Power v Klaasen Enterprises Limited T/A Patikiautos Reference No. MVD 283/2017 [2017] NZMVDT 181 (16 November 2017)

Last Updated: 20 December 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 181 Reference No. MVD 283/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	DANIEL JOHN POWER
		Purchaser
	AND	KLAASEN ENTERPRISES LIMITED T/A PATIKIAUTOS
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 1 November 2017
DATE OF DECISION 16 November 2017
APPEARANCES
Mr D J Power, Purchaser
Mr D Klaassen, for the Trader

ORDERS

A. Klaasen Enterprises Limited shall, within 10 working days of the date of this decision, pay $2,400 to Mr Power.

DECISION

[1] The vehicle had a pre-existing fault with its engine that breaches the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the Act”).
[2] The engine fault amounts to a failure of a substantial character. Mr Power is entitled to reject the vehicle under s 18(3) of the Act and recover all amounts paid in respect of the vehicle.

REASONS

Introduction

[3] On 11 May 2017, Daniel Power purchased a 2004 Nissan Expert, registration number FHN622 for $2,400 from Klaasen Enterprises Limited trading as Patikiautos (“Klaasen Enterprises”). The vehicle had an odometer reading of approximately 171,700 kms[1] at the time of sale.
[4] Within a week of purchasing the vehicle, Mr Power noticed that its temperature gauge would intermittently spike – the needle of the temperature gauge would indicate that the engine was overheating, but after a minute or two would return to normal. The temperature gauge continued to intermittently spike, with Mr Power advising that he noticed this occur on 10 to 15 different occasions. Mr Power continued to use the vehicle, ensuring that the radiator was regularly topped up with water.
[5] In July 2017, Mr Power became sufficiently concerned about this potential fault to have the vehicle assessed by Takanini Auto Court 2014 Limited, diagnosed the vehicle as having cracks in the cylinder head in the vehicle’s engine and estimated that repairs would cost $1,923.26. Takanini Auto Court also advised that the vehicle’s thermostat had been removed.
[6] Mr Power contacted Klaasen Enterprises, asking the trader to contribute to the cost of repairs. Klaasen Enterprises declined to do so. Mr Power has now applied to the Tribunal seeking to reject the vehicle and obtain a refund of all money paid in respect of the vehicle.

The Issues

[7] The issues that require 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) Did Mr Power cause the engine damage?
• (c) Is the cracked cylinder head a failure of a substantial character?
• (d) What remedy is Mr Power entitled to under s 18 of the Act?

Does the vehicle have faults that breach the acceptable quality guarantee in s 6 of the Act?

[8] 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.
[9] The expression "acceptable quality" is defined in s 7(1) of the Act 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] 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 Power’s subjective perspective.
[11] The question I must determine is whether the vehicle had a cracked cylinder head when it was supplied to Mr Power, or whether it was caused by Mr Power’s continued driving of an overheating vehicle.

Did the fault exist when the vehicle was sold to Mr Power?

