Dragicevic v Eastwood Motor Group Limited - Reference No. MVD 355/2016 (Wellington) [2017] NZMVDT 1091; [2017] NZMVT Wellington 91 (3 February 2017)

Motor Vehicle Disputes Tribunal of New Zealand

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Dragicevic v Eastwood Motor Group Limited - Reference No. MVD 355/2016 (Wellington) [2017] NZMVDT 1091 (3 February 2017); [2017] NZMVT Wellington 91

Last Updated: 22 March 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Reference No. MVD 355/2016 (WN91)

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN ANTHONY LAURENCE DRAGICEVIC

Purchaser

AND EASTWOOD MOTOR GROUP LIMITED

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

S Gregory – Assessor

HEARING at Palmerston North on 26 January 2017

DATE OF DECISION 3 February 2017
APPEARANCES

A L Dragicevic, Purchaser
R M Dragicevic, Wife of Purchaser

M Eastwood, Dealer Principal of Trader
G J Allan, General Manager of Trader
S A McLean, Service Manager of Trader
B S Redpath, Technical Support Officer, Hyundai Motors NZ

DECISION

1. Mr Dragicevic's application to reject the vehicle is adjourned. He is invited to collect his vehicle from the trader and drive it with a "flight recorder" attached to ensure that the problems identified in his application have been fixed, and to allow Eastwood Motor Group Limited the opportunity to assess and remedy any ongoing problems.
2. Mr Dragicevic may request a telephone conference prior to 3 April 2017 if, after taking the steps described in A. above, he can demonstrate the matters identified in his claim are not fixed, and he needs the Tribunal to make further orders in relation to those matters.

100. Unless Mr Dragicevic requests a telephone conference prior to 3 April 2017, his application will be dismissed.

REASONS

Introduction

[1] Mr Dragicevic seeks to reject his 2015 Hyundai ix35, which he purchased brand new from the trader, Eastwood Motor Group Limited (“EMGL”). The vehicle has had a number of possibly interrelated electrical faults which Mr Dragicevic says the trader took too long to address and/or failed to fix. Mr Dragicevic’s claim raises the following questions:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Consumer Guarantees Act 1993 (“the Act”)?
• (b) If so, did the purchaser require the trader to remedy the failure within a reasonable time?
• (c) If so, did the trader refuse or neglect to remedy the failure, or not succeed in doing so within a reasonable time?
• (d) Is the failure of a substantial character within the meaning of s 21 of the Act?

Background

[2] On 1 December 2015, Mr Dragicevic purchased a brand new 2015 Hyundai ix35 for $41,635 (including on road costs and a service plan) from EMGL.
[3] Mr Dragicevic submits that, from the outset of his ownership of the vehicle, it had several defects:

• (a) a scratch on the rear side panel, which was repaired prior to delivery on 4 December 2015;
• (b) a water mark around the bumper area;
• (c) both rear rubber door seals came off when the doors were opened;
• (d) there was a clicking sound on the right front of the vehicle when turning right;
• (e) the audio unit continuously reset itself, without prompting, to the radio mode each time the ignition was turned on, even if it had previously been set to USB or CD mode;
• (f) the vehicle’s engine would cut out from time-to-time when driving;
• (g) the vehicle’s power would decrease intermittently when driving;
• (h) the front passenger and driver windows would "go down randomly";
• (i) the front driver's door and rear hatch door would lock randomly or not unlock;
• (j) the instrumentation lighting flickered intermittently without prompting.

