights being misdirected and read in the vehicle’s service manual that it has auto levelling headlights. They contacted Mr Elston who said that if the service manual said the vehicle had auto levelling headlights it must have them. On 26 April the purchasers contacted Mr Page at Hyundai NZ Ltd, on the advice of Mr Elston, and sent Mr Page a list of the faults the purchasers had found with the vehicle, many of which the Tribunal notes have since been repaired by the trader when the vehicle was returned on 24 May 2016, other than the following faults which the purchasers say have not been fixed by the trader:
(a) the electro chromatic rear view mirror does not operate;
(b) the driver’s seat padding has dropped and makes it uncomfortable for the driver on a long journey;
(c) the driver’s door has cold air coming through after door locks were changed during the recall;
(d) the push button start is unreliable and fails to start the vehicle on first being pushed. This occurs about three times each week;
(e) the purchasers say the vehicle’s headlights are very dim.
[31] I do not consider that any reasonable consumer paying $57,585 for a new Hyundai Sonata 2.0T Elite A6 Limited would regard a vehicle with the faults listed in the previous paragraph to be acceptable. I therefore have no hesitation in finding this vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act at the time of sale.
[32] By 9 June 2016 the purchasers felt the trader was not taking their concerns seriously and they sought the advice of the Community Law Centre in Hastings. This resulted in a meeting between the purchasers and the trader’s Mr Townshend and Mr Chan on 22 June at the trader’s premises. Unfortunately the trader does not appear to have prepared and circulated minutes of what was agreed at that meeting.
[33] The purchasers claim the trader agreed that Mr Chan and Mr Townshend would ask Hyundai NZ Ltd for monetary compensation to be paid for the missing three items. If the purchasers agreed to accept the amount of compensation offered by Hyundai NZ Ltd, the trader would retrofit fog lights and a separate switch and would also fix the other faults the purchasers still had with the vehicle. The purchasers also say that Mr Townshend asked them if they would consider another Hyundai vehicle which they said they would. A few days later the purchasers received a call from Mr Elston to arrange to show them possible replacement vehicles but, on being questioned as to what he had to show them, Mr Elston said there were only two; a Hyundai i40 diesel series 2 and a Tucson. The purchasers did not want a diesel vehicle and sought to obtain information from Mr Chan as to what compensation Hyundai NZ Ltd were prepared to pay. Mr Chan apparently told the purchasers that the subject of compensation had not been raised with Hyundai NZ Ltd because the trader thought the purchasers were willing to exchange the vehicle for another. The purchasers say this lack of consideration by the trader and apparent resilement from what had been agreed at the meeting on 22 June, together with the trader’s delay in fixing the faults with the vehicle resulted in their deciding to reject the vehicle, which they did in writing and hand delivered to the trader on 28 June 2016.
[34] Mr Chan told the Tribunal that the trader is willing to replace the electro chromatic rear vision mirror, will repair or replace the driver’s seat and would look at resealing the door panel to eliminate the cold air flow. Mr Chan says the trader has been unable to find the intermittent push start fault and believes that the headlights comply with the VIRM requirements for headlights.
Conclusion on issue [d]
[35] I am satisfied, having reviewed the chronology of events, the emails to the trader and Hyundai NZ Ltd, and listened to the evidence given by each party that the purchasers have required the trader to remedy the five faults listed in paragraph [30] above. I am also satisfied that the purchasers gave the trader a reasonable time in which to do so. The purchasers did not produce any evidence to show the headlights do not meet the VIRM standard for a warrant of fitness however, with that exception, I find the trader has failed, within a reasonable time, to address and resolve the purchasers concerns regarding the faulty electro chromatic rear view mirror, the driver’s seat padding, the cold air flow from the driver’s door and the intermittent fault with the engine start button.
Issue [e]: Are the purchasers entitled to reject the vehicle?
Relevant law
[36] Section 9(4) of the Act (reproduced in paragraph [16] above) provides that where goods fail to comply with the guarantee as to description Part 2 gives the consumer a right of redress against the supplier (here the trader). A similar remedy is available to a consumer where the supplier fails within a reasonable time to remedy a failure in the guarantee of acceptable quality; see s 18(2)(b) of the Act.
[37] Section 18(3)(a) in Part 2 of the Act (reproduced in paragraph [21] above) allows the consumer to elect whether, subject to s 20, to reject the vehicle in accordance with s 22 or to obtain from the trader damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.
Application of law to facts
[38] In this case the purchasers have elected to reject the vehicle and they did so in writing with the letter they delivered to the trader on 28 June 2016 setting out the grounds for their rejection. I thus find they have complied with s 22 of the Act.
[39] Rejection took place within nine months of the vehicle being supplied to them which is somewhat longer than one might expect. However I find that the purchasers spent much of that time, particularly the period since March 2016, attempting to get the trader to acknowledge that the vehicle was missing the three features (fog lights, speed limiter and glovebox cooler) and that those features could not be retrofitted to the vehicle, and then responding to the purchasers’ requests to remedy the vehicle’s other faults. Taking account of the trader’s delay in dealing with the purchasers’ concerns I consider that rejection took place within a reasonable period of the date of supply.
Conclusion
[40] The purchasers’ rejection of the vehicle is upheld with effect from 28 June 2016. The trader will be ordered to repay the purchaser the full purchase price of $57,585 by direct crediting that sum to the purchasers’ bank account, details of which were contained in the purchasers’ rejection letter. As soon as the sum of $57,585 is lodged in the purchasers’ bank account by the trader, the purchasers shall immediately thereafter return the vehicle to the trader.
DATED at AUCKLAND this 4th day of October 2016
C. H. Cornwell
Adjudicator
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2016/138.html