Knowles v Pay Less Motors Limited - Reference No. MVD 176/2017 [2017] NZMVDT 133 (19 September 2017)

Last Updated: 17 October 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 133 Reference No. MVD 176/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	CLAYTON ADAM SHANE KNOWLES
		Purchaser
	AND	PAY LESS MOTORS LIMITED
		Trader
MEMBERS OF TRIBUNAL
J S McHerron, Barrister – Adjudicator
S D Gregory, Assessor S Haynes, Observing Assessor
HEARING at Auckland on 15 August 2017
DATE OF DECISION 19 September 2017
APPEARANCES
C A S Knowles, Purchaser (by AVL)
R Shyam, Sales Manager of Trader

DECISION

Pay Less Motors Limited must pay Mr Knowles $4,117.98 no later than 26 September 2017.

REASONS

Introduction

[1] Mr Knowles agreed to purchase a 2012 BMW 520D that had travelled 74,482 km from Pay Less Motors Limited. When the vehicle was delivered to Mr Knowles, he discovered its odometer reading was 92,624 km. He seeks compensation in respect of that discrepancy, as well as reimbursement for other repairs that he has carried out on the vehicle.
[2] Mr Knowles’ claim raises the following issues:

• (a) Did the vehicle fail to comply with its description?
• (b) Did the vehicle fail to comply with the guarantee of acceptable quality?
• (c) Did Mr Knowles agree to settle his claim?
• (d) Can the failure be remedied? Did Pay Less Motors refuse to remedy the failure?
• (e) What is the appropriate remedy?

Issue one: Did the vehicle fail to comply with its description?

[3] Section 9(1) of the Consumer Guarantees Act 1993 (the Act) provides that “where goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description.”
[4] The BMW that Mr Knowles purchased was advertised on Trade Me as having travelled 74,482 km. Similarly, the vehicle offer and sale agreement (“VOSA”) stated the distance the vehicle had travelled was 74,480 km. The consumer information notice provided with the vehicle also stated that the distance the vehicle had travelled was 74,480 km.
[5] When the vehicle was delivered from the trader’s premises in Auckland to the purchaser’s residence in Nelson, Mr Knowles discovered that its actual odometer reading was 92,624 km.
[6] Mr Knowles emailed Pay Less Motors about this mileage discrepancy on 11 April 2017 stating:

I believe this is a significant difference and it does affect the value of the car considerably.

[7] Pay Less Motors does not dispute that there was a significant discrepancy as claimed in the vehicle’s mileage and that, in this respect, the vehicle failed to comply with its description. Pay Less Motors emphasised in its response to Mr Knowles and in the hearing that this was an “honest mistake”. Nevertheless, I accept Mr Knowles’ claim that this discrepancy constitutes a significant difference which is likely to have a bearing on the vehicle’s value, to be discussed further below. At this point, it suffices to conclude that the vehicle failed to comply with its description, in breach of the guarantee in s 9(1) of the Act.

Issue two: Did the vehicle fail to comply with the guarantee of acceptable quality?

[8] 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.
[9] 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.

