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Motor Vehicles Disputes Tribunal of New Zealand |
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Motor Vehicle Disputes Tribunal of New ZealandLast Updated: 17 May 2017
BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
Reference No. MVD 357/2016 (WN98)
IN THE MATTER of the Motor Vehicle Sales Act 2003
AND
IN THE MATTER of a dispute
BETWEEN ADRIAN CRAIG ZIMMER
Purchaser
AND TYSON PETER GRIFFIN ADAMS T/A ADAMS MOTORS
Trader
MEMBERS OF TRIBUNAL
J S McHerron, Barrister – Adjudicator
R Dixon – Assessor
HEARING at Christchurch on 24 February 2017
DATE OF DECISION 15 March 2017
APPEARANCES
A C Zimmer, Purchaser (by AVL)
G Smith, Purchaser's Witness (by AVL)
No appearance by Trader
DECISION
The Tribunal makes the following orders:
REASONS
Introduction
[1] Mr Zimmer’s vehicle has serious problems with its engine and transmission which became evident on the day he took delivery of the vehicle. Mr Zimmer wants to have these problems repaired at the trader’s expense, but the trader refuses to pay for the repairs.
[2] The following issues arise for the Tribunal’s determination:
- (a) Did the parties contract out of the Consumer Guarantees Act 1993 (“the Act”)?
- (b) If not, did the vehicle fail to comply with the guarantees in ss 6, 8 and/or 9 of the Act?
- (c) If so, did the trader refuse to remedy the failure within a reasonable time, in accordance with s 18 of the Act?
- (d) If so, what remedy is the purchaser entitled to?
Background
[3] Mr Zimmer purchased a 1996 Toyota Hilux Surf with 288,500 km on the odometer for $9,250 including transport costs, from Tyson Adams trading as Adams Motors, on 6 October 2016.
[4] Mr Zimmer had seen the vehicle advertised on Trade Me, where it was described as a “very nice example of the Hilux for its age”. The Trade Me listing also stated that the previous owner had replaced the vehicle's cylinder head. The vehicle was listed under the Trade Me account “fastenterprises”. The listing noted that the vehicle was being sold by a registered motor vehicle dealer with the number M324035. This is the trader number associated with Mr Adams.
[5] The Trade Me listing also stated that there was “no warranty” with the vehicle. This was the first of several examples where Mr Adams purported to contract out of the Act in a way that was not permitted by ss 43(2) or 43A. Those sections require, at the minimum, that both parties are in trade, that the vehicle is "supplied and acquired in trade" and that the parties "agree to contract out of the provisions of this Act". The evidence presented does not satisfy me that any of these matters are established. Nor does it appear that Mr Zimmer had any opportunity to negotiate the terms of any contracting out, which was asserted unilaterally by Mr Adams. Section 43(4) of the Act provides that it is an offence against s 13(i) of the Fair Trading Act 1986 for a trader to purport to contract out of any provision of this Act other than in accordance with ss 43(2) or 43A. I intend to provide a copy of this decision to the Commerce Commission for it to consider any further action against Mr Adams, including possible prosecution under s 13(i) of the Fair Trading Act.
[6] Mr Zimmer phoned Mr Adams to discuss the vehicle with him. Mr Zimmer told Mr Adams that he needed the vehicle for towing off-road. For that reason, he was seeking a vehicle with a strong engine and a good transmission. Mr Adams confirmed that the vehicle had a new cylinder head. He said that the motor was in strong condition and that its transmission was in good condition and shifted smoothly.
[7] On the strength of these representations, Mr Zimmer agreed to purchase the vehicle. Mr Adams prepared a Vehicle Offer and Sale Agreement (“VOSA”). The VOSA contained the following special condition that was inserted by Mr Adams:
VEHICLE IS SOLD AS IS NOTING THE WOF IS OLDER THAN 30 DAYS AND THAT THERE IS NO WARRANTY WITH THE VEHICLE AND THE BUYER HAS CHOSEN NOT TO HAVE A MECHANICAL INSPECTION.
[8] The VOSA also included the following term:
Consumers Guarantees Act 1993
It is a condition of sale that the Consumers Guarantees Act 1993 will not apply to any goods or services acquired for business purposes. To the extent permissible by law the provisions of the Consumers Guarantees Act 1993 do not apply to this agreement. Any warranty is restricted to that warranty (if any) provided by the manufacturer of the vehicle.
