McCool v Kiwi Enterprises Auckland Limited T/A Cheap Cars Wairau Valley Reference No. MVD 290/2016 (Auckland) [2016] NZMVDT 150; [2016] NZMVT Auckland 150 (17 November 2016)

Last Updated: 19 December 2016

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2016] NZMVT Auckland 150

Reference No. MVD 290/2016

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN SARA-JANE PRUDENCE MCCOOL

Purchaser

AND KIWI ENETERPRISES AUCKLAND LIMITED T/A CHEAP CARS WAIRAU VALLEY

Trader

MEMBERS OF TRIBUNAL
Mr C H Cornwell, Barrister & Solicitor, Adjudicator

Mr S D Gregory, Assessor

HEARING at Auckland on 15 November 2016

DATE OF DECISION 17 November 2016
APPEARANCES

Ms S-J P McCool, the purchaser

Mrs S McCool purchaser’s mother
Mr P McCool, purchaser’s father
Mr N Prasad, director of the trader

DECISION

The Tribunal makes the following orders:

1. The purchaser’s rejection of the vehicle is upheld with effect from 16 June 2016.
2. The trader shall pay the purchaser $4,026.90 immediately.
3. As soon as the trader has paid the purchaser $4,026.90 it shall arrange to collect the vehicle at its expense from the purchaser in the Hawkes Bay.

REASONS

Background
[1] On 28 February 2016, Ms McCool (“the purchaser”) bought a 2001 Toyota Corolla station wagon registration number FPY806 (“the vehicle”) for $3,800 from Kiwi Enterprises Auckland Limited trading as Cheap Cars Wairau Valley (“the trader”). The vehicle had travelled 158,022kms at the time of sale.

[2] The purchaser discovered that the vehicle’s engine consumed oil at a rate of one litre for every 1000kms travelled and that the vehicle requires a replacement engine fitted for which she has been quoted $2,650.73. The purchaser claims the vehicle is not of acceptable quality under the Consumer Guarantees Act 1993 (“the Act”) and she has rejected the vehicle and seeks a refund of her purchase price.

[3] The trader says the vehicle was in good condition when it was sold to the purchaser, that it was was sold without a warranty, and on an “as is” basis and that it should not be required to accept rejection of the vehicle.

[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 issues requiring consideration are:

(a) Whether the vehicle complied with the guarantee of acceptable quality in s 6 of the Act?
(b) If not, was the failure to comply of substantial character entitling the purchaser to reject the vehicle?

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

Relevant law

[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 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 her right to reject the vehicle within a reasonable time.

Application of law to facts

[10] The purchaser’s mother bought the vehicle from the trader for the purchaser. The trader did not, in breach of the Consumer Information Standards (Used Motor Vehicles) Regulations 2008, display a consumer information notice with the vehicle or provide the purchaser’s mother with a CIN signed by the trader. The trader should be aware that it is unable to contract out of the provisions in the Act except in situations covered by s 43 of the Act, which does not apply in this application.

[11] The trader advertised the vehicle as “freshly serviced”. However there was no service sticker on the vehicle’s windscreen. The trader did not supply the purchaser with a new warrant of fitness for the vehicle issued within 30 days prior to the date of sale.

[12] The purchaser’s parents drove the vehicle from Auckland back to Otane in the Central Hawkes Bay for the purchaser who used it to travel from Otane to Napier; a distance of about 120kms return, on a regular basis.

[13] After she had owned and driven the vehicle for about three weeks the purchaser heard the engine make a rattling sound. On checking the engine oil she found it was very low and required three litres of oil to top it up. By that stage the purchaser estimates she had driven 2,500kms in the vehicle.

[14] On 8 April the vehicle required a further one litre of engine oil and on 20 April the purchaser noticed blue smoke from the vehicle. On 30 April 2016 the purchaser took the vehicle to Waipawa Auto Super Shoppes (“Waipawa”). Its odometer was recorded as 167,651kms showing the purchaser had used the vehicle to travel 9,629kms in the two months she had owned it. Waipawa reported the compression was down in cylinder #4, there were signs of oil burning on the spark plugs, and they recommended the purchaser have the vehicle’s engine replaced at a cost which they estimated on 2 May 2016 to be $2,650.73.

