Ballantine v Fivefifteen Holdings Limited t/a Grant Ward Nissan - Reference No. MVD 269/2016 (Wellington) [2017] NZMVDT 1095; [2017] NZMVT Wellington 95 (13 February 2017)

Motor Vehicle Disputes Tribunal of New Zealand

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Ballantine v Fivefifteen Holdings Limited t/a Grant Ward Nissan - Reference No. MVD 269/2016 (Wellington) [2017] NZMVDT 1095 (13 February 2017); [2017] NZMVT Wellington 95

Last Updated: 21 March 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

Reference No. MVD 269/2016 (WN95)

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN ANDREW NEIL BALLANTINE

Purchaser

AND FIVEFIFTEEN HOLDINGS LIMITED T/A GRANT WARD NISSAN

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

D Binding – Assessor

HEARING at Christchurch on 17 January 2017

Further submissions received on 20, 23 and 28 January 2017

DATE OF DECISION 13 February 2017
APPEARANCES

A N Ballantine, Purchaser
E M Crawford, Purchaser's Partner and Witness
A Clifford, Purchaser's Witness (by telephone)

G D Constable, Dealer Principal of Trader (by AVL)

DECISION

Mr Ballantine's rejection of the vehicle is not upheld and his application to the Tribunal is dismissed.

REASONS

Introduction

[1] Andrew Ballantine wishes to reject a 2006 Audi S6 V10 he purchased at the end of 2015. In determining whether he is entitled to do so, the Tribunal must consider two issues:

• (a) Is the purchaser of the vehicle a consumer pursuant to s 2 of the Consumer Guarantees Act 1993 (“CGA”)?
• (b) If not, was the vehicle reasonably fit for purpose and/or of merchantable quality for the purposes of ss 16(a) and 16(b) of the Sale of Goods Act 1908?

Background

[2] On 14 December 2015, Mr Ballantine purchased a 2006 Audi S6 V10 with 174,445 km on the odometer for $20,000 from Fivefifteen Holdings Ltd trading as Grant Ward Nissan. Prior to agreeing to purchase the vehicle, Mr Ballantine took it for a test drive, but he did not have any pre-purchase mechanical inspection carried out.
[3] Mr Ballantine operates a luxury rental car business, Devine Rentals Ltd, of which he is a director, but he purchased the vehicle in his own name, not that of the company.

[4] When he collected the vehicle from the trader's premises in Alexandra, Mr Ballantine noticed some “worrying faults”, including that the car revved spontaneously up to 1,500 rpm while its transmission was in park or neutral. However, the vehicle drove satisfactorily at this stage, so Mr Ballantine continued driving it to Queenstown. While there, he performed a few short trips in the vehicle, during which it continued to run satisfactorily. He then drove it towards the West Coast, intending to go as far as Greymouth. The vehicle drove well for the first few hours but then he noticed that it began to lose power. Mr Ballantine became worried that the vehicle would overheat. He called for roadside assistance and had the vehicle towed to a mechanic in Hokitika. Mr Ballantine told the Tribunal that the mechanic gave a “very bleak prognosis” for the vehicle, noting it had many fault codes and was not running on all cylinders. No written evidence of the Hokitika mechanic’s report was produced; nor was the mechanic called as a witness.
[5] On 21 December 2015, Mr Ballantine emailed the trader's dealer principal, Grant Constable, to advise him that the vehicle’s idle “wouldn’t hold”, that the engine had been shaking, warning lights had appeared and a mechanic had told him there was oil in the water. Mr Ballantine indicated that he would like to return the vehicle so that the trader could resell it to someone else.
[6] Mr Constable requested Mr Ballantine to return the vehicle to him as soon as possible so his Audi specialist technician could assess it and advise on what the problem was. He told Mr Ballantine that Grant Ward Nissan was entitled to have the opportunity to assess the vehicle and rectify any issues with it. The parties agreed that Mr Ballantine would take the vehicle to Christchurch, where Grant Ward Nissan would collect it and take it back to Alexandra for this assessment to occur.
[7] It took until March 2016 before Mr Ballantine got the vehicle to Christchurch as arranged. While there, he took it to the Cranford Street Garage, for assessment. Cranford Street Garage:

• (a) found a fault recorded in the vehicle’s second ECU, which it could not access with its scan tool;
• (b) found oil residue in the coolant reservoir which reappeared after it was removed;
• (c) welded joins in the rear exhaust;
• (d) issued a warrant of fitness for the vehicle.

