Marsh v Magnum Motors (1996) Limited Reference No. MVD 259/2017 [2017] NZMVDT 161 (19 October 2017)

Last Updated: 16 November 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 161 Reference No. MVD 259/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	DAVID THOMAS MARSH
		Purchaser
	AND	MAGNUM MOTORS (1996) LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at on 6 October 2017
DATE OF DECISION 19 October 2017
APPEARANCES
Mr D T Marsh, Purchaser Mrs S Marsh, witness for the Purchaser
Mr M Fernando, for the Trader

ORDERS

A. Magnum Motors (1996) Limited shall, within 15 working days and at its own expense, uplift the vehicle and repair the rear suspension airbag fault.

DECISION

[1] The vehicle has two faults which breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the Act). The vehicle had a fault with its I-Drive, which Magnum Motors has repaired. The vehicle also has a fault with its rear suspension airbag, which makes the vehicle inoperable.
[2] Mr Marsh is not entitled to reject the vehicle under s 18(3) of the Act. The vehicle’s faults do not amount to a failure of a substantial character.
[3] Mr Marsh is instead entitled to have the vehicle’s faults repaired under s 18(2) of the Act.

REASONS

Introduction

[4] On 28 October 2016, David Marsh purchased a 2007 BMW X5 for $16,995 from Magnum Motors. The vehicle had an odometer reading of 316,700 kms at the time of sale.
[5] In April 2017, the vehicle developed a fault with its I-Drive. Mr Marsh was also concerned about the amount of oil that the vehicle was consuming, believing that this could be indicative of a major mechanical problem with the vehicle.
[6] In May 2017, Magnum Motors repaired the faulty I-Drive. Magnum Motors also conducted an abbreviated oil consumption test and had no concerns about the extent of the vehicle’s oil consumption.
[7] Approximately one month after the repaired vehicle was returned, the vehicle’s rear suspension airbag failed. On 1 July 2017, Mr Marsh had the vehicle assessed by Auckland City BMW, who advised that the left rear suspension airbag required replacement, at a cost of $945.23.
[8] Mr Marsh asked Magnum Motors to repair the faulty suspension airbag. Magnum Motors declined to repair the fault.
[9] Mr Marsh has now applied to the Tribunal seeking to reject the vehicle because he considers it to be unsafe. Magnum Motors denies that Mr Marsh is entitled to reject the vehicle, although it says that it is prepared to fix the faulty suspension airbag.

The Issues

[10] The issues requiring consideration in this case are:

• (a) Do the vehicle’s faults amount to a breach of the acceptable quality guarantee in s 6 of the Act?
• (b) If so, do the faults amount to a failure of a substantial character under s 21 of the Act?
• (c) What remedy is Mr Marsh entitled to under the Act?

Do the vehicle’s faults breach the acceptable quality guarantee in s 6 of the Act?

[11] 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.
[12] 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.”

[13] 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 Mr Marsh’s subjective perspective.

The I-Drive fault is a breach of the acceptable quality guarantee

[14] The I-Drive is an important system in a BMW X5. The I-Drive is a computer system used to control systems such as the air conditioner, heater, stereo, four-wheel drive and navigation system.
[15] The vehicle developed a fault with its I-Drive in April 2017, six months after Mr Marsh purchased the vehicle. During this time Mr Marsh drove no more than 5,000 kms. I acknowledge that the vehicle was nine years old and had travelled 316,700 kms when it was purchased by Mr Marsh. However, Mr Marsh has used the vehicle only sporadically during his ownership, and I am satisfied that a reasonable consumer would not expect a vehicle of this age, price and mileage to develop a fault with its I-Drive within six months and 5,000 kms of purchase.
[16] I therefore consider that the I-Drive fault amounted to a breach of s 6 of the Act.

The rear suspension airbag fault is also a breach of the acceptable quality guarantee

[17] I am also satisfied that the rear suspension airbag fault is a breach of s 6 of the Act because the vehicle has not been as durable as a reasonable consumer would expect. Again, I acknowledge the age and mileage of the vehicle. However, in reaching the conclusion that this fault breaches the acceptable quality guarantee, I consider that a reasonable consumer would not expect a fault that has made the vehicle inoperable and will cost $945.23 to repair to occur within a little less than 5,500 kms of driving.

Mr Marsh has not proven that the vehicle consumes excessive amounts of oil

[18] Mr Marsh has not been able to prove the exact extent of the vehicle’s oil consumption as he was unable to perform an oil consumption test because of the rear suspension airbag fault. However, based on Mr Marsh’s testimony, it appears that the vehicle has consumed between one and a half litres and three litres of oil during Mr Marsh’s ownership, which equates to approximately a third to a half of a litre of oil consumed per 1,000 kms travelled.
[19] Mr Gregory advises that a BMW X5 of this age and mileage is likely to consume a significant amount of oil. Mr Gregory considers that the level of oil consumption reported by Mr Marsh is not indicative of a significant fault with the vehicle. On that basis, I am not satisfied that the vehicle has a fault that causes it to consume excessive amounts of oil.
[20] For Mr Marsh’s benefit it is worth noting that Mr Gregory considers that the vehicle should not consume more than three quarters of a litre per 1,000 kms. It may be advisable for Mr Marsh to continue to monitor the vehicle’s oil consumption because oil consumption above that level would suggest that the vehicle may have a more significant fault and further assessment should be conducted.

Is Mr Marsh entitled to reject the vehicle?

[21] Section 18 of the Act sets out the remedies under the Act. Section 18 provides:

“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), he 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.”

[22] Relevant to the facts of this case, Mr Marsh may reject the vehicle if the faults with the vehicle amount to a failure of a substantial character under s 18(3)(a) of the Act.

Are the vehicle’s faults a failure of a substantial character?

[23] 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] Section 21(a) of the Act applies to this case. The question I must answer is whether the faults that this vehicle has 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 am not satisfied that any one of the vehicle’s faults is a failure of a substantial character.
[26] The vehicle was a 9-year-old vehicle which had travelled over 315,000kms when purchased. Mr Gregory considers that neither of the I-Drive nor rear suspension airbag faults, when considered in isolation, is serious and each of the faults can be repaired without much difficulty.
[27] I am not satisfied that a fully informed reasonable consumer would not have purchased the vehicle because of the existence of any one of the faults. In those circumstances, Mr Marsh is not entitled to reject the vehicle. The faults are not failures of a substantial character.

The accumulated faults are not a failure of a substantial character

[28] Mr Marsh may also 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.
[29] 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] Mr Marsh claims to have lost faith in the reliability of this vehicle.
[30] I am not satisfied that the vehicle’s accumulated 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, these are relatively minor faults that are not unexpected in a vehicle that has travelled more than 315,000 kms. I am not satisfied that the faults with this vehicle are such that a reasonable buyer could say that he or she has lost all confidence with the vehicle.
[31] On that basis, I find that the accumulated faults with this vehicle are not sufficient to allow Mr Marsh to reject the vehicle under s 18(3) of the Act.

What remedy is Mr Marsh entitled to under s 18 of the Act

[32] Mr Marsh is entitled to have the rear suspension airbag fault repaired under s 18(2) of the Act.
[33] I therefore order that Magnum Motors must, within 15 working days and at its own expense, uplift the vehicle and repair the rear suspension airbag fault.
[34] The I-Drive fault has been repaired, so no further orders are required in relation to that fault.

DATED at AUCKLAND this 19th day of October 2017

B.R. Carter
Adjudicator

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

[2] Ibid, at 417.