[12] Mr Klaassen, who appeared for Klaasen Enterprises, says that the fault did not exist when the vehicle was sold to Mr Power. To support this submission, Mr Klaassen says that he did not notice the vehicle overheat while it was in his possession.
[13] During the hearing, Mr Klaassen advised that he had driven the vehicle for more than 2,000 kms between 3 April 2017, when he took possession of the vehicle, and 11 April 2017, when the vehicle was sold to Mr Power. He says that, although he was not closely monitoring the temperature gauge, he did not notice the vehicle overheating.
[14] Mr Klaassen’s oral evidence was inconsistent with Klaasen Enterprises’ written submission to the Tribunal. In that submission, Klaasen Enterprises advised that the vehicle had been driven for about 500 kms while in its possession, advising the Tribunal that the odometer reading at the time of sale was approximately 171,696 kms.
[15] Mr Klaassen’s oral evidence was also inconsistent with what he told Mr Power about the distance he had driven in the vehicle. Mr Power alleges that Mr Klaassen told him that he had driven the vehicle to and from Tauranga, with limited driving around Auckland. I accept Mr Power’s evidence on this point. Mr Power came across as a credible witness with a clear recollection of events and conversations relevant to this case.
[16] I tested Mr Klaassen on the inconsistencies between his oral evidence, the written submission to the Tribunal and what was said to Mr Power. Mr Klaassen did not budge from his evidence that he drove the vehicle for more than 2,000 kms. He said that he drove from Papatoetoe to Albany to visit his mother two or three times a day on every day he had possession of the vehicle. He also said he drove the vehicle to and from Tauranga in that time.
[17] I do not accept Mr Klaassen’s oral evidence on the distance he drove in the vehicle. His evidence was inconsistent with the Trader’s written submission to the Tribunal, which had been prepared by Mr Klaassen, and is inconsistent with what Mr Klaassen told Mr Power about the distance driven. I consider it more likely that that Mr Klaassen drove approximately 500 kms in the vehicle while it was in his possession.
[18] Mr Klaassen says that he did not closely monitor the temperature gauge while driving the vehicle. Consequently, because the overheating occurred intermittently and for a short period, I consider that there is a real likelihood that he would not have noticed an intermittent temperature spike during his approximately 500 kms of driving. Therefore, I consider that Mr Klaassen’s evidence does not show that the engine fault was not present when the vehicle was sold to Mr Power.
[19] Instead, I am satisfied that the vehicle was overheating when it was sold to Mr Power, due to the vehicle having a cracked cylinder head.
[20] The vehicle overheated shortly after it was sold to Mr Power. Mr Haynes, the Tribunal’s Assessor, advises that a vehicle overheats because its engine is starved of cooling fluid. Mr Haynes says that overheating usually occurs if the vehicle has a faulty cooling system, external water leaks or if it is leaking water through a cracked cylinder head.
[21] I am satisfied, for the following reasons, that the vehicle was overheating because of a cracked cylinder head.
[22] Firstly, as advised by Mr Haynes, a vehicle overheats if it has a faulty cooling system, external water leaks or a cracked cylinder head. In this case, there is no evidence that this vehicle has a faulty cooling system or external water leaks. There is, however, evidence of a cracked cylinder head.
[23] Secondly, there is evidence that shows that the vehicle had a history of overheating before it was sold to Mr Power. Mr Haynes notes that the vehicle’s thermostat was removed at some time before the vehicle was sold to Mr Power. Mr Haynes says that this is evidence of previous overheating. Mr Haynes advises that removing the thermostat is a way of disguising that the vehicle is overheating.
[24] I am therefore satisfied that the vehicle was overheating, due to it having a cracked cylinder head, at the time it was sold to Mr Power and that a previous owner (not Klaasen Enterprises) had attempted to conceal the overheating by removing the vehicle’s thermostat.

Did Mr Power’s use of the vehicle cause the fault?

[25] Klaasen Enterprises says that the cracked cylinder head was caused by Mr Power continuing to drive the vehicle after it overheated.
[26] Section 7(4) of the Act provides that goods will not fail to comply with the guarantee of acceptable quality if the goods are 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. I must therefore consider whether Mr Power’s use of the vehicle has caused the fault.
[27] I do not consider that Mr Power’s continued driving of the vehicle has caused the cracked cylinder head. The fault existed before he purchased the vehicle. Mr Haynes advises that the vehicle’s engine would have been damaged to the point that it required replacement or reconditioning at the time it was sold to Mr Power.
[28] Mr Haynes says that the fact that Mr Power was able to drive the vehicle for approximately 7,000 kms does not prove that the fault developed because of Mr Power’s continued use of the vehicle. Mr Haynes says that a vehicle with a cracked cylinder head can continue to be driven for a long period of time, provided that it is regularly topped with water, which is what Mr Power did.
[29] Mr Power’s continued driving of the vehicle was unwise, because he took a risk that the vehicle’s engine would fail, but it has not caused the cracks in the cylinder head. Those cracks existed when the vehicle was sold to him.
[30] I am therefore satisfied that this vehicle had a pre-existing fault that breached the acceptable quality guarantee in s 6 of the Act. I consider that a reasonable consumer would not expect a vehicle of this price, age and mileage to have a cracked cylinder head that would cost nearly $2,000 to repair.

Are the faults a failure of a substantial character?

[31] Mr Power 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.”

[32] The question I must answer is whether the fault with this vehicle is such that a reasonable consumer, fully acquainted with the true nature and extent of the fault, would not have purchased the vehicle.
[33] I am satisfied that the cracked cylinder head is a failure of a substantial character. I consider that a reasonable consumer would not have paid $2,400 for a 13-year-old vehicle that had travelled a little more than 171,000 kms at the date of purchase if it knew that it had pre-existing cracks in its cylinder head that were causing the vehicle to overheat and that would require repairs costing nearly $2,000.

What remedy is Mr Power entitled to under the Act?

[34] 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), 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.”

[35] Mr Power is entitled to reject the vehicle and obtain a refund under s 18(3)(a) of the Act as the cracked cylinder head amounts to a failure of a substantial character.
[36] Accordingly, I order that Klaasen Enterprises must, within 10 working days of the date of this decision, pay $2,400 to Mr Power.

DATED at AUCKLAND this 16th day of November 2017

B.R. Carter
Adjudicator

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[1] There is no reliable evidence as to the precise odometer reading at that date.