Ibrahim v Sell Your Car Limited - Reference No. MVD 294/2017 [2017] NZMVDT 185 (20 November 2017)

Last Updated: 25 March 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 185 Reference No. MVD294/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	OMAR IYAD YOUSEF IBRAHIM
		Purchaser
	AND	SELL YOUR CAR LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 2 November 2017
DATE OF DECISION 20 November 2017
APPEARANCES
Mr O I Y Ibrahim, Purchaser
Mr O Novikov, for the Trader Mr A Tkachenko, Witness for the Trader

ORDERS

1. Omar Ibrahim’s application to reject the vehicle is upheld.
2. Sell Your Car Limited shall, within 10 working days of the date of this decision, pay $6,969.05 to Omar Ibrahim.

DECISION

[1] The vehicle has a significant water leak that has likely caused damage to the vehicle’s electrical components. This water leak and the resulting electrical damage is a breach of the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the Act”).
[2] The water leak is a failure of a substantial character for the purposes of s 21 of the Act. Mr Ibrahim is therefore entitled to reject the vehicle under s 18(3) of the Act.

REASONS

Introduction

[3] On 25 July 2017, Omar Ibrahim purchased a recently imported 2007 Toyota Wish for $6,800 from Sell Your Car Limited. The vehicle had an odometer reading of 53,300 kms at the time of sale.
[4] Soon after purchase, Mr Ibrahim noticed that water was leaking into the vehicle. He noticed that water had entered the vehicle’s boot and that the underside of the vehicle’s carpet was wet.
[5] Mr Ibrahim, who is a mechanical engineer, was concerned that the water in the vehicle had damaged the vehicle’s electrical components. Mr Ibrahim had also discovered that the vehicle had previously suffered impact damage to its rear, which Mr Ibrahim considers to be the likely cause of the water leak. Mr Ibrahim rejected the vehicle and requested a refund of the purchase price.
[6] Sell Your Car has refused to accept this rejection, and has instead offered to repair the water leak.

The Issues

[7] The issues that require consideration in this case are:

• (a) Does the water leak breach of the acceptable quality guarantee in s 6 of the Act?
• (b) Does the water leak amount to a failure of a character for the purposes of s 21 of the Act?
• (c) Is Mr Ibrahim entitled to reject the vehicle under s 18(3) of the Act?

Does the water leak breach the acceptable quality guarantee?

[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 Ibrahim’s subjective perspective.
[11] Sell Your Car did not dispute that the vehicle has a water leak. Sell Your Car says that the leak has only arisen recently and is easily remedied.

The leak is significant

[12] The evidence provided by Mr Ibrahim shows that the vehicle has a significant water leak.
[13] Mr Ibrahim, who I found to be a diligent and credible witness, says that he first noticed water in the vehicle on 29 July 2017, four days after he purchased the vehicle. He says that the vehicle’s boot was “full of water” and the underside of the vehicle’s carpet was wet. Mr Ibrahim says the vehicle has continued to leak water.
[14] Mr Ibrahim provided photographs of the vehicle. Those photographs show water in the rear of the vehicle, condensation in the rear lights and rust developing in the boot of the vehicle.
[15] Mr Ibrahim also provided a video of rainwater leaking into the boot of the vehicle. The video shows water streaming into the vehicle and draining out of the plughole at the bottom of the boot.
[16] Mr Ibrahim also had the vehicle assessed by Europa Auto Services Limited on 13 September 2017. Europa Auto Services found:

• (a) water in the boot.
• (b) water going into the wiring loom
• (c) rust developing in the welded areas of the boot
• (d) water in side pockets in the boot
• (e) water beneath the front passenger and driver’s seats.

[17] Europa Auto Services also found that the vehicle had suffered impact damage at the rear. Europa Auto Services says that the damage had been repaired, but the vehicle’s boot lid was not aligned correctly.
[18] I am satisfied that this evidence proves that the vehicle has a significant water leak. Mr Gregory, the Tribunal’s Assessor, considers that the water leak may have been caused by the impact damage to the vehicle’s rear, which has caused the vehicle’s panels to be mis-aligned, allowing water to enter.