[15] On 17 May the purchaser spoke to Mr Prasad on the telephone informing him of the cost of replacing the engine and on the same day she sent a copy of the estimate for the replacement engine she had been given on 2 May by Waipawa to the trader by email. The trader did not respond. The purchasers sent another email on 24 May giving the trader three options:

1. to repair the vehicle within a reasonable time so it would last longer than three months; or

2. to replace it with an identical vehicle; or

3. to refund the purchase price.

The trader replied that it would give three months warranty on a repair.

[16] The purchaser’s father drove the vehicle back to Auckland on 28 May and delivered it to the trader. On 1 June the trader telephoned the purchaser and told her there was nothing wrong with the engine. Thee trader claimed the purchaser had caused any issue with the engine by failing to service the vehicle and using the wrong grade of oil in the engine. The purchaser’s father collected the vehicle on 3 June and the purchaser had it serviced on 9 June 2016 by Hawkes Bay, Taupo and Eastland Toyota (“Toyota”). Toyota checked the vehicle’s engine and advised the engine smoked excessively. When they removed the spark plugs they found excessive oil/carbon build up indicating oil was getting into the combustion chamber. Toyota carried out a combustion test which showed the compressions were 210 to 220psi whereas they should be 150-160psi indicating excessive oil was entering the combustion chambers. Toyota’s advice was that the engine will require a complete rebuild or a 2nd hand unit.

[17] On 16 June the purchaser sent the trader a copy of the Toyota report with an email rejecting the vehicle. The trader replied on 17 June offering to refund $3,000 because the purchaser had used the vehicle for three months. The purchaser rejected that offer on 20 June.

[18] 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 15-year-old Toyota Corolla station wagon which had travelled 158,022kms at the time of sale. Second, to the vehicle’s sale price of only $3,800. Third, to the trader’s advertising in which it claimed the vehicle had always been “well maintained and service” (sic) was “freshly serviced” and was “economical and reliable”.

[19] If the vehicle had been freshly serviced as the trader claimed its engine must have been consuming oil at the rate of one litre per 1,000kms as the purchaser claimed from the time it was sold to her in order to use three litres of oil in the course of the first 2,500kms of use. The purchaser’s evidence of the quantities of oil she put in the vehicle’s engine, together with the findings contained in the Waipawa and the Toyota reports convince me that this old vehicle was using excessive quantities of oil- very probably at the rate of one litre per thousand kms. The trader’s claims the engine had been well maintained and serviced were patently untrue.

Conclusion on issue [a]

[20] I have no hesitation in finding as a fact that this vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act for the reasons given in the previous paragraph.

Issue [b]: Was the failure to comply of substantial character entitling the purchaser to reject the vehicle?

[21] 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

[22] I do not think that any reasonable consumer aware of the nature and extent of the vehicle’s engine issues would have acquired this vehicle. I consider the vehicle’s worn engine condition was a failure of substantial character within the meaning of s 21(a) of the Act.

Conclusion on issue [b]

[23] The vehicle’s failure was of substantial character in terms of s 21(a) of the Act. The purchaser is entitled to have her rejection upheld and I will order the trader to immediately refund the full purchase price of $3,800 and the cost of the following consequential losses: the cost of the Waipawa report of $88.90, and the cost of the purchaser’s airfare to Auckland of $138; a total of $4,026.90. I do not consider it was necessary for either Mr or Mrs McCool to attend the hearing so I will not be ordering the trader to pay their air travel costs from Napier to Auckland return.

[24] When it has paid the purchaser $4,026.90, the trader can uplift the vehicle from the purchaser in the Hawkes Bay at its expense.

DATED at AUCKLAND this 17th day of November 2016

C. H. Cornwell
Adjudicator