[9] Mr Zimmer’s evidence was that neither of these special terms was discussed with him before he agreed to purchase the vehicle. Again, they do not comply with the contracting out requirements in s 43 of the Act.
[10] The vehicle was delivered to Wellington, where Mr Zimmer collected it from the wharf on 14 October 2016. Immediately on collecting the vehicle, Mr Zimmer observed its engine was not idling smoothly. He also noticed a "chuffing" sound coming from the exhaust. Mr Zimmer also noticed that the vehicle's transmission shuddered. He had difficulty climbing the Ngauranga Gorge out of Wellington on his way home. The vehicle’s engine shook when changing down.
[11] On the way home, Mr Zimmer telephoned his mechanic, Graham Smith of Zion Motors. Mr Smith is experienced in repairing this model of vehicle. He agreed to assess the vehicle straight away. Mr Smith told the Tribunal that when Mr Zimmer brought the vehicle to him, he test drove it and immediately noticed that it did not sound right. Mr Smith also noticed that the vehicle lacked power, even in a 50 km/h zone. At higher speed, Mr Smith noticed that the transmission did not change smoothly. Mr Smith also noticed a pulsing noise from the exhaust. Mr Smith carried out a compression test. The test indicated that the first three cylinders were all within the normal range, but cylinder four was about 30% lower than normal. Mr Zimmer and Mr Smith thought this was unusual in a vehicle that apparently had a new cylinder head installed. Mr Smith also performed a tee-kay test which did not indicate any problems with the head gasket.
[12] Mr Smith recorded the vehicle's transmission oil was black. He suspected there was a transmission fault. Mr Smith noted the engine was running erratically and idling rough. There was a knocking noise from the exhaust. Mr Smith told Mr Zimmer that the black and burnt smelling transmission fluid indicated the vehicle had had a very hard life with minimal (if any) servicing.
[13] Mr Zimmer became concerned that the transmission might slip and potentially overheat when he was using the vehicle to tow other vehicles at low speed off-road.
[14] Mr Zimmer telephoned Mr Adams on the night he received delivery of the vehicle, 14 October 2016, to discuss the problems he had found with it. Mr Adams’ initial comment to Mr Zimmer was “well I hope that doesn’t cost you too much to fix”. He said that, as it was a trade-in vehicle, there was no warranty attaching to it. Again, this is inconsistent with the contracting out provisions in s 43 of the Act.[1]
[15] Pressed by Mr Zimmer to reconsider his position, Mr Adams consulted with a colleague and then texted Mr Zimmer back as follows:
... (1) Vehicle was sold below “retail value” and on a “as is where is” basis with no warranty implied or expressed and under the basis we had not inspected the vehicle you were aware that you had the option to have the vehicle mechanically checked prior to purchasing as per vehicle sales agreement.
(2) We will not partake in any repairs on this “trade-in vehicle” but we would be prepared to refund you the purchase price minus $500 transport fees to Wellington. Once the vehicle is back with us in the same condition as it left we will refund $8,750 to your account.
[16] Mr Zimmer explained to Mr Adams that this offer was not suitable to him because he would rather have the vehicle repaired. Mr Zimmer also pointed out to Mr Adams in a letter dated 25 October 2016 that he would need to hire another vehicle in order to tow his trailer. Mr Zimmer said that he wanted Mr Adams to pay for the repairs to the vehicle so it would meet the criteria for an acceptable vehicle under the Act. This would mean resolving the cylinder head/valve problem to bring the compression back up to uniform levels and ensure the vehicle no longer has an erratic running or rough idling engine. It would also mean repairing the transmission so it is smooth in operation and no longer judders when shifting or taking off.
Did the vehicle fail to comply with the guarantees in ss 6, 8 and/or 9 of the Act?
[17] 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.
[18] The meaning of acceptable quality is defined in s 7 of the Act (as far as is relevant) as follows:
- 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.
[19] 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.
[20] Sections 8 and 9 of the Act provide as follows:
8 Guarantees as to fitness for particular purpose
(1) Subject to section 41, the following guarantees apply where goods are supplied to a consumer:
(a) that the goods are reasonably fit for any particular purpose that the
consumer makes known, expressly or by implication, to the
supplier as the
purpose for which the goods are being acquired by the consumer; and
(b) that
the goods are reasonably fit for any particular purpose for which the supplier
represents that they are or will be fit.