The leak has been present for some time

[19] Sell Your Car says that the water leak is recent, and that it did not see any evidence of a water leak while the vehicle was in its possession.
[20] I disagree. The vehicle has rust, most likely caused by fresh water leaking into it. Mr Gregory advises that fresh water corrosion takes some time to manifest itself, and the corrosion to the extent shown in the photographs presented to the Tribunal indicates that water was present in the vehicle before it was imported into New Zealand.

The water leak has caused damage to the vehicle’s electrical components

[21] Mr Gregory advises that the vehicle’s electrical components are likely to have suffered damage due to this water leak. Mr Gregory says the Europa Auto Services report shows that water has already entered the wiring loom and reached vital control modules. This is highly likely to cause significant problems in the near future. Mr Gregory also notes that Mr Ibrahim reported that he was experiencing faults with the vehicle’s radio, which he said was “glitching” intermittently. Mr Gregory says that this is evidence that water is likely to have affected the vehicle’s body control module.
[22] I am therefore satisfied that the vehicle has a water leak that breaches that 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 significant water leak that has been present for some time and is likely to have caused damage to the vehicle’s electrical components at the time of sale.

Is the water leak a failure of a substantial character?

[23] Mr Ibrahim 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 the fault with this vehicle are such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle.
[25] I am satisfied that the water leak is a failure of a substantial character. I consider that a reasonable consumer would not have paid $6,800 for a 10-year-old vehicle that had travelled a little more than 53,000 kms at the date of purchase if it knew that it had a significant pre-existing water leak that is likely to have caused damage to the vehicle’s electrical components.

What remedy is Mr Ibrahim entitled to under the Act?

[26] 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.”

[27] Mr Ibrahim is entitled to reject the vehicle and obtain a refund under s 18(3)(a) of the Act as the water leak amounts to a failure of a substantial character.
[28] Mr Ibrahim is also entitled to recover $169.05, being the cost of having the water leak assessed by Europa Auto Services under s 18(4) of the Act.
[29] Mr Ibrahim also seeks to recover $230, being the cost of filing applications in the Disputes Tribunal and the Motor Vehicle Disputes Tribunal.
[30] Under cl 14(1)(a)(ii) of sch 1 to the Motor Vehicle Sales Act 2003, I can only order these types of costs where, in the opinion of the Tribunal:

“the matter ought reasonably to have been settled before proceeding to a hearing but that the party against whom an award of costs is to be made refused, without reasonable excuse, to take part in the discussions referred to in clause 5(1)(b) or acted in a contemptuous or improper manner during those discussions; ...”

[31] I consider that the matter should have been settled before the hearing. However, I find that Sell Your Car did not refuse, without reasonable excuse, to discuss the application with Mr Ibrahim. The evidence shows that the parties have properly discussed resolving the matter, with Sell Your Car offering to repair the water leak. As a result, Mr Ibrahim cannot recover the cost of filing applications in the Disputes Tribunal and the Motor Vehicle Disputes Tribunal.

Fair Trading Act allegation

[32] Mr Ibrahim also alleged that he was misled in breach of the Fair Trading Act 1986. Mr Ibrahim says that he asked Sell Your Car whether the vehicle had previously been damaged. Mr Ibrahim says that Sell Your Car failed to tell him that the vehicle had previously suffered accident damage, which had been repaired before the vehicle was imported into New Zealand.
[33] In light of my finding that Mr Ibrahim is entitled to reject the vehicle and recover all amounts paid in respect of the vehicle, I do not need to consider this aspect of Mr Ibrahim’s claim. Consequently, I make no finding as to whether Sell Your Car has engaed in conduct that breached the Fair Trading Act.

Conclusion

[34] The vehicle has a significant water leak that has likely caused damage to the vehicle’s electrical components. This water leak and the resulting electrical damage is a breach of the acceptable quality guarantee in s 6 of the Act
[35] The water leak is a failure of a substantial character for the purposes of s 21 of the Act. Mr Ibrahim is therefore entitled to reject the vehicle under s 18(3) of the Act.
[36] Accordingly, I order that Sell Your Car must, within 10 working days of the date of this decision, pay $6,969.05 to Mr Ibrahim

DATED at AUCKLAND this 20th day of November 2017

B.R. Carter
Adjudicator