Liang v Infinity Cars Limited Reference No. MVD 309/2016 (Auckland) [2016] NZMVDT 159; [2016] NZMVT Auckland 159 (2 December 2016)

Last Updated: 26 January 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2016] NZMVT Auckland 159

Reference No. MVD 309/2016

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN CHAO LIANG

Purchaser

AND INFINITY CARS LIMITED

Trader

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

Mr S D Gregory, Assessor

HEARING at Auckland on 29 November 2016

DATE OF DECISION 2 December 2016
APPEARANCES

Mr C Liang, the purchaser

Ms L Zhang, partner and support person for the purchaser
Mr B Qastom, director of the trader

DECISION

The Tribunal makes the following orders:

1. The purchaser’s rejection of the vehicle is upheld.
2. The trader shall pay the purchaser the following amounts immediately:
   • (i) The purchase price of $16,700 paid by the purchaser; and
   • (ii) The sum of $85 paid to the trader for transmission oil and the transmission additive, and $132.25 paid by the purchaser to Craft Automotive for its report.
3. When the trader has made full payment to the purchaser of $16,917.25 in order 2 (above) the trader shall arrange at its expense to collect the vehicle from Craft Automotive and pay any storage charges to Craft Automotive.

REASONS

Background

[1] On 9 March 2016, Mr Liang (“the purchaser”) bought a 2010 Nissan Juke vehicle registration number JRQ974 (“the vehicle”) for $16,700 from Infinity cars Limited (“the trader”). The vehicle’s odometer at the time of sale was 28,207kms.

[2] The vehicle’s transmission failed on 12 September 2016 after the vehicle had travelled 35,299kms or 7,092kms after buying the vehicle. The purchaser has rejected the vehicle and has applied to have his rejection upheld and the trader ordered to refund the purchase price and consequential costs.

[3] The trader has refused to accept the purchaser’s rejection claiming that the vehicle was of acceptable quality at the time of sale.

[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, is the failure of substantial character?
(c) If so, is the purchaser entitled to have his rejection upheld?

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 his right to reject the vehicle within a reasonable time.

Application of law to facts

[10] The purchaser agreed to buy the vehicle from the trader for $16,700 on 9 March 2016. The vehicle, a Japanese import, although six years old, had only 28,207kms on its odometer.

[11] On 7 September the purchaser says he heard an unusual noise from the vehicle’s CVT transmission and returned it to the trader. The trader had its technician top up the transmission oil and add an additive to try and fix the issue. Its technician told the purchaser to drive the vehicle normally for the next 10 days. The purchaser was charged $85 for transmission oil and additive by the trader.

[12] On 12 September the vehicle’s transmission failed in Napier. The vehicle was towed by the AA to Hawkes Bay Nissan who recorded the odometer reading as 35,299kms. In a repair invoice Hawkes Bay Nissan report they started the vehicle whilst in park and heard a grinding noise coming from the transmission. They tried to select reverse or drive but say that the vehicle lurched and instantly stalled the engine.

[13] The purchaser had the vehicle towed from Napier to Craft Automotive in Barrys Point Road, Takapuna who checked the CVT system and confirmed the report of Hawkes Bay Nissan.

[14] The purchaser sent the trader an email on 26 September 2016 rejecting the vehicle. The trader refused to accept responsibility.

[15] At the hearing Mr Qastom for the trader said the transmission was found to be satisfactory when the AA did an appraisal of the vehicle for the trader on 23 December 2015 at 28,207kms however it is not clear if the AA drove the vehicle at that time and if so at what speed. Mr Qastom claimed that because the vehicle had travelled 7,0922kms before the transmission failed the vehicle was reasonably durable.

[16] 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 six-year-old Japanese imported Nissan Juke which had travelled 28,207kms at the time of sale and has since been driven a further 7,029kms. Second, to the vehicle’s sale price of $16,700.

[17] The vehicle’s transmission showed signs of failing in early September and the trader sought to prolong the transmission’s life by having an additive put into the CVT fluid in the transmission. The vehicle’s transmission failed a short time later on 12 September. The Tribunal’s assessor thinks the transmission fault was probably caused by the torque converter linings perishing.

[18] The trader sought to argue that the vehicle was durable. I and most reasonable people would disagree. I do not think for one moment that a reasonable consumer paying $16,700 for a six-year-old low mileage vehicle would regard such a vehicle as reasonably durable when its transmission failed seven months and 7,029kms of use.

Conclusion on issue [a]

[19] The vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act because it was not as durable as a reasonable consumer would regard as acceptable, having regard to its age, mileage and price.

Issue [b]: Is the failure of substantial character?

[20] 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

Application of law to facts

[21] I do not think that any reasonable consumer aware of the nature and extent of the failure of the vehicle’s transmission would have acquired this vehicle. Furthermore the vehicle is substantially unfit for the purpose for which vehicles are commonly supplied: to drive from one place to another. This vehicle is incapable of moving without an operational transmission. I therefore find that the vehicle’s failure is of substantial character within the meaning of both s 21(a) and (c) of the Act.

Conclusion on issue [b]

[22] The vehicle’s failure is of substantial character.

Issue [c]: Is the purchaser entitled to have his rejection upheld?

Relevant law

[23] Section 18(3) of the Act provides that where a failure is of a substantial character the consumer may, subject to s 20, reject the goods in accordance with s 22.

Application of law to facts

[24] The purchaser notified the trader by email on 26 September 2016 that he was rejecting the vehicle and of the grounds for rejection as required by s 22(1) of the Act. Rejection occurred within six months and 17 days of the date of supply which I consider to be within a reasonable time after the date of supply as required by s 20 of the Act.

Conclusion on issue [c]

[25] The purchaser is entitled to have his rejection of the vehicle on 26 September 2016 upheld. I will order accordingly. I will also order the trader to pay the purchaser the full purchase price of $16,700 as well as the costs he incurred for the transmission fluid and additive of $85 and the cost of the Craft Automotive diagnosis of $132.25; a total of $16,917.25. When the trader has paid the purchaser $16,917.25 it shall, at its expense, arrange to collect the vehicle from Craft Automotive and pay any storage fees.

DATED at AUCKLAND this 2nd day of December 2016

C. H. Cornwell
Adjudicator