Watson v 4S Motors Limited - Reference No. MVD 158/2017 [2017] NZMVDT 119 (8 August 2017)

Last Updated: 15 September 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 119 Reference No. MVD158/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	TAMSIN WATSON
		Purchaser
	AND	4S MOTORS LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 26 July 2017
DATE OF DECISION 8 August 2017
APPEARANCES
Mrs T Watson, Purchaser
Mr J Watson, Witness for the Purchaser
Mr G Sexton for the Trader
Mr Y Lu Witness for the Trader

ORDERS

1. 4S Motors Limited shall, at its own expense and within 20 working days of the date of this decision, repair the fault with the vehicle’s mechatronic control unit and transmission range sensor.
2. 4S Motors Limited shall also provide Mrs Watson with a loan vehicle while the repairs are being conducted should Mrs Watson request one.

DECISION

[1] The vehicle has faults with its mechatronic control unit and transmission range sensor that breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the Act”). The fault with the vehicle’s exhaust gas recirculation (EGR) cooler and engine mounts also breach s 6 of the Act, although those faults have been repaired.
[2] The vehicle’s faults do not amount to a failure of a substantial character for the purposes of s 21 of the Act. As a result Mrs Watson is not entitled to reject the vehicle.

REASONS

Introduction

[3] On 19 September 2016, Tamsin Watson purchased a 2009 Audi Q5 3.0TDI Quattro, registration number FLZ359, from 4S Motors Limited for $28,990.The vehicle had an odometer reading of 138,800kms at the time of sale. Mrs Watson also purchased a 24 Month Autosure Essential Cover warranty for $1,480.50.
[4] Mrs Watson began experiencing problems with the vehicle in late January or early February 2017. The vehicle would intermittently stall while reversing and when coming to a stop. Mrs Watson also considered that the vehicle was “not running properly”.
[5] In late February 2017, Mrs Watson took the vehicle to Continental Cars, an Auckland based repairer, for its annual service and to have any faults with the vehicle diagnosed. Continental Cars was unable to reproduce the fault that caused the vehicle to stall but did find faults with the vehicle’s exhaust gas recirculation (EGR) cooler and left side engine mounts.
[6] Continental Cars replaced the EGR cooler and engine mounts. These repairs were covered by Mrs Watson’s Autosure warranty. Mrs Watson paid an excess of $350 for each repair.
[7] The stalling problem continued, and in late February or early March the vehicle also began jolting and surging. Continental Cars again assessed the vehicle and diagnosed faults with the vehicle’s mechatronic control unit and transmission range sensor.
[8] Continental Cars provided an estimate of $9,316.86 to replace the mechatronic control unit and range sensor. Continental Cars has also provided an estimate of $6,623.24 for replacing the vehicle’s clutch, which may be damaged as a result of the transmission problems. Continental Cars said any damage to the clutch will only become evident once the transmission is removed to perform the other repairs.
[9] Mrs Watson then took the vehicle to Transmission Solutions NZ Limited for a second opinion. Transmission Solutions also found faults with the mechatronic control unit and transmission range sensor. Transmission Solutions has recommended reconditioning the mechatronic control unit rather than replacement. It has provided an estimate of $9,353.82 to perform all work on the mechatronic control unit, range sensor and clutch.
[10] 4S Motors accepts that the vehicle has a fault with its mechatronic control unit and transmission range sensor and has offered to repair those faults. 4S Motors does not accept that there is a proven fault with the clutch, but it has offered to replace the clutch as it is prudent to do so while the transmission is being repaired.
[11] Mrs Watson does not want the faults repaired. She has rejected the vehicle and requested a refund. 4S Motors has not accepted this rejection and says that the faults are not a failure of a substantial character under the Act.

The Issues

[12] The issues for consideration in this case are:

• (a) Does the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Act?
• (b) Are any of the vehicle’s faults a failure of a substantial character for the purposes of s 21 of the Act?
• (c) What remedy is Mrs Watson entitled to under s 18 of the Act?

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

[13] Section 6 of the Act imposes on suppliers and manufacturers of consumer goods "a guarantee that the goods are of acceptable quality." Section 2 of the Act defines "goods" as including vehicles.
[14] The expression "acceptable quality" is defined in s 7 as follows:

“7 Meaning of acceptable quality

(1) For the purposes of section 6, goods are of acceptable quality if they are as—

(a) fit for all the purposes for which goods of the type in question are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from minor defects; and

(d) safe; and

(e) durable,—

as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—

(f) the nature of the goods:

(g) the price (where relevant):

(h) any statements made about the goods on any packaging or label on the goods:

(ha) the nature of the supplier and the context in which the supplier supplies the goods:

(i) any representation made about the goods by the supplier or the manufacturer:

(j) all other relevant circumstances of the supply of the goods.