[4] Mr Dragicevic submitted that, from the outset, he made EMGL aware of these problems with the vehicle. Mr Dragicevic told the Tribunal that he left the vehicle with EMGL about 10 separate times between December 2015 and May 2016. However, neither Mr Dragicevic nor EMGL were able to provide a written record of most of these transactions prior to May 2016. Apart from some damage to a bumper repaired in December 2015, the earliest formal record held by EMGL of the vehicle having any mechanical or servicing needs was on the notes relating to the vehicle's 1500 km service on 7 January 2016. The record of that service indicates that the clicking noise when turning right and the water spotting on the black trim were fixed at that time. Mr McLean, EMGL’s service manager, who dealt with Mr Dragicevic at the time of the January 2016 service and repairs, denied that any other matters were raised with him by Mr Dragicevic then.
[5] None of the other matters are mentioned in any of the trader's records or in any email correspondence supplied by the purchaser, prior to May 2016.
[6] EMGL accepted Mr Dragicevic mentioned various concerns about other matters with its staff informally, but it disputed the number of times he brought the vehicle in for attention. EMGL mentioned that Mr Dragicevic was engaged by EMGL as a part-time contractor to deliver its vehicles. It seems the problems with the vehicle may have been discussed between Mr Dragicevic and EMGL's staff informally, without the vehicle having been booked in for assessment and repair.
[7] It appears that it was not until May 2016 that the vehicle was formally booked into EMGL’s workshop and a repair order generated in relation to the defective audio unit.
[8] EMGL’s notes associated with the repair, recorded in a repair order dated 17 May 2016, described the issue as an intermittent problem that when the vehicle was turned off, the audio unit would default to the radio setting, even if it had previously been used to listen to music stored on a USB stick or CD. EMGL consulted Hyundai Motors NZ, which recommended that a new audio unit be installed. Hyundai then seems to have changed its recommendation, advising EMGL to send the existing audio unit to La Trobe Electronics for repairs.
[9] On 24 May 2016, EMGL removed the audio unit and sent it to La Trobe Electronics, which was unable to find a fault with it. Nevertheless, a replacement unit was supplied and fitted to the vehicle.
[10] Despite the installation of the replacement audio unit, the same problem continued. EMGL consulted Hyundai Motors NZ about what to do next. EMGL acknowledges a delay which it blames on staffing issues at Hyundai Motors NZ and the need to obtain more information.
[11] The problems with the locks, windows and the vehicle cutting out or powering down were not formally recorded by EMGL until July 2016. EMGL’s evidence was that these issues came up when Mr McLean and an EMGL technician, Jack McDougall, were discussing the audio unit with Mr Dragicevic in July 2016. On that occasion, Mr Dragicevic mentioned that the car had other faults: erratic door locking, problems with the power windows and that the vehicle was cutting out.
[12] Mr McLean asked Mr Dragicevic if he would make the vehicle available for Mr McDougall to drive, in an attempt to replicate the cutting out fault. Mr McDougall lived some distance from work (a 35 km round trip) providing a good opportunity to test the vehicle on his commute. The vehicle was booked in for diagnosis and repairs on 15 July 2016. Mr McLean told the Tribunal that it was only then, in July 2016, that he became aware of Mr Dragicevic’s concerns that the vehicle was cutting out. Mr McLean said he took the issue very seriously and made out a repair order for it immediately so that the problem could be diagnosed and fixed. EMGL’s evidence was that it was continually working on the vehicle from 15 July 2016 until 17 August 2016, although during that time the vehicle was periodically returned to Mr Dragicevic without the problems having been fully addressed. The vehicle was rebooked for further analysis and Mr Dragicevic was given a loan vehicle when necessary.
[13] EMGL’s notes between 15 July 2016 and 17 August 2016 describe a methodical process of diagnosis and repair of the vehicle. Throughout this process EMGL consulted Hyundai Motors NZ on technical matters, including through an online "Technical Hotline" process designed to elicit contributions and possible solutions from the wider Hyundai network.
[14] Throughout this period, EMGL was engaged in trying to assist Mr Dragicevic to resolve the problems with the vehicle. Nevertheless, Mr Dragicevic became dissatisfied because of the amount of time EMGL was taking to fix the vehicle, apparently without success.
[15] On 15 July 2016, Mr McDougall discussed the vehicle's problems with Mr Dragicevic and observed that the audio unit was still switching by itself from "media" mode to "FM radio" mode and that the driver's door and tail gate were locked but the other doors were unlocked. EMGL returned the vehicle to Mr Dragicevic and asked him to bring it back the following week.
[16] Mr Dragicevic returned the vehicle to EMGL on 27 July 2016. Mr McDougall checked the power supply wiring for the central locking and audio originating from the vehicle's smart junction box.[1] He then replaced the smart junction box with one from another vehicle. He also swapped the steering wheel in case there was a problem with the audio buttons on it. He checked the earths and battery connections, and found no fault codes. After carrying out these checks, Mr McDougall could not get the vehicle to fault so he returned it to Mr Dragicevic on 28 July 2016.
[17] Between 28 July and 3 August 2016, Mr Dragicevic experienced problems with the audio unit resetting itself, doors locking spontaneously, windows malfunctioning and the vehicle "powering down".
[18] Mr Dragicevic contacted Hyundai Motors NZ's Relationship Ambassador, Lindsay Thorp by phone in late July/early August and by email on 2 August 2016 seeking a full refund of the purchase price. In that email, Mr Dragicevic set out a detailed chronology of the problems he had experienced with the vehicle, starting from mid-December 2015. From Mr Dragicevic’s chronology, it appears that the vehicle had first begun to "power off" randomly in March 2016. Mr Dragicevic pointed out that he was concerned about the delay in dealing with the issues but also mentioned that:

Eastwoods are a great team, they have done more than enough to try and fix the fault. I don’t want this to affect the relationship we have with the yard as they are a great team and a great product.

[19] Nevertheless, Mr Dragicevic advised Hyundai: “we are at the stage where we would like a refund of the amount paid and will purchase another vehicle”.
[20] It appears that EMGL was unaware Mr Dragicevic wanted a refund until 17 August 2016, which appears to be the date on which Hyundai NZ forwarded Mr Dragicevic's concerns to EMGL's General Manager, Gary Allan.
[21] This was after Mr Dragicevic had returned the vehicle to EMGL, on 8 August 2016, to let it continue to work on the vehicle and remedy its defects. Mr Dragicevic explained to the Tribunal that he felt obliged to return the vehicle as requested, to allow further repairs and problem solving to occur, but said that he and his wife felt “duped” into doing so.
[22] The Technical Hotline notes show that on 9 and 10 August 2016, Mr McDougall checked the vehicle's earths, voltage and battery connections and all were fine. He tested the battery, starting system and charging system as well and these were also fine. In the notes, Mr McDougall describes Mr Dragicevic's complaint about the windows as follows:

...he pushes the window switch down to auto, it will go half way and stop, then he pushes it down again and it goes back up[. I]f he pulls the switch up the window goes down. I just can't see how this is possible.

[23] Mr McDougall opened up the driver's door and found moisture inside. When he took out the driver's door lock, water dribbled out of it. He replaced the driver’s door lock actuator, and tested it with no further faults found with the locking or window operation. EMGL concluded that water may have come in from the window being left down, the vehicle being washed with a high pressure hose or the failure of a seal or weather strip.
[24] Mr McDougall fitted a "flight recorder", an electronic device connected to the vehicle's computer systems which would capture relevant data if the vehicle cut out. With the flight recorder fitted, Mr McDougall drove the vehicle over 700 km trying to replicate the vehicle cutting out, but he could not get the vehicle to fault. EMGL’s report on the cutting out/powering down issue stated:

Extensive time spent testing and attempting to diagnose a fault. Unable to replicate fault. Removed smart junction box from donor vehicle and fit to this vehicle. Check all electrical functions and road test. Check for fault codes. All ok. Fit suspect smart junction box to sales vehicle, road test extensively and check fault codes. All ok. Fit flight recorder to try and record fault during further extensive road testing. All ok. Not once were we able to produce the fault described by the owner. Due to inability to replicate fault HMNZ will not consider warranty for this job. Time written off for training.

[25] Mr McDougall was unable to replicate the fault with the windows either. He checked the plug for the window motor and switch assembly, which appeared normal, and he could not find any signs of moisture in relevant components.
[26] After further checks, on 15 August 2016 Mr McDougall concluded that the second audio unit was also faulty. He replaced the audio "head unit" again, with one from a later model vehicle. At the hearing, Mr Dragicevic expressed concerns that the audio unit appeared to have come from an older vehicle and that it did not sit flush with the dashboard. These concerns were disputed by EMGL's representatives, who said that the new unit fitted correctly in the dashboard. No photographs were supplied by either party so it was difficult for the Tribunal to resolve this dispute on the facts. However, in any event, EMGL had indicated that it would be willing to replace the audio unit with the same model that was sold with the vehicle, if Mr Dragicevic wished.
[27] On 15 August 2016, Mr Dragicevic wrote a further letter to Lindsay Thorp at Hyundai Motors NZ, stating:

Over the weekend we had some thought in to the issue at this point we decided on a refund and go from there ... We also think this would be sorted directly with Hyundai. And in no way Eastwoods have done anything wrong.