(2) Those guarantees do not apply where the circumstances show that—
(a) the consumer does not rely on the supplier’s skill or judgment;
or
(b) it is unreasonable for the consumer to rely on the supplier’s
skill or judgment.
(3) This section applies whether or not the purpose is a purpose for which the goods are commonly supplied.
(4) Part 2 gives the consumer a right of redress against the supplier where the goods fail to comply with any guarantee in this section.
9 Guarantee that goods comply with description
(1) Subject to section 41, where goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description.
(2) A supply of goods is not prevented from being a supply by description by reason only that, being exposed for sale or hire, they are selected by a consumer.
(3) If the goods are supplied by reference to a sample or demonstration model as well as by description, the guarantees in this section and in section 10 will both apply.
(4) Where the goods fail to comply with the guarantee in this section,—
(a) Part 2 gives the consumer a right of redress against the supplier;
and
(b) Part 3 may give the consumer a right of redress against the
manufacturer.
[21] Mr Zimmer has clearly established that the vehicle failed to comply with the guarantee of acceptable quality. Notwithstanding its age and high mileage, Mr Zimmer was entitled to expect that it would be in adequate running order on the day of delivery. However, there are serious problems with the engine and transmission indicating that the vehicle has not been adequately maintained and is not fit to be driven in its current state.
[22] Moreover, I also consider that Mr Zimmer has established that Mr Adams has breached the guarantee as to fitness for particular purpose in s 8 of the Act. Mr Zimmer told Mr Adams before purchasing the vehicle that he was looking for a vehicle to be used to tow other vehicles off-road at low speed. Mr Adams confirmed this vehicle would be suitable for that purpose, but it is not. It was reasonable for Mr Zimmer to rely on Mr Adams’ skill and judgement in that regard. Mr Adams is a registered motor vehicle dealer. Mr Zimmer was justified in placing trust in such a person to supply a vehicle that was suitable for the needs Mr Zimmer had described. Unfortunately, Mr Zimmer's trust was misplaced.
[23] Furthermore, I consider that Mr Zimmer has also established a breach of s 9 of the Act. The evidence shows that the vehicle has not had a new cylinder head installed recently and the motor and transmission are not in a good condition. The reality contradicts the description in the Trade Me listing. It also contradicts what Mr Adams told Mr Zimmer by telephone, Neither description was correct – the vehicle failed to comply with its description.
Did the trader refuse to remedy the failure within a reasonable time in accordance with s 18 of the Act?
[24] Section 18 of the Act provides:
- 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.
[25] Mr Zimmer required Mr Adams to remedy the vehicle's failures, in accordance with s 18(2)(a) of the Act. Mr Adams refused to do so. Initially, Mr Adams relied on his assertion that the vehicle was sold “as is” with no warranty, contrary to s 43 of the Act and s 13(i) of the Fair Trading Act. Mr Adams later attempted to argue that the parties had agreed to contract out of the Consumer Guarantees Act but, as I have indicated above, Mr Adams has been unable to point to any agreement to that effect satisfying the requirements of s 43 of the Act. Mr Zimmer purchased the vehicle for private purposes. He did not acquire it in trade, let alone agree to exclude the application of the Act.
[26] Mr Adams has offered to refund Mr Zimmer the purchase price minus transport costs. However, this offer does not satisfy Mr Adams’ obligations under the Act. That is because Mr Adams is not offering to provide Mr Zimmer with a full refund of the money he paid for the vehicle. In any event, Mr Adams has not established that he “cannot reasonably be expected to repair the goods” in terms of s 19(1)(c) of the Act.
[27] Accordingly, in terms of s 18(2)(b)(i), Mr Adams is entitled to have the failure remedied by Zion Motors and obtain from Mr Adams all reasonable costs incurred in doing so.
Estimated costs to repair the vehicle
[28] Mr Zimmer asked Zion Motors to provide a quote for repairing the vehicle to an undamaged condition, without serious drive-train faults. This was how the vehicle was advertised and represented.
[29] Zion Motors indicated that the cylinder head would have to be removed in order to assess the current engine damage and then either repaired or replaced as necessary. Once the cylinder head is removed, new parts (such as head gasket, head bolts, seals and cooling system fluid) will have to be used even if the old head can be repaired and put back on.