[8] Mr Ballantine had not discussed with Grant Ward Nissan that he was intending to get this work done by Cranford Street Garage. Cranford Street Garage invoiced Mr Ballantine for $305.35. Its invoice records an odometer reading of 176,231 km as at 4 March 2016.
[9] Grant Ward Nissan arranged for the vehicle to be transported to its workshop in Alexandra. In early April 2016, it checked the vehicle for a blown head gasket and replaced the radiator header tank, which it found had become contaminated with oil. Grant Ward Nissan also checked for a misfire in the engine. The invoice for this work ($404.89, paid for by Grant Ward Nissan), indicates that a cylinder actuator o-ring was replaced, which was intended to remedy both the engine misfiring and an oil leak that had been traced to the defective o-ring. Various other damp oil patches around the engine were noted on the invoice, but Grant Ward Nissan described these as consistent with the vehicle’s age. Both parties also told the Tribunal that a new ignition coil pack was installed to address the engine misfiring, although this is not reflected in the invoice for the work.
[10] A contractor for Mr Ballantine’s business collected the vehicle from Grant Ward Nissan and took it to Queenstown. The contractor reported that the "check engine" light came on in the vehicle while he was driving it, but otherwise it drove satisfactorily.
[11] On 14 April 2016, Mr Ballantine collected the vehicle from Queenstown and noted that the free revving idle issue was recurring and the "check engine" light was on again. He telephoned Grant Ward Nissan and drove the vehicle back there. Grant Ward Nissan reset the "check engine" light and told Mr Ballantine there was no significant problem with the vehicle.
[12] Mr Ballantine then started to drive back to Christchurch. For the first couple of hours of his journey the car performed well and gave no cause for concern. However, as he was about to arrive at Lake Tekapo, the low coolant warning illuminated and the engine temperature gauge began to rise out of the normal range. Mr Ballantine drove the vehicle on to Tekapo and stopped there. He texted Mr Constable to advise that the vehicle had suffered a coolant leak. In his text, he asserted the vehicle was not fit for purpose as, in three attempts, it had not completed a long drive. Mr Ballantine stated he was rejecting the vehicle, pointing out that he had given Grant Ward Nissan an opportunity to remedy faults on previous occasions. Mr Ballantine left the vehicle at Tekapo for the trader to collect.
[13] After confirming the presence of a coolant leak, Grant Ward Nissan replaced the radiator and returned the vehicle to Christchurch. Grant Ward Nissan produced an invoice for this work in the sum of $1,487.11, made out to Protecta Insurance NZ Ltd.
[14] Mr Ballantine and his partner Ms Crawford collected the vehicle in Christchurch and it ran satisfactorily under light driving. However, as soon as Ms Crawford accelerated to 80 kph, the "check engine" light started flashing and the engine started shaking.
[15] Mr Ballantine took the vehicle to Roses Auto Electrical in Christchurch to have its computer scanned. Roses Auto Electrical reported that it found multiple engine faults in engine control module (“ECM”) 1 and 2. Roses Auto Electrical found that the ECM ground wiring was loose, causing intermittent electrical failures. Roses Auto Electrical repaired the wiring, replaced the spark plugs and replaced the air flow meters, which it reported had been incorrectly installed. Roses Auto Electrical’s invoice was for $2,104.96. This invoice was made out to Devine Rentals. Mr Ballantine told the Tribunal that the reference to Devine Rentals was a mistake which came about because his company places a lot of business with Roses Auto Electrical. He repeated that the vehicle is a private car. Ms Crawford said she paid Roses Auto Electrical’s invoice. Aaron Clifford was the technician at Roses Auto Electrical who assessed the vehicle in August 2016 and made various repairs. Mr Ballantine called Mr Clifford as a witness. Mr Clifford told the Tribunal he understood the vehicle was Mr Ballantine's private car.
[16] Grant Ward Nissan had not authorised Mr Ballantine to take the vehicle to Roses Auto Electrical. Instead, Mr Constable asked Mr Ballantine to take the vehicle to Vantage Auto Diagnostics and had offered to pay for the vehicle to be assessed and repaired there. Neither party produced any documentation to support these assertions, but Mr Ballantine agreed that Mr Constable had asked him to take the vehicle to Vantage, but that he had elected to take the vehicle to Roses instead.