[28] On 17 August 2016, EMGL phoned Mr Dragicevic to say that he could collect the vehicle. EMGL asked Mr Dragicevic to drive the vehicle as normal but with the flight recorder attached. If the fault recurred, it would record data which EMGL would overlay onto correct data to see where the fault lay. Mr Dragicevic refused this request and told EMGL that he would be seeking a refund of his money on the vehicle. Mr Dragicevic continued to use a loan car supplied by EMGL from 8 August 2016 until 5 October 2016, when it was returned.
[29] On 26 August 2016, Lindsay Thorp responded to Mr Dragicevic as follows:

Thank you for your email, just to reassure you the Hyundai management team are aware that you are in discussions with Gary at Hyundai Wairarapa. As the sales agreement is between you and Hyundai Wairarapa this is a matter that needs to be resolved with Gary and his team ... I understand the issues with the vehicle have been resolved to the best of my knowledge. Gary has been unable to fault the vehicle, as such they are disinclined to offer any refund. However this is a matter for you and Gary to discuss.

[30] At various times, EMGL have offered Mr Dragicevic a replacement vehicle of the same year with lower mileage which EMGL understood Mr Dragicevic initially agreed to but then changed his mind. EMGL also offered him a lower mileage Hyundai Tucson which he could have for an additional $3,000. EMGL also arranged a meeting on 1 September 2016 with Bevan Redpath, a technical specialist from Hyundai Motors NZ, to discuss how Hyundai could continue to assist. On 15 September 2016, Mr Dragicevic entered into an agreement with EMGL to sell the vehicle "on behalf", but this agreement is no longer in force. The vehicle remains with EMGL.

Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Act?

[31] Section 6(1) of the Act provides that where goods are supplied to a consumer there is a guarantee “that the goods are of acceptable quality”. According to s 2 of the Act, “goods” includes vehicles.
[32] The meaning of acceptable quality is defined in s 7 of the Act (as far as is relevant) 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.

[33] The question whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[34] I do not think there is any doubt, and certainly the trader did not seriously dispute, that this vehicle had a number of defects which a reasonable purchaser of a brand new vehicle would not have regarded as acceptable.
[35] Most of the concerns were minor and cosmetic and were readily fixed without any delay. More serious were the electrical issues that arose. Perhaps the most serious issue raised by Mr Dragicevic involved the vehicle cutting out or powering down while being driven. EMGL's position on this issue was that it has not been able to replicate it and it doubts that the problem still exists (if it ever existed). However, EMGL would like to give Mr Dragicevic the opportunity to continue to monitor this issue with a flight recorder that will allow EMGL to diagnose the cause of the problem and fix it if it recurs. Mr Dragicevic doubts that the powering down issue has been resolved and he no longer wants to take the risk that the vehicle will perform in this manner in the future. That is why he does not want to take the vehicle back.
[36] The Tribunal’s Assessor, Mr Gregory, considers that the cutting out issue is probably related to the other electrical issues. In his view, the replacement of the smart junction box may have helped to fix these issues. Alternatively, Mr Gregory thought it possible that a control module associated with the audio unit may have been replaced which may incidentally have led to the problem being fixed.
[37] In Mr Gregory’s view it is likely that all the electrical issues have now been remedied. Nevertheless, Mr Gregory accepts that this vehicle had a number of electrical faults that support the Tribunal’s conclusion that it failed to comply with the guarantee of acceptable quality in s 6 of the Act.

Did the purchaser require the trader to remedy the failure within a reasonable time?

[38] Section 18 of the Act provides:

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.

[39] Mr Dragicevic complied with his obligation in s 18(2)(a) to require EMGL to remedy the vehicle’s failure.[2] Unfortunately, there was a period between January and May 2016 when little seems to have been done to address the issues raised by Mr Dragicevic. This was probably because Mr Dragicevic mentioned the issues relatively informally when he was doing his contracting work as a driver for EMGL. An alternative explanation would be that EMGL did not take Mr Dragicevic’s concerns seriously enough, but it is unclear why it would not do so when the vehicle was under warranty and it would have been possible for EMGL to claim its costs from Hyundai NZ. This is a case where the lack of written documentation from the first half of 2016 makes it difficult to assess exactly where responsibility for the delay lies. It is clear that once Mr Dragicevic arranged for the vehicle to be formally booked in for repairs of the electrical issues at EMGL, it has taken the issue seriously and appears to have done everything it can to rectify the defects.