[10] 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.
[11] Under this heading, Mr Knowles raised a number of different issues. I have concluded that only one of the defects he identified amounts to a failure of the vehicle to comply with the guarantee of acceptable quality. That issue was the failure of the vehicle’s left rear suspension airbag.
[12] About six weeks after he purchased the vehicle, Mr Knowles observed a warning light on the dashboard indicating the vehicle’s “cornering ability [was] restricted”. This warning was diagnosed by Haven BMW as signifying a failure in the left rear suspension airbag/air spring. Both the Tribunal’s Assessor Mr Gregory and a second Assessor, Mr Haynes, who observed the hearing, advised that suspension airbag failures are not uncommon in this model of BMW. It is a critical failure in that the vehicle cannot be properly driven until the airbag is repaired.
[13] The fact that the suspension airbag failed within a few weeks after purchase, indicates that the vehicle lacked durability. A reasonable purchaser who had spent $28,300 on a vehicle that was only five years old would not expect to have to replace a vital component of the vehicle so soon after purchase. Accordingly, in this respect, the vehicle failed to comply with the guarantee of acceptable quality.
[14] None of the other issues raised by Mr Knowles amount to a failure to comply with the guarantee of acceptable quality, such that Mr Knowles is entitled to obtain relief in this Tribunal proceeding.
[15] Addressing each of Mr Knowles’ other claims one by one: first, the vehicle’s battery had to be replaced. This is a wear and tear issue, not one of quality. Mr Gregory and Mr Haynes confirmed that a battery could reasonably be expected to be at the end of its life in a vehicle that is approximately five years old. I conclude that this is not a matter indicating the vehicle was not of acceptable quality.
[16] Second, Mr Knowles raised concerns about marks on the paintwork which he did not regard as acceptable. There was evidence of some dialogue with Pay Less Motors about these paintwork defects. However, no photographs were provided to the Tribunal; nor were any estimated repair costs supplied. Accordingly, it is not possible for the Tribunal to form a view as to whether the paintwork defects were sufficiently serious to constitute a breach of the guarantee of acceptable quality. Mr Knowles' claim fails in this respect.
[17] Third, various issues arose in regard to the vehicle’s tyres and there was evidence of correspondence between the parties in relation to that issue. However, Mr Knowles confirmed at the hearing that all issues regarding the tyres had been resolved and there were no issues outstanding.
[18] Fourth, Mr Knowles also raised an issue concerning a discrepancy in the road user charges that had been paid in respect of the vehicle. However, at the hearing Mr Knowles confirmed that he was not out of pocket in respect of road user charges.
[19] Fifth, Mr Knowles also complained that only one key had been provided with the vehicle and he produced an invoice for the supply and coding of a spare key. I did not see any evidence that the vehicle had been advertised as having two keys. Nor is it an issue of acceptable quality, as the existing key that was provided with the vehicle appears to work.
[20] Finally, Mr Knowles raised certain issues concerning a fault with the vehicle’s headlights, requiring a reasonably expensive repair. There was no evidence of this fault in Mr Knowles’ original claim and the Tribunal (and, it appears, the trader) was only advised of it two working days before the hearing. I do not consider this was adequate notice to Pay Less Motors of this defect and so I indicated at the hearing that I did not accept Mr Knowles could introduce it as part of his claim. (Mr Knowles also faces the difficulty that he appears to have incurred costs repairing this defect before advising Pay Less Motors and giving it an opportunity to repair the fault, contrary to the requirement in s 18(2) of the Act.)
[21] Accordingly, as indicated above, I find that in respect of the rear suspension airbag defect Mr Knowles has established that the vehicle failed to comply with the guarantee of acceptable quality. However he has not established a breach of the Act in respect of any of the other defects identified.

Issue three: Did Mr Knowles agree to settle his claim?

[22] Both parties attempted to negotiate a resolution to Mr Knowles’ claim. Mr Knowles emailed Pay Less Motors to say he would accept $3,000 in full and final payment. At this time, his primary concerns were the mileage discrepancy and the paint defects.
[23] Pay Less Motors offered $500 (or alternatively a refund of the $28,000 purchase price, but Mr Knowles would have to meet the costs of transporting the vehicle back to Auckland himself).
[24] Mr Knowles responded that on payment by the trader of $500 plus supply of an additional tyre: “we are all square”. This was, however, before Mr Knowles observed the “cornering ability restricted” warning light illuminated, signalling the problem with the suspension airbag. It was clear that Mr Knowles wished to preserve his ability to seek recourse against Pay Less Motors for any further defects, such as became apparent soon afterwards in respect of the suspension airbag.
[25] Pay Less Motors responded that it was happy to reimburse Mr Knowles $500 and provide him a tyre. However, it was what Pay Less Motors said next that led to Mr Knowles terminating settlement negotiations without agreement.
[26] The full text of Mr Shyam’s email on behalf of Pay Less Motors dated 11 May 2017 was as follows:

Hi Clayton

Yes we are happy to reimburse 500 and send you the tyre as we discussed before and for this issue which you had now as you said you never wanted any warranty and we gave a deal and you were happy so from here anything happens to your car ... its your responsibility thanks.