Is the purchaser of the vehicle a consumer for the purposes of s 2 of the Act?

[17] At the hearing, I drew the parties' attention to the definition of "consumer" in s 2 of the CGA, which provides (as far as is relevant):

consumer means a person who—

(a) acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption; and

(b) does not acquire the goods or services, or hold himself or herself out as acquiring the goods or services, for the purpose of—

(i) resupplying them in trade; or

...

[18] I explained that if Mr Ballantine was acquiring the vehicle for the purpose of using it as a rental vehicle then that would amount to resupplying the vehicle in trade. That is because s 2 also provides that "supply" includes supply (or resupply) by way of hire and "trade" includes a business relating to the supply of goods.
[19] I asked Mr Ballantine to confirm whether he had purchased the vehicle for the purposes of resupplying it as a rental car through his company, Devine Rentals. He denied that he had done so.
[20] I then mentioned an advertisement I had seen on Devine Rentals’ Facebook timeline offering a black Audi S6 V10 for rental. The vehicle appeared similar to the vehicle in question. Mr Ballantine's partner Ms Crawford told the Tribunal that the vehicle that was advertised on Devine Rentals’ Facebook was a different vehicle from the vehicle in the present dispute. She said the vehicle advertised on Facebook belonged to an 'outsourcer'. No further proof of the outsourcing arrangement was provided.
[21] Mr Ballantine explained that, at the time of purchase, Mr Constable asked him whether he was purchasing the vehicle with the intention of using it as a rental car in his business. The finance company which provided a loan to Mr Ballantine to assist him to purchase the vehicle also asked him the same question. Mr Ballantine told both Mr Constable and the finance company that he was not purchasing the vehicle for the purpose of using it as a rental car. In the hearing, he told the Tribunal:

...it was never purchased to use as a rental car. It was purchased as my personal car and that was made clear to Grant Ward Nissan at the time I purchased it as well because they did ask that question themselves.

[22] After the hearing, I supplied both parties with a printout of relevant extracts from Devine Rentals' Facebook timeline and offered them an opportunity to comment. Ms Crawford and Mr Ballantine emailed the Tribunal repeating that the advertised vehicle was different from the vehicle in the present dispute, which was purchased as Mr Ballantine's personal vehicle. They supplied a further copy of the photograph of the vehicle displayed on Facebook, showing that it had a foreign number plate. They provided no other evidence supporting Ms Crawford's claim that the vehicle offered for rental belonged to an 'outsourcer'.
[23] Following the hearing, Mr Constable supplied the Tribunal with a report showing that, two days after purchasing the vehicle, on 16 December 2015, Mr Ballantine submitted an MR14 form at VTNZ Queenstown, changing the vehicle's use from a private vehicle (code 01) to a rental vehicle (code 07). In addition, the documents supplied by Mr Constable show that Mr Ballantine obtained a certificate of fitness ("COF") for the vehicle, notwithstanding that it had been issued with a new warrant of fitness the day before by the trader. This information was not disclosed to the Tribunal by Mr Ballantine or Ms Crawford at (or after) the hearing despite its obvious relevance to the issue of the purpose for which Mr Ballantine purchased the vehicle.
[24] Mr Ballantine was provided with a copy of the material supplied by Mr Constable and invited to comment, but he did not do so.
[25] In my assessment, the only reason why Mr Ballantine would have changed the use of the vehicle to "rental", and then obtained a COF for it, was because he intended to use it as a rental vehicle as part of Devine Rentals' fleet and these were the regulatory requirements with which he would need to comply before doing so. The fact that this occurred so soon after Mr Ballantine purchased the vehicle indicates that it is likely that his purpose at the time of purchasing the vehicle was to resupply it in trade.
[26] The material supplied by Mr Constable shows that Mr Ballantine completed another change of use form for the vehicle on 22 December 2015 changing its use back from rental to private. The Tribunal did not have the benefit of Mr Ballantine's explanation of this further change, but it may have been because, by then, he had decided he wished to return the vehicle to the trader. I do not consider this further change in the vehicle's use alters my conclusion regarding the purpose for which it is likely that Mr Ballantine purchased the vehicle. As Venning J explained in Kerry Stone Ltd v Knowles, a distinction can be drawn between the purpose for which a vehicle is purchased and the various uses to which it may later be put, referring to the following dictionary definition of "purpose":[1]