Did the trader refuse or neglect to remedy the failure or not succeed in doing so within a reasonable time?

[40] Should EMGL have acted sooner in fixing the problems that Mr Dragicevic identified? If so, then Mr Dragicevic may have been entitled to reject the vehicle under s 18(2)(b)(ii) of the Act.
[41] He argues EMGL was given nine months to remedy the vehicle's failures. In my view, however, there is real uncertainty about exactly when and how Mr Dragicevic raised these issues with EMGL, and the lack of written documentation prior to May 2016 counts against him in that regard.
[42] This lack of documentation makes it difficult to be clear exactly what problems were raised and when or the precise manner in which the trader responded. None of the subsequent written material supplied by both parties indicated any reluctance by EMGL to assist Mr Dragicevic to remedy the problems with his vehicle once he booked his vehicle in for assessment and repairs.
[43] Nor was there any written evidence of Mr Dragicevic’s dissatisfaction with EMGL’s efforts to rectify the defects, until around August 2016.
[44] I think it is likely that Mr Dragicevic did not want to prejudice his working relationship with EMGL and so only raised the issues in an informal way. This operated ultimately to his disadvantage in that it has delayed getting the matters fixed. That is because no repair order was generated for any of these earlier transactions, so there is no record of what problem was presented and what steps were taken to resolve it. That meant Mr Dragicevic's concerns were not addressed within the proper processes. The lack of necessary paperwork indicates the process of diagnosis and repair did not properly get underway until mid-2016.
[45] The problem relating to the audio unit took approximately three months to fix, from the time of the first repair order for that work on 17 May 2016. This is a fairly long time, and EMGL's initial repairs did not succeed, but overall I accept EMGL's evidence that certain faults, particularly electrical faults such as these ones, can be time-consuming to repair, particularly where the cause of the fault is not immediately clear.
[46] The other problems (vehicle cutting out, door locks and windows) have taken about a month to resolve since the first repair order for that work was generated in July 2016. Again, this was undoubtedly a long time for Mr Dragicevic, especially as he claimed to have been experiencing these issues for much longer. But given the testing that was required, and the methodical process that was followed to rectify the issues that EMGL confirmed were present, I do not accept Mr Dragicevic's argument that the vehicle was not repaired within a reasonable time.
[47] Nor do I accept Mr Dragicevic's argument that the vehicle remains defective, even after EMGL's repairs. As he has refused to collect the vehicle after EMGL finished working on it on 17 August 2016, he cannot prove that it has not been repaired. Mr Gregory and I accept EMGL's evidence that the vehicle has been repaired and is no longer exhibiting the problems Mr Dragicevic has identified. EMGL wants Mr Dragicevic to take the vehicle back with a flight recorder installed. This will allow any ongoing issues with the vehicle cutting out to be recorded, diagnosed and repaired. Where a purchaser seeks to exercise rights under s 18 of the Act, the purchaser must cooperate with the trader in permitting the trader to remedy any defects. Unless and until Mr Dragicevic cooperates with EMGL to confirm whether any of the problems are continuing, the Tribunal's conclusion must be that the vehicle is free of the defects identified.
[48] Accordingly, I conclude on the facts that EMGL has remedied the failure within a reasonable time, even though in hindsight all parties accept that it would have been preferable if these matters had been resolved sooner.

Is the failure of a substantial character within the meaning of s 21?

[49] It follows that, as EMGL has apparently remedied the failure within a reasonable time, Mr Dragicevic would not have had a right to reject the vehicle unless the failure was of a substantial character within the meaning of s 21 of the Act. Section 21 provides:

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.