Kind regards

Director

Ronald Shyam (Shyamji)

[27] At the hearing, Mr Shyam stated that this email, together with Mr Knowles’ indication he would accept $500 plus a tyre, constitutes a binding settlement agreement. If correct, Mr Knowles would not be able to continue with his claim under the Act, as s 43(7) affirms that parties are entitled to settle or compromise claims under the Act. Such settlements are an acceptable form of contracting out of the Act.
[28] Mr Knowles' position, by contrast, was that he no longer wanted to (and did not) take the $500 from Pay Less Motors after it became clear that, by doing so, he would not be able to seek Pay Less Motors' assistance in respect of other problems arising with the vehicle. Mr Knowles points to the subsequent failure of the suspension airbag as justifying his decision not to accept the $500 payment offered.
[29] I accept that Mr Knowles did not settle his dispute with Pay Less Motors. He came close to settling, but it was Pay Less Motors’ insistence that accepting the money would put an end to any future claims (“from here anything happens to your car ... its your responsibility”) that led to Mr Knowles backing out of the proposal to settle the matter that he had made. This was confirmed in Mr Knowles’ email to Pay Less Motors of 18 May in which he said:

I believe that you should cover the cost of the suspension repair but you have already stated that you will not. If this is still your opinion then I will be taking legal action. Let me know either way.

Issue four: Can the failure be remedied? Did Pay Less Motors refuse to remedy the failure?

[30] The failure of the vehicle to comply with its description in respect of the odometer reading cannot be remedied. However, the suspension airbag issue can and has been remedied. Mr Knowles was required to give Pay Less Motors the opportunity to fix that defect, which he did. However, Pay Less Motors’ position in its email of 11 May 2017 was that it was not prepared to accept responsibility for any further problems with the vehicle. Mr Knowles sought to confirm that on 18 May by informing Pay Less Motors that he believed it should cover the cost of suspension repairs. Pay Less Motors maintained its position that the matter had been settled and that Mr Knowles was not entitled to make any further claims in respect of the vehicle, including in respect of the suspension airbag.
[31] Accordingly, I conclude that Pay Less Motors refused to remedy the failure of the suspension airbag.

Issue five: What is the appropriate remedy?

[32] In respect of the mileage discrepancy the appropriate remedy is governed by s 18(3) of the Act, which provides:

18. Options against suppliers where goods do not comply with guarantees

...

(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.

[33] It can be seen from s 18(3)(a) that where a failure cannot be remedied, a purchaser is entitled to reject the vehicle. Mr Knowles does not wish to reject the vehicle in the present case. Rather, he seeks compensation under s 18(3)(b) for the difference in value between the vehicle he obtained, and the lower-mileage vehicle he agreed to purchase.
[34] The Tribunal asked Mr Knowles to obtain two valuations of the difference in value of a vehicle with such a mileage discrepancy. The valuations he obtained suggested a range of $2,500 to $5,000 reduction in value. Mr Gregory considered that the appropriate valuation of the approximately 18,000 km discrepancy in this case was in the order of $3,000. Mr Gregory asked Mr Shyam to comment on this figure. Mr Shyam did not dispute that $3,000 was an appropriate estimate of the reduction in value. Accordingly, I adopt $3,000 as the appropriate amount of compensation to reflect the vehicle's reduction in value attributable to the mileage discrepancy.
[35] In relation to the suspension airbag, s 18(2)(b)(i) of the Act provides that if a trader refuses to remedy a failure then the purchaser may “have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied”.
[36] Mr Knowles had the suspension airbag defect addressed by Haven BMW at a cost of $1,117.98. Mr Gregory accepted that these were “reasonable costs” in terms of the requirement in s 18(2)(b)(i) of the Act.
[37] Accordingly, I order Pay Less Motors Limited to pay Mr Knowles $4,117.98, being the total of these two recoverable amounts, to be paid within seven days of the date of this decision.

J S McHerron
Adjudicator