Sutton v Kerr t/a Kerr Autotraders - Reference No. MVD 269/15 (Auckland) [2016] NZMVDT 29; [2016] NZMVT Auckland 29 (17 March 2016)

Last Updated: 19 April 2016

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2016] NZMVT Auckland 29

Reference No. MVD 269/15

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN ROSEMARY JUSTINE SUTTON & RACHAEL JUSTINE SUTTON

Purchasers

AND GEOFFREY LEONARD KERR T/A KERR AUTOTRADERS

Trader

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

HEARING at Auckland on 15 March 2016

DATE OF DECISION 17 March 2016

APPEARANCES

Mrs R J Sutton, the purchaser

Mr G L Kerr, the trader

DECISION

The Tribunal makes the following orders:

(a) The purchasers’ claim to have their rejection of the vehicle upheld is declined.
(b) The purchasers should immediately release the vehicle to the trader to uplift from The Workshop (Dairy Flat) Limited. The trader will repair or replace the vehicle’s transmission and the faulty driver’s window at his expense and return the vehicle to the applicants within ten working days of the date of this order.
(c) The purchasers should, immediately after receiving the vehicle back from the trader, take it to a transmission specialist to have it test driven and checked to ensure the transmission functions properly.
(d) Leave is reserved to the purchasers to reapply to the Tribunal, within one month of the date of this order, with a written transmission specialist’s report, to reject the vehicle if the transmission and driver’s window are not properly repaired by the trader within the time stipulated in order (b) above.

REASONS

Background

[1] On 12 June 2015, Rosemary and Rachael Sutton (“the purchasers”) bought a 2005 Volkswagen Golf registration GQP685 (“the vehicle”) from Geoffrey Leonard Kerr trading as Kerr Autotraders (“the trader”) for $6,700. The purchasers have rejected the vehicle because they say its automatic transmission is faulty and causes the vehicle to jump out of gear and the transmission leaks oil. They requested the trader to remedy the fault but they say the trader failed to do so within a reasonable time and they rejected the vehicle on 7 December 2015. The purchasers have applied to have their rejection upheld and the trader ordered to refund their purchase price.
[2] The trader says he understood the purchasers had their mechanic at The Workshop (Dairy Flat) Ltd repair the transmission on 30 November 2015 at a cost of $1,210-06 and he was sent a copy of the repair invoice. The trader says he thought the vehicle’s transmission had been repaired and was unaware the transmission was still faulty until 7 March 2016. The trader says he is happy to repair or replace the transmission at his expense.
[3] Pursuant to clause 10 of Schedule 1 of the Motor Vehicle Sales Act 2003 (“MVSA”), 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) Did the vehicle comply with the guarantee of acceptable quality in s 6 of the Consumer Guarantees Act 1993?
• (b) If not, is the failure of a substantial character?
• (c) Are the purchasers entitled to have their rejection of the vehicle upheld?

[a]: Did the vehicle comply with the guarantee of acceptable quality in s 6 of the Consumer Guarantees Act 1993?

Relevant law

[5] 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.”
[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 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 purchasers 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 purchasers exercised their right to reject the vehicle within a reasonable time.

Application of law to facts

[8] The purchasers test drove and then agreed to buy the vehicle from the trader for $6,700 on 12 June 2015. The vehicle is a Japanese import which had travelled 104,867kms according to the Consumer Information Notice signed by the trader and Rachael Sutton. The purchasers borrowed the full purchase price and other financing charges from Finance Direct Limited at 18.95% over three years on the security of the vehicle and another vehicle.

[9] The vehicle had two minor faults soon after it was supplied by the trader; a switch needed to be replaced and the driver’s window stopped working. The purchasers telephoned the trader on a number of occasions to have these faults rectified and on the last occasion the trader told them he was going overseas and would have his manager, Mr Mark Sutton, contact the purchasers. Mr Sutton did not contact the purchasers and these faults remain unrepaired.

[10] In late November 2015 after the vehicle had travelled 113,370kms (8,503kms after sale) its automatic transmission started to jump out of gear. On 30 November 2015 the purchasers had the vehicle’s transmission checked by The Workshop (Dairy Flat) Ltd (“The Workshop”) who report in an invoice dated 30 November 2015 that the transmission was not operating correctly and that they had found stored faults codes #17119 (gear 5 incorrect ratio) and #01192 (lock up clutch). Their report states low oil level brings those codes up. On hoisting the vehicle The Workshop found what they describe as “severe oil leaks” appearing to be coming from the front oil seal but they were unable to find the source of the oil leaks. They checked the aluminium housing for cracks and none were evident. They checked the torque converter which was free of faults. They reassembled the transmission and refitted it to the vehicle, filled the transmission with oil and road tested the vehicle. They then hoisted the vehicle again and found a “very small leak evident”. The Workshop charged the purchasers $1,210-05 for that work.

[11] The purchaser, Mrs Sutton, says that after she collected the vehicle and drove it a short distance she noticed it was still jumping out of gear. The transmission oil level was low and she returned the vehicle to The Workshop where it has remained since early December 2015.