[50] In my view a reasonable consumer would not acquire a brand new vehicle that regularly and unpredictably cuts out or powers down. Furthermore, such a vehicle could potentially be regarded as unsafe in terms of paragraph (d) of the definition in s 21.
[51] However, on the present facts, I am reluctant to find that Mr Dragicevic has established that the failure was of a substantial character. Although potentially very serious, there is a lack of scientific proof that this vehicle has or had a cutting out fault.
[52] Moreover, Mr Dragicevic's application to reject the vehicle faces two further obstacles.
[53] First, s 20(1)(a) of the Act requires a right of rejection to be exercised within a reasonable time after the supply of the vehicle. Mr Dragicevic's evidence was that the vehicle first started cutting out in March 2016. He did not purport to reject the vehicle for another five months until August 2016, eight months after purchase. I do not think a reasonable consumer with genuine safety concerns about a vehicle would wait five months after a defect became apparent before rejecting it. But I consider Mr Dragicevic's real difficulty is in establishing that the vehicle had a defect at the time he purported to reject it, let alone a substantial defect. In Nesbit v Porter,[3] the Court of Appeal held that a reasonable time for the exercise of the right of rejection was:

...one which suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of a breakage or malfunction is not apparent, the consumer can be expected to do by taking the goods to someone, usually and preferably the supplier, for inspection. In this context, therefore, a defect is not "apparent" until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial.

[54] If (despite predictions) the vehicle continues to cut out, then Mr Dragicevic will need to give EMGL an opportunity to identify its cause and advise what has to be done to fix it. Unless and until that occurs, there is currently no defect needing to be fixed that can support a right to reject the vehicle.
[55] The second obstacle Mr Dragicevic's rejection application faces is the identity of the recipient of his notice of rejection. His rejection email of 2 August 2016 was sent to Hyundai Motors New Zealand Limited, the vehicle's manufacturer.[4] There is no right to obtain the remedy of rejection against a manufacturer.[5] Notice of rejection must be given to the supplier,[6] in this case EMGL. This was something pointed out to Mr Dragicevic by Hyundai.[7] He did not notify EMGL he wished to reject the vehicle until 17 August 2016. But, by then, it was too late, as the vehicle had already been fixed.
[56] Accordingly, for these reasons, I conclude that Mr Dragicevic did not have the right to reject the vehicle. Even if I am wrong in concluding this was not a failure of a substantial character in terms of s 21 of the Act, Mr Dragicevic lost his right to reject the goods because it took five months for him to do so from the time when he first observed the vehicle cutting out, eight months after the supply of the vehicle, which was not a "reasonable time" in terms of s 20 of the Act. In addition, Mr Dragicevic notified his rejection to the wrong person, Hyundai Motors NZ. By the time he notified EMGL, the vehicle had already been fixed.

What should happen next?

[57] I have concluded that Mr Dragicevic is not currently entitled to a remedy in relation to the identified defects. I acknowledge, however, that my decision is based on the fact that both Mr Gregory and EMGL consider that it is likely that the defects have been fixed.
[58] Both EMGL and Hyundai Motors New Zealand assure Mr Dragicevic that they will stand by the vehicle and repair it if, contrary to their view, the defect has not been fixed. To that end they have offered to return the vehicle to Mr Dragicevic with a flight recorder fitted to it. This will be an accurate and scientific way of recording the circumstances of any further “cutting out” of the vehicle and aiding diagnosis of the cause. If that occurs, and EMGL is unable to offer a ready solution, then the Tribunal will offer Mr Dragicevic the opportunity to return for further consideration of whether he is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act.
[59] Accordingly, I propose to adjourn Mr Dragicevic’s application to reject the vehicle for two months from the date of this decision. I invite him to collect his vehicle from EMGL and take up the offer of having monitoring equipment fitted to it so that if the vehicle cuts out again that data can be recorded. If that occurs, and EGML cannot readily solve the problem, I invite Mr Dragicevic to return to the Tribunal for consideration of whether further remedies are warranted.

J S McHerron
Adjudicator

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[1] A smart junction box is the primary hub of a vehicle's electrical system. It provides power for the electrical functions of the vehicle and protects against excessive current loads.

[2] In Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 at [11] the High Court stated that where the defect can be remedied and is not of a substantial character, the purchaser must follow the requirement in s 18(2) to allow the supplier an opportunity to remedy the failure within a reasonable time in accordance with the provisions of s 19.

[3] Nesbit v Porter [2000] NZCA 288; [2000] 2 NZLR 465 (CA) at [39].

[4] The definition of "manufacturer" in s 2 of the Act includes a foreign manufacturer with an ordinary place of business in New Zealand, and a person who imports or distributes foreign-manufactured goods.

[5] Section 27 of the Act.

[6] Section 22(1) of the Act.

[7] As noted above at [29].