[30] In relation to the transmission, Mr Smith indicated that a full flush, filter and gasket change may be all that is required. He estimates there is a 50% to 60% chance that servicing the transmission in this manner will fix the problem.
[31] Zion Motors has estimated $778.86 to carry out the transmission service. It estimates a further $2,810.60 to remove the cylinder head, and to set up and fit a new head, exhaust valves and valve springs, head gasket, head set and head bolts. If the transmission service does not fix the problem, Zion Motors’ recommendation is to overhaul the transmission, at an estimated additional cost of $4,738.
[32] The Tribunal’s Assessor, Mr Dixon, has reviewed Zion Motors' estimates and considers them to be reasonable for the work that is required to fix this vehicle.
[33] I conclude that Mr Adams must immediately pay Mr Zimmer the estimated cost for Zion Motors to remove the head, and to set up and fit a new head, exhaust valves and valve springs, head gasket, head set and head bolts in the sum of $2,810.60. Mr Adams must also pay Mr Zimmer the estimated costs of a transmission service: $778.86. I will also allow Mr Zimmer the opportunity to return to the Tribunal if the transmission service does not fully rectify the transmission. If that is necessary, I will then order payment of the costs of a transmission overhaul.
[34] I also allow Mr Zimmer to claim the costs of an urgent repair to replace the axle seals on 4 November 2016. Without this repair the vehicle was unable to be used. This repair cost $307.72.
[35] In addition, Mr Zimmer is entitled to recover from Mr Adams damages for any loss or damage to him resulting from the failure which was reasonably foreseeable as liable to result from the failure.[2] In this category, I will allow Mr Zimmer to recover his costs in obtaining a compression test and tee-kay test on 14 October 2016 in the sum of $150. I also allow Mr Zimmer his costs in hiring a rental vehicle in December 2016 in the sum of $398.90. I will not allow Mr Zimmer the costs of the valuation that he obtained for the vehicle, as I do not consider that it was necessary for Mr Zimmer to obtain a valuation for the purposes of the proceedings.
Costs
[36] The Tribunal has a limited jurisdiction to award costs against a party if that party, after receiving notice of a hearing, fails to attend the hearing without good cause.[3] In such a case, the Tribunal may order the party to pay to the Crown its reasonable cost of the hearing and to another party that party’s reasonable costs in connection with the proceedings.[4]
[37] Mr Adams failed to attend the hearing without good cause. The day before the hearing, on 23 February 2017, Mr Adams emailed the Tribunal’s case manager stating “I will need to do the hearing via phone”. The case manager asked Mr Adams to provide reasons in writing as to why he or another representative of the trader was not able to attend the hearing in person. He did not reply. The case manager then advised Mr Adams that he or a representative of the trader would need to attend the hearing in person or risk an award of costs under cl 14(1)(b) of Schedule 1 to the Motor Vehicle Sales Act 2003.
[38] On the day of the hearing, when Mr Adams did not appear, the Tribunal's clerk contacted Mr Adams to ask why he had not arrived at Court in preparation for the hearing. Mr Adams feigned ignorance that the hearing was proceeding at that time.
[39] When this information was communicated to me, I asked the clerk to tell Mr Adams that he should attempt to get to the hearing as soon as possible. He did not turn up. I commenced the hearing in Mr Adams' absence at 11.07 am, 37 minutes after it was scheduled to begin. The hearing continued until approximately midday. Mr Adams did not turn up at all. Mr Adams did not advise why he did not attend the hearing, either before or afterwards.
[40] Accordingly, I consider that the criteria for an award of costs against Mr Adams are met and I propose to order him to pay the Crown $750 in respect of the reasonable costs of the Tribunal hearing.
[41] I will also order Mr Adams to pay Mr Zimmer the cost of his application to the Tribunal, $50, plus the costs of his witness Mr Smith, for his appearance at the Tribunal hearing, $224.25.
[42] The total amounts payable by Mr Adams are set out at the beginning of the decision, at paragraphs A. to C. above.
J S McHerron
Adjudicator
[1] See above at paragraph [5].
[2] Section 18(4) of the Act.
[3] Motor Vehicle Sales Act 2003, Schedule 1, cl 14.
[4] Ibid, cl 14(2).
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2017/1098.html