(2) Where any defects in goods have been specifically drawn to the consumer's attention before he or she agreed to the supply, then notwithstanding that a reasonable consumer may not have regarded the goods as acceptable with those defects, the goods will not fail to comply with the guarantee as to acceptable quality by reason only of those defects.

(3) Where goods are displayed for sale or hire, the defects that are to be treated as having been specifically drawn to the consumer's attention for the purposes of subsection (2) are those disclosed on a written notice displayed with the goods.

(4) Goods will not fail to comply with the guarantee of acceptable quality if—

(a) the goods have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods; and

(b) the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent.

(5) A reference in subsections (2) and (3) to a defect means any failure of the goods to comply with the guarantee of acceptable quality.”

[15] In considering whether or not goods meet the guarantee of acceptable quality, the Tribunal must consider the quality elements as set out in s 7(1)(a)-(e) of the Act as modified by the factors set out in s 7(1)(f)-(j), from the perspective of a “reasonable consumer”. The test is an objective one; it is not a view of those factors from Mrs Watson’s subjective perspective.

The vehicle’s faults breach the acceptable quality guarantee

[16] The mechatronic control unit and transmission range sensor faults are faults that breach the acceptable quality guarantee because they have not been as durable as a reasonable consumer would expect. A vehicle’s transmission is essential to its proper operation and the mechatronic control unit and range sensor are essential to the proper operation of the transmission. The faults currently cause the vehicle to stall at low speeds and have difficulty selecting the appropriate gear.
[17] I am satisfied that a reasonable consumer would not expect an eight year old vehicle that cost $28,990 to have these faults so shortly after purchase. I acknowledge that the vehicle had travelled 138,800 kms at the time of purchase, and a further 10,600kms by the time the faults were diagnosed. Nonetheless, a reasonable consumer would not consider these faults to be acceptable, even in a vehicle that has travelled that distance.
[18] I also consider the EGR cooler fault to be a breach of the acceptable quality guarantee. The EGR cooler is part of the vehicle’s exhaust system and it operates to reduce harmful nitrous oxide omissions. The vehicle’s EGR cooler required replacement in February 2017.
[19] The broken engine mounts also breach the acceptable quality guarantee. The engine mounts hold the engine in place and broken engine mounts can lead to other parts prematurely failing.
[20] Mrs Watson was unable to provide the exact cost of the EGR and engine mount repairs as they were paid for by Autosure and she was not given details. However, Mr Gregory, the Tribunal’s Assessor, advises this repair would cost approximately $5,000 I am satisfied that a reasonable consumer would not expect to have to replace an important part of the vehicle’s exhaust system and engine mounts, at a cost of approximately $5,000, within six months of purchase.

No evidence of a fault with the vehicle’s clutch

[21] The repair estimates obtained by Mrs Watson include the cost of replacing the vehicle’s clutch. It may well be that the parties agree to replace the clutch, but the evidence does not prove that the vehicle has a fault with its clutch.
[22] The only evidence to suggest a clutch fault is the burnt clutch oil found by Transmission Solutions. Mr Gregory says that the evidence of burnt clutch oil, at this vehicle’s age and mileage, does not prove the existence of a fault. The clutch oil in a vehicle of this age and mileage will commonly be discoloured and the absence of other symptoms (such as slipping or shuddering) suggests that there is no clutch fault.

Are any of the faults a failure of a substantial character?

[23] Mrs Watson seeks to reject the vehicle because its faults amount to a failure of a substantial character. A failure of a substantial character is defined in s 21 of the Act:

“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.”

[24] The question I must answer is whether, under s 21(a) of the Act, the vehicle’s faults are such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle.