1.a. That which one sets before oneself as a thing to be done or attained; the object which one has in view.

2.a. The action or fact of intending or meaning to do something; intention, resolution, determination.

3. The object for which anything is done or made, or for which it exists; the result or effect intended or sought; end, aim.

[27] Contrary to Mr Ballantine's and Ms Crawford's oral evidence, I conclude that at the time he purchased the vehicle, Mr Ballantine is likely to have had the purpose, object or intention of using the vehicle as a rental vehicle. The information provided by Mr Constable is strong evidence of that contemporaneous intention. Mr Ballantine wished to keep his intention to use the vehicle as a rental car hidden from the trader and finance company and, ultimately, the Tribunal. I cannot establish whether the vehicle was actually used as a rental car (although the Facebook advertisement and other links between Devine Rentals and the vehicle that I have described, give me cause for suspicion that it was). But it is Mr Ballantine's purpose at the time he purchased the vehicle that is primarily relevant in ascertaining whether he is a consumer, rather than the actual use to which the vehicle was put.
[28] Accordingly, as Mr Ballantine purchased the vehicle with the purpose of resupplying it in trade as a rental vehicle, he is not a consumer for the purposes of the CGA and the guarantees in that Act do not apply. The Tribunal will instead need to consider whether Mr Ballantine is entitled to any relief under the Sale of Goods Act.

Was the vehicle reasonably fit for purpose and/or of merchantable quality for the purposes of ss 16(a) and 16(b) of the Sale of Goods Act 1908?

[29] Where the Consumer Guarantees Act applies to a consumer transaction, that transaction is not subject to the equivalent conditions and warranties in the Sale of Goods Act 1908. As I have found that the Consumer Guarantees Act does not apply, this is one of the relatively few cases in which the Tribunal needs to consider the application of the Sale of Goods Act.

[17] Section 16 of the Sale of Goods Act provides:

16 Implied conditions as to quality or fitness

Subject to the provisions of this Act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

(a) where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:

provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose:

(b) where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality:

provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed:

(c) an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade:

(d) an express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.

Compare: 1895 No 23 s 16

[30] On the present facts, both paragraphs (a) and (b) of s 16 are potentially applicable.
[31] In relation to s 16(a), Mr Ballantine did not make known to Grant Ward Nissan any particular purpose for which he required the vehicle. However, in Taylor v Combined Buyers Ltd, Salmond J held:[2]

... that the expression "particular purpose" used in this enactment is not limited to a special purpose communicated to the seller, as distinguished from the general purpose to which goods of that class are normally devoted, but includes such general purpose itself, and that it is not necessary for the buyer expressly to communicate to the seller the fact that he desires the goods for that general purpose. The seller must be taken to know that, if nothing is said to the contrary, food is bought for the purpose of being eaten, and motor-cars for the purpose of locomotion.

