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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 16 January 2018
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BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
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Reference No. MVD 257/2017
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IN THE MATTER
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of the Motor Vehicle Sales Act 2003
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AND
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IN THE MATTER
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of a dispute
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BETWEEN
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KEVIN WAYNE CHANDLER
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Purchaser
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AND
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FORTIS CARS LIMITED T/A FORTIS MOTOR GROUP
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Trader
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Haynes, Assessor
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HEARING at Auckland on 14 November and 5 December 2017
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DATE OF DECISION 18 December 2017
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APPEARANCES
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Mr K W Chandler, Purchaser
Mrs L Chandler, Witness for the Purchaser
Mr W G Roeske, Witness for the Purchaser
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Ms A Tutengaehe and Mr C Hollick, for the Trader
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ORDERS
DECISION
[1] The vehicle did not have a valid warrant of fitness when it was sold to Mr Chandler and has several faults that breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the Act”).
[2] The vehicle has corrosion that amounts to a failure of a substantial character sufficient to justify rejection of the vehicle under s 18(3) of the Act. Further, its accumulated defects also amount to a failure of a substantial character sufficient to justify rejection.
[3] Mr Chandler is entitled to reject the vehicle and recover all amounts paid in respect of it.
REASONS
Introduction
[4] On about 8 May 2017, Kevin Chandler purchased a 1994 Nissan Safari, registration number ATS370, from Fortis Cars Limited, trading as Fortis Motor Group, for $15,995. The vehicle had an odometer reading of 244,980 kms at the time of sale.
[5] Mr Chandler paid a deposit of $7,100 to purchase the vehicle in March 2017. There was a delay in finalising the purchase as Mr Chandler was awaiting an insurance payment.
[6] On about 3 May 2017, Leah Chandler, Mr Chandler’s wife, mistakenly transferred $40,000 into a bank account belonging to Fortis Cars. She was intending to transfer those funds to her husband’s bank account. On 9 May 2017, after Mr Chandler had agreed to finalise the purchase of the vehicle, Fortis Cars returned that money to Mrs Chandler, less the outstanding balance owing on the vehicle.
[7] Mr Chandler lived in Westport and Fortis Cars is based in Auckland. The vehicle was delivered to Christchurch, where Mr Chandler uplifted the vehicle. The vehicle did not have a warrant of fitness issued within the previous month, as required by Land Transport Rules. Further, the vehicle had failed its most recent warrant of fitness inspection on 20 April 2017, which means that the vehicle did not have a valid warrant of fitness when it was supplied to Mr Chandler.
[8] Mr Chandler was not aware that the vehicle did not have a valid warrant of fitness. Approximately five kilometres into the return journey to Westport, the left front wheel fell off. Mr Chandler managed to replace the wheel and continue to Westport. Mr Chandler also noticed that the vehicle’s brakes were not functioning as they should.
[9] The next day the vehicle became bogged on a beach at Westport, and had to be towed off the beach. Mr Chandler was surprised, as the vehicle was advertised as a four-wheel drive. He had the vehicle assessed by a local mechanic, who Mr Chandler says considered that the vehicle’s four-wheel drive hubs had been removed. The mechanic also considered that the vehicle’s cab had been raised, which would require Low Volume Vehicle certification before the vehicle could obtain a warrant of fitness. Mr Chandler also discovered that the vehicle’s starter motor was faulty, which he replaced at a cost of $350.
[10] Mr Chandler then contacted Fortis Cars to repair the vehicle and to provide an up to date warrant of fitness. The vehicle was not repaired to Mr Chandler’s satisfaction, and he has since discovered that the vehicle has numerous other faults.
[11] Mr Chandler has now applied to the Tribunal to reject the vehicle and to obtain a refund of all amounts paid in respect of the vehicle. Mr Chandler also says that Fortis Cars had contacted him in April 2017, before he purchased the vehicle, to advise him that the contract to purchase the vehicle was cancelled because of his delay in paying the outstanding balance. He says that, after Fortis Cars received the mistaken payment of $40,000 from Mrs Chandler, it then sought to reinstate the contract and told Mr Chandler he would not receive that money back unless he agreed to purchase the vehicle. Mr Chandler says he agreed to complete the purchase under duress, as it was the only way to quickly recover the mistaken payment. Mr Chandler seeks damages to punish Fortis Cars for this alleged conduct.
[12] Fortis Cars denies that Mr Chandler is entitled to reject the vehicle. It says that it has always been prepared to have the vehicle’s faults assessed and to obtain a warrant of fitness for the vehicle and has attempted to resolve this matter by previously offering to refund the purchase price of the vehicle. It also denies that it coerced Mr Chandler into purchasing the vehicle by threatening to not return the mistaken payment of $40,000.
The Issues
[13] The issues requiring consideration in this case are:
- (a) Does the vehicle have faults that breach the acceptable quality guarantee in s 6 of the Act?
- (b) Is Mr Chandler entitled to reject the vehicle because the faults amount to a failure of a substantial character for the purposes of s 21 of the Act?
- (c) Has Mr Chandler lost the right to reject the vehicle?
- (d) What remedy is Mr Chandler entitled to under the Act?
- (e) Did Fortis Cars coerce Mr Chandler into purchasing the vehicle?
Does the vehicle have faults that breach the acceptable quality guarantee?
[14] 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.
[15] 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.”
[16] 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 Chandler’s subjective perspective.
The vehicle has faults that breach the acceptable quality guarantee
[17] I am satisfied that the vehicle has, or has had, the following faults that breach the acceptable quality guarantee in s 6 of the Act:
- (a) A fault that caused the left front wheel to fall off, damaging the left front guard flare.
- (b) Chassis corrosion.
- (c) A faulty brake booster.
- (d) A faulty number plate light.
- (e) A faulty starter motor.
The fault that caused the wheel to fall off
[18] While returning from Christchurch to Westport, the vehicle’s left front wheel fell off, damaging the left front guard flare. When the vehicle was inspected by Avonhead Automotive Limited on 4 December 2017, the damage to the guard flare was one of the reasons for the vehicle failing its warrant of fitness inspection.
[19] I am satisfied that the fault that caused the wheel to fall off is a breach of the acceptable quality guarantee in s 6 of the Act. No reasonable consumer would expect the front wheel of a recently purchased vehicle, irrespective of its price, age and mileage, to fall off shortly after purchase, causing damage that would then cause the vehicle to fail a warrant of fitness inspection.
Chassis corrosion
[20] Avonhead Automotive also identified significant chassis rust in the vehicle. Wayne Roeske, the inspector who performed