[12] On 1 December 2015 Mrs Sutton sent a letter addressed to Deville Holdings Ltd, a company which appears to have no connection with the trader’s sale of the vehicle to the purchasers, informing it of the transmission fault, that the vehicle was not driveable, and asking the trader to remedy the fault at the trader’s expense. Her letter asked that the vehicle be uplifted from The Workshop and for the trader to have it repaired. Mrs Sutton did not receive a response from the trader until after she had sent an email on 4 December. Mr Mark Sutton sent a reply to her on 4 December saying he had no record of the purchasers buying any vehicle from Deville Holdings Ltd but they had bought a vehicle from Kerr Autotraders and that he was a duly authorised officer of Kerr Autotraders. He requested details of the current mileage of the vehicle, a written report from a reputable transmission specialist and evidence of any pre-existing issue with the transmission and copies of any maintenance carried out on the transmission.

[13] On 7 December Mrs Sutton sent a copy of the invoice from The Workshop containing a description of what they had found and done to the vehicle which recorded the vehicle’s mileage. In that email Mrs Sutton rejected the vehicle on the grounds that it was not fit for purpose and was sold in an unfit state with defects. The trader did not respond to that email, nor did it respond to the Tribunal when the Tribunal sent a copy of the application filed by the purchasers with a request, in terms of clause 5(2) of the Schedule to the MVSA, that the trader mediate the dispute with the purchasers and report back in writing to the Tribunal within 14 days. If, as Mrs Sutton indicated in her letter of 1 December to Deville Holdings, she wanted the trader to rectify the fault, she did not give the trader a reasonable time within which to do so, as required by s18(2)(a) of the Act, before she purported to reject the vehicle on 7 December 2015.

[14] The trader says that he and Mr Mark Sutton were on leave over Christmas and that Mr Sutton did not return until 17 February and he on 5 March 2016. However neither Mr Sutton nor the trader took any step to mediate the dispute until a week before the hearing when Mr Sutton telephoned Mrs Sutton and offered to repair or replace the vehicle’s transmission at the trader’s expense and to collect the vehicle and take it to the trader’s transmission specialist. The trader says it has been quoted $1,500 to repair the transmission and $2,000 to replace it. The trader claims that had he known of the problem earlier, he would have repaired it earlier. However the Tribunal considers Mr Mark Sutton, whom it accepts is an agent of the trader, was well aware the vehicle’s transmission was still faulty on 7 December 2015 when he received Mrs Sutton’s letter of rejection but for reasons known only to Mr Sutton, chose to ignore the matter even after he received the application from the Tribunal in early December 2015.

[15] In deciding if the vehicle complied with the guarantee of acceptable quality at the time of sale I have taken account, as required by s 7 of the Act, first, to the nature of the goods, in this case a 10-year-old Japanese imported VW Golf with 104,867kms on its odometer at the time of sale. Second, to the price paid for the vehicle of $6,700. I have also taken account of the fact that the vehicle had a fault with a switch and its driver’s window mechanism from shortly after it was sold, neither of which the trader has repaired. Finally, I have taken account of the fact that the vehicle appears to have been driven some 8,000kms over five months from 12 June until late November 2015 without any indication of a transmission fault.

[16] The Tribunal, in the course of preparing for the hearing of the purchasers’ application sent a written request to the purchasers to have a transmission specialist inspect and report on the vehicle. The Tribunal made this request to assist the purchasers to obtain more reliable evidence to support their claim. Unfortunately the purchasers chose not do this. Mrs Sutton produced an email estimate from Mr Browne at AA Automotive on the cost of obtaining and fitting a second hand transmission.

[17] I have decided, after reviewing the evidence given by the parties that the vehicle did not 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 for a vehicle of this age, type and price. I believe a reasonable consumer paying $6,700 for a 10 year old Golf, even one ex Japan with 104,867kms on its odometer at the time of sale, would expect to get more than 8,000kms of use from such a vehicle over five months before the automatic transmission became faulty and jumped out of gear. Accordingly, I find that the vehicle did not comply with the guarantee of acceptable quality.

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

Relevant law

[18] 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
[19] The cost of replacing the transmission is estimated by Mr Browne of AA Automotive as $5,117-50 inclusive of GST for the supply and fitting of a second hand transmission. However in referring to Mr Browne’s estimate I must take account of the fact that he has not driven and tested the vehicle so that his evidence is not particularly reliable in terms of helping me decide if the vehicle is or is not of acceptable quality.

[20] The only evidence I have that the vehicle’s transmission is still faulty is Mrs Sutton’s oral evidence. The report she produced, dated 30 November 2015 from The Workshop, appears to show that the vehicle has been repaired and now only has a very small oil leak. In the absence of a report from a transmission specialist who has test driven, scanned and analysed the vehicle’s stored fault codes, and has identified by driving the vehicle whether or not, as Mrs Sutton claimed, the vehicle is no longer driveable and needs a replacement transmission, I do not think I can reasonably find, on a balance of probabilities, that the vehicle’s failure to comply with the guarantee of acceptable quality is of substantial character.

Conclusion on issue [b]:
[21] For the reasons given in the previous paragraph I have decided that the purchasers did not prove that the failure is of substantial character within the meaning of s21 of the Act. The consequence of this is that the purchasers should immediately release the vehicle to the trader to collect and repair or replace the transmission and the driver’s window at his cost before returning it to the purchasers.

DATED at AUCKLAND this 17th day of March 2016

C. H. Cornwell
Adjudicator