[32] Accordingly, it is sufficient for the purposes of s 16(a) that Mr Ballantine made it known to the trader "by implication" that he was acquiring the vehicle for the purpose of driving it.
[33] In the generic sense that the vehicle was sold by a dealer of used vehicles, the element of s 16(a) that "the goods are of a description which it is in the course of the seller's business to supply" is also made out. However, I do not think Mr Ballantine has established that he "relie[d] on the seller's skill and judgment". Mr Ballantine inspected and test-drove the vehicle himself and, as the director of a luxury rental car company, can be taken to be an experienced acquirer of vehicles, someone who was capable of exercising his own independent judgment.
[34] Moreover, I do not consider Mr Ballantine has established that the vehicle was not "reasonably fit for purpose" in terms of s 16(a). In Finch Motors Ltd v Quin (No 2),[3] Hardie Boys J held that what is reasonable in terms of fitness "must obviously depend on the circumstances of the case". He accepted that a distinction needs to be drawn between a new car and a second hand one and that:

• (a) It is to be expected that a second hand car will develop defects.
• (b) In the general run of cases, s 16(a) gives little help to the purchaser of a second hand car.
• (c) Where the purchaser has given no particularised purpose, the implied term is no more than that the car is in a roadworthy condition, fit to be driven along the road in safety.

[35] In assessing whether the vehicle was fit for purpose, I propose to put to one side the issues of the oil contaminated header tank and associated matters remedied in April 2016 at the trader’s expense, as well as the leaking radiator, subsequently replaced by the trader in or around August 2016. These matters have now been rectified and Mr Ballantine has no basis for any ongoing claim in relation to them. In the Tribunal’s Assessor Mr Binding's view, the current faults identified are distinct from those matters that have already been rectified by the trader and cannot be simply regarded as a continuation of the same faults.
[36] The primary issue for the Tribunal in determining whether the vehicle is reasonably fit for purpose relates to the outstanding issues currently experienced in relation to the vehicle. These amount to the ongoing illumination of the "check engine" light which reappears when the vehicle is placed under acceleration and reaches a speed of approximately 80 kph. Mr Ballantine also argues that the engine continues to misfire and shake and that, on occasion it has gone into limp mode. He argues that the vehicle has never been fit for purpose and has never completed a long trip while in his ownership.
[37] Mr Clifford's evidence was that after the work he carried out on it, the vehicle was running better than previously, and that it is driveable, but “nowhere near perfect”. Mr Clifford considers there to be a high possibility of ongoing mechanical issues, due to the fact that earths underneath the vehicle’s computers were left loose. Mr Clifford has not seen the vehicle since August 2016, and did not provide an updated report to the Tribunal on the vehicle’s current state. Mr Ballantine offered to show Mr Binding the vehicle at the hearing. However, this was not possible, as Mr Constable appeared by AVL link, so would not have been able to be present while the Tribunal inspected the vehicle.
[38] Mr Binding does not think an inspection during the hearing would have been of much assistance, anyway. What might have been more useful, but was not provided by the purchaser, was a current and comprehensive report on:

• (a) what is causing the "check engine" light to be illuminated, the engine shaking and activation of limp mode when the vehicle is driven at open road speed;
• (b) what is the solution to these issues, in terms of recommended actions and repair costs.