The faults, when considered separately, are not a failure of a substantial character

[25] I consider that the EGR cooler and engine mount faults are not a failure of a substantial character. Although the faults were costly to repair, both are relatively minor faults.
[26] I also consider that the mechatronic control unit and transmission range sensor fault are not a failure of a substantial character. In reaching this conclusion I acknowledge that repairs to the mechatronic control unit and transmission range sensor will cost thousands of dollars. Mr Gregory advises that the repair is likely to cost between $6,000 and $9,500. However, the cost of repairs, although relevant, is not decisive in determining whether the faults amount to a failure of a substantial character. That is particularly the case with used, high mileage, European vehicles. Those who purchase such vehicles should do so understanding that relatively minor and straightforward repairs can be expensive. The cost of repairs cannot therefore be determinative of whether a fault amounts to a failure of a substantial character.
[27] Instead, there are other factors that convince me that this fault is not a failure of a substantial character.
[28] The first is that the faults have not made the vehicle inoperable. Mrs Watson continues to drive the vehicle, and has driven more than 6,000kms since the fault was first diagnosed. The mechatronic control unit and transmission range sensor, which control clutch operation and gear selection, need to be repaired to ensure the correct function of the clutch and gearbox shift, and to avoid damage to the clutch assembly, but they do not require repair to make the vehicle operable.
[29] The second is that the fault has not made the vehicle unsafe. Mrs Watson’s evidence was that the vehicle intermittently stalls at low speeds. I am not satisfied that a fault that causes a vehicle to stall while at low speeds makes the vehicle unsafe. It would be a different story if the vehicle was stalling while travelling at speed. A fault that causes a vehicle to stall in those circumstances could well be unsafe. But that is not the case here.
[30] The third is that the vehicle is a seven year old European vehicle which had travelled nearly 140,000kms when purchased. Mr Gregory advises that an Audi Q5 of this age and mileage is highly likely to develop faults, with mechatronic control unit and transmission range sensor faults being common.
[31] A reasonable consumer would have realistic expectations as to the durability of a used European vehicle of this age and mileage and would understand that such vehicles can develop faults of this nature that can be costly to fix. In deciding to purchase such vehicles, a reasonable consumer acknowledges and accepts that risk.
[32] In those circumstances, I am not satisfied that a fully informed reasonable consumer would not have purchased the vehicle. The faults with the mechatronic control unit and transmission range sensor are not uncommon in Audi Q5s of this age and mileage. The faults do not make the vehicle inoperable or unsafe. These faults certainly breach the acceptable quality guarantee and require repair, but they are not faults that a reasonable purchaser of a seven year old Audi Q5, that had travelled nearly 140,000kms, would consider a failure of a substantial character.

The accumulated faults are not a failure of a substantial character

[33] Mrs Watson may also seek to reject the vehicle if the accumulation of defects with the vehicle amount to a failure of a substantial character for the purposes of s 18(3)(a) of the Act.
[34] In Cooper v Ashley & Johnson Motors Limited,[1] the District Court stated that a purchaser may reject a vehicle where there had been an accumulation of minor defects, which in themselves could not be described as substantial. The Court noted that a point will eventually be reached where the purchaser could “say convincingly that he or she had no confidence in the reliability of the vehicle”.[2]
[35] This vehicle has had an accumulation of defects with the EGR cooler, engine mounts, mechatronic control unit and transmission range sensor. However, I am not satisfied that these faults, although they amount to a breach of s 6 of the Act, collectively amount to a failure of a substantial character. As noted above, high mileage used European vehicles have a real likelihood of developing faults that can be costly to repair. I am not satisfied that the faults with this vehicle are such that a reasonable buyer of a high mileage European vehicle could say that he or she has lost all confidence with the vehicle.
[36] On that basis, I find that the accumulated faults with this vehicle are not sufficient to allow Mrs Watson to reject the vehicle under s 18(3) of the Act. I note that this was a finely balanced decision, and that if any further faults that breach the acceptable quality guarantee were to occur with this vehicle in the near future, the outcome may well be different if the matter is brought back before the Tribunal.

What remedies are available to Mrs Watson

[37] Section 18 of the Act sets out the remedies under the Act. Section 18 of the Act provides as follows:

“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.”

[38] Mrs Watson is not entitled to reject the vehicle. The vehicle’s faults are not a failure of a substantial character.
[39] Under s 18(2)(a) of the Act, Mrs Watson is entitled to have the faults with the mechatronic control unit and transmission range sensor remedied by 4S Motors Limited. The EGR cooler and engine mounts have been repaired, so no orders need to be made in that regard.
[40] I therefore order that 4S Motors must, at its own expense and within 20 working days of the date of this decision, repair the fault with the vehicle’s mechatronic control unit and transmission range sensor.
[41] 4S Motors Limited must also provide Mrs Watson with a loan vehicle while the repairs are being conducted, should Mrs Watson request one.

DATED at AUCKLAND this 8th day of August 2017

B.R. Carter
Adjudicator

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[1] Cooper v Ashley & Johnson Motors Limited [1996] 7 TCLR 407.

[2] Ibid, at 417.