Pearson v MIT Limited t/a Buy a Car - Reference No. MVD 299/2016 (Wellington) [2017] NZMVDT 1094; [2017] NZMVT Wellington 94 (10 February 2017)

Motor Vehicle Disputes Tribunal of New Zealand

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Pearson v MIT Limited t/a Buy a Car - Reference No. MVD 299/2016 (Wellington) [2017] NZMVDT 1094 (10 February 2017); [2017] NZMVT Wellington 94

Last Updated: 17 May 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Reference No. MVD 299/2016 (WN94)

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN SUSAN ANN PEARSON

Purchaser

AND MIT LIMITED T/A BUY A CAR

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

D Binding – Assessor

HEARING at Christchurch on 31 January 2017

DATE OF DECISION 10 February 2017
APPEARANCES

S A Pearson, Purchaser (by AVL)
S D Williamson, Director of Trader

DECISION

MIT Limited must pay Ms Pearson $9,999 immediately.

REASONS

Introduction

[1] Ms Pearson’s vehicle suffered a catastrophic engine failure due to overheating, less than three weeks after she purchased it. The engine now requires replacing and she seeks to recover the cost of repairs. The following issues arise:

• (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 to do so?
• (d) If so, what remedy is the purchaser entitled to?

Background

[2] On 8 August 2016, Ms Pearson purchased a 2006 Hyundai Santa Fe 2.2 diesel with 255,486 km on the odometer for $9,999 from the trader, MIT Limited trading as Buy A Car. Before Ms Pearson took delivery of the vehicle, Buy A Car arranged for the vehicle's timing belt to be replaced at its expense.
[3] Ms Pearson found that the vehicle operated satisfactorily and without incident in the first fortnight after she purchased it.
[4] On 26 August 2016, Ms Pearson took the vehicle on a trip to the South Island. She left Hamilton and drove to Wellington without any problems. Late on 26 August, Ms Pearson travelled with the vehicle to Picton on a ferry and stayed there overnight.
[5] The following morning, Ms Pearson drove from Picton to Blenheim, again without incident. She stopped in Blenheim for approximately 60-90 minutes before continuing for Kaikoura. After driving through Ward, Ms Pearson noticed that the vehicle lost acceleration. Shortly afterwards, she noticed the vehicle’s temperature gauge begin to rise, signalling it was overheating. Ms Pearson immediately slowed down to about 70 kph and looked for a place to stop the vehicle. However, the road was windy and she could not find a side area to stop safely immediately without risking other motorists' or her own safety. Ms Pearson drove slowly for a short time; she says it was no more than five minutes, until she reached a restaurant at Kekerengu with an easily accessible carpark, where she stopped. Until then, apart from the temperature gauge, Ms Pearson had not noticed any other signs that the vehicle was overheating, such as steam or an unusual smell.
[6] At Kekerengu, Ms Pearson opened the bonnet and saw steam coming from the radiator and signs that coolant had sprayed over the engine. A passing mechanic advised her to call the AA, which she did. The AA asked her over the telephone to attempt to start the vehicle, but it would not even crank.
[7] Ms Pearson arranged for the vehicle to be towed to Blenheim and then on to Hamilton; this was covered through her AA membership. The vehicle was inspected in Hamilton by Te Rapa Automotive, which removed the top engine covers and pressure tested the cooling system. Te Rapa Automotive found a split in the top radiator hose and no water in the cooling system. Te Rapa Automotive observed signs that the hose had been removed, and that it had been cut from another length of hose. They also observed broken engine mount bolts and intercooler bracket bolts. Te Rapa Automotive considered there may have been damage from previous work carried out on the vehicle. The invoice for Te Rapa Automotive’s inspection, amounting to $255, has been paid by Buy A Car.
[8] It is accepted by both parties that the vehicle's engine needs to be replaced. Three estimates have been obtained for this work. The trader’s estimate, from Magnum Compliance Services in Christchurch, is that the work can be done for $9,504.75 but the trader acknowledged this does not include the cost of transporting the vehicle from Hamilton to Christchurch. Ms Pearson has obtained two estimates. The first estimate, from Te Rapa Automotive, is for $11,709.36. Ms Pearson also obtained an estimate from Ingham Hyundai in Hamilton for $13,208.88.

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

[9] 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.
[10] 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.

...

(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.

[11] 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.
[12] In assessing whether this vehicle failed to comply with the guarantee of acceptable quality it is necessary for the Tribunal to have regard to the fact that it is a high-mileage 10 year old vehicle. However, the failure that has led to the vehicle overheating occurred within a short time after purchase, only 19 days, after the purchaser had only driven 2,325 km. Its failure so soon after purchase indicates the vehicle was not as durable as a reasonable consumer would regard as acceptable, even having regard to its age and high mileage.
[13] Indeed, Mr Williamson from Buy A Car acknowledged that the trader is liable under the Act in relation to the failure of the radiator hose. Mr Williamson argued, however, that s 7(4) of the Act applies in the present case because Ms Pearson used the vehicle in a manner that was inconsistent with the manner in which a reasonable consumer would have done. In particular, he argued that Ms Pearson should have pulled off the road and switched the engine off sooner than she did and that, if she had done so, the catastrophic engine damage would have been avoided.
[14] Mr Williamson produced an aerial map of the road from Ward to Kekerengu on which he had superimposed photographs of what he argued were suitable and safe stopping points. He accepted that most of those stopping points were on the opposite side of the road from that on which Ms Pearson was travelling, which would have required her to cross the oncoming lane in order to reach the stopping point.
[15] Ms Pearson agreed that, in hindsight, perhaps she could have pulled off the road earlier. At the time, however, she found the situation stressful and did not realise she had to stop immediately, on noticing the vehicle overheating, to prevent engine damage.
[16] In the Tribunal’s Assessor Mr Binding’s view, a reasonable consumer would not continue to drive a vehicle for any longer than was absolutely necessary if they were aware that the vehicle was overheating. Mr Binding and I think it is likely that Ms Pearson could have stopped the vehicle earlier than she did. However, Mr Binding considers that even if Ms Pearson had stopped as soon as she thought something might be wrong, which on her evidence was when she noticed "a little deceleration", this would have been too late to prevent the damage that was done to the vehicle's engine.
[17] The radiator hose appears to have failed quickly, causing rapid loss of coolant, overheating and a seized engine. Mr Binding observed that modern diesel engines, in general, with an aluminium cylinder head and a cast-iron block, have little tolerance to overheating, compared to petrol engines or older diesel engines. Ordinarily, a smell and possibly steam would be noticeable before catastrophic damage occurred, but these things may not have been noticeable to Ms Pearson, as she was travelling at speed on the open road.
[18] In Mr Binding's view, it is plausible that the first sign Ms Pearson noticed something was wrong, was the vehicle decelerating. By then, in Mr Binding’s view, the engine would already have begun to seize. If an engine is starting to seize, permanent damage has already occurred. In response to a question from Mr Binding, Mr Williamson seemed broadly to accept this as correct. Accordingly, based on Mr Binding's advice, I conclude that by the time Ms Pearson first noticed anything was wrong, permanent damage had already occurred, requiring replacement of the engine.
[19] It follows that although a reasonable consumer would have pulled off the side of the road and switched off the engine sooner, it would not have altered the outcome. In terms of s 7(4)(b) of the Act, the vehicle would still not have complied with the guarantee of acceptable quality even if it had been “used” consistently with the manner in which a reasonable consumer would have used the vehicle (i.e. by pulling off the road and stopping the engine sooner).
[20] The Tribunal therefore concludes that the vehicle failed to comply with the guarantee of acceptable quality because it was insufficiently durable. Section 7(4) does not apply to change that position.

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

[21] It was accepted that Ms Pearson required Buy A Car to remedy the failure.

Did the trader refuse to do so?

[22] The parties told the Tribunal that they had been in negotiations about the extent to which the trader would contribute to the costs of repairing the vehicle. However, it was accepted that the trader had refused to meet anywhere near the full cost of any repairs. Accordingly, I conclude that Buy A Car refused to remedy the failure in Ms Pearson’s vehicle.

What remedy is the purchaser entitled to?

[23] Section 18(2)(b)(i) provides that where a trader who has been required to remedy a failure refuses to do so, the purchaser may have the failure remedied elsewhere and obtain from the trader “all reasonable costs” incurred in having the failure remedied. As I have mentioned, the parties have presented estimates for the work required, ranging from $9,504.75 up to $13,208.88.
[24] In my view, it is appropriate in this case to limit the level of “reasonable costs” recoverable by the purchaser to the purchase price she paid for the vehicle. It is questionable whether this vehicle is economic to repair. The answer may depend on whether the purchaser is willing to pay the additional amount necessary to have the vehicle repaired by either of the two suppliers from which she obtained an estimate. If she decides that it is not economic to repair then I do not consider she should be compensated for more than the purchase price of the vehicle, which she would also have been able to recover if she exercised her right of rejection under s 18(3)(a) of the Act. Similarly, on the present facts, s 19(1)(c) of the Act applies. As the repair costs exceed the purchase price, Buy A Car "cannot reasonably be expected to repair" the vehicle, and so under s 19(1)(c) it can comply with the requirement to remedy the failure "by providing a refund of any money paid or other consideration provided by the consumer in respect of the [vehicle]".
[25] For these reasons, I order MIT Limited to pay Ms Pearson $9,999 immediately.

J S McHerron
Adjudicator