[39] Mr Ballantine has failed to establish the nature and extent of any defect. Mr Ballantine's and Ms Crawford's evidence that the "check engine" light is on, that the engine shakes and has gone into limp mode are indications that something may be wrong, but it is not clear what, or how to fix it. Mr Clifford's evidence indicates that there were problems with the wiring, which he fixed, but he indicated the vehicle was "running better but nowhere near perfect" and "driveable" at the time he last saw it in August 2016. There is insufficient evidence of what the cause of, or solution to, the current problems might be or what is the likely cost of any repairs needed. The trader attempted to assist the purchaser to diagnose and solve these problems but its efforts to assist have been spurned by the purchaser.
[40] Even without further evidence, the evidence available to the Tribunal clearly establishes that the vehicle is roadworthy. It obtained a new warrant of fitness immediately after purchase (as well as a certificate of fitness when Mr Ballantine changed its use to rental vehicle, shortly thereafter). The vehicle also obtained a further warrant of fitness on 4 March 2016. The vehicle has travelled more than 5,000 km while in Mr Ballantine's ownership. In terms of the requirements in Finch Motors it was and is in a roadworthy condition, fit to be driven along the road in safety. Mr Ballantine has failed to establish a breach of the implied condition as to fitness in s 16(a) of the Sale of Goods Act.
[41] I now turn to consider whether s 16(b) of the Sale of Goods Act applies. There is an implied condition of merchantable quality where goods are bought by description from a seller who deals in goods of that description. Mr Ballantine told the Tribunal he became aware of the vehicle because he saw the trader's listing of it on Trade Me. Although the listing was not produced in evidence, it can be assumed it contained a description of the vehicle. In Beale v Taylor, a sale resulting from the advertisement of a motor vehicle was held to be a sale by description.[4] I consider Mr Ballantine purchased the vehicle by description from a seller who deals in goods of that description (Grant Ward Nissan). The implied condition of merchantable quality therefore applies.
[42] Like the guarantee as to acceptable quality in s 6 of the CGA, the content of the implied condition of merchantable quality in any particular case depends upon the attributes of the particular vehicle in question. However, the basic concept of merchantable quality has been held to mean "commercially saleable under the description by which the goods are sold".[5] As I have mentioned, the contents of the Trade Me listing were not produced in evidence and Mr Ballantine did not emphasise any particular description of the vehicle that was made by the trader prior to his purchasing it. The vehicle's consumer information notice contained the usual factual material concerning the vehicle's year (2006) and mileage (174,445 km) and that it was first registered in New Zealand in 2006.
[43] In Finch Motors, Hardie Boys J considered the "most appropriate elaboration" of "merchantable quality" to be that by Lord Reid in Hardwick Game Farm v SAPPA, in which he said:[6]

..."merchantable quality" [means] that the goods in the form in which they were tendered were of no use for any purpose for which goods which complied with the description under which these goods were sold would normally be used, and hence were not saleable under that description. This is an objective test: "were of no use for any purpose..." must mean "would not have been used by a reasonable man for any purpose..."

[44] I do not consider that Mr Ballantine has established that the vehicle was not of merchantable quality according to this test. As I have already stated, the vehicle was driveable and warrantable. It is a reasonably old, high mileage, high performance vehicle. It was sold to Mr Ballantine for the relatively low price of $20,000. I say "relatively low" because, when new, the vehicle is likely to have cost about ten times that amount. One reason why such high performance luxury vehicles depreciate in value so rapidly is because, as they age, they are susceptible to expensive and complicated repairs and maintenance needs. Mr Ballantine, as the director of a luxury rental car business, is no doubt well aware of this fact, as emphasised by Mr Constable at the hearing. In Mr Binding's and my assessment, nothing in the evidence has established anything objectively unexpected for a vehicle of this type, given its age, mileage and price.
[45] A reasonable consumer would expect that a vehicle of this model, age, mileage and price would probably be (in Mr Clifford's words) "nowhere near perfect". Moreover, a reasonable consumer would be aware that ownership of such a vehicle is likely to entail costly maintenance obligations. Not everyone would wish to purchase such a high mileage vehicle, with the attendant risks of defects requiring costly repairs. But Mr Ballantine has failed to establish that the vehicle was not commercially saleable. I conclude that the vehicle was of merchantable quality. Mr Ballantine's application to reject the vehicle is therefore dismissed.

J S McHerron
Adjudicator

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[1] Kerry Stone Ltd v Knowles [2007] DCR 318 (HC) at [40].

[2] Taylor v Combined Buyers Ltd [1923] NZGazLawRp 133; [1924] NZLR 627 (SC) at 629.

[3] Finch Motors Ltd v Quin (No 2) [1980] 2 NZLR 519 (HC) at 524.

[4] Beale v Taylor [1967] 1 WLR 1193 (CA), referring to the (then) equivalent UK legislation, the Sale of Goods Act 1893.

[5] Finch Motors Ltd v Quin (No 2) [1980] 2 NZLR 519 (HC) at 524.

[6] Hardwick Game Farm v SAPPA [1968] UKHL 3, [1969] 2 AC 31 (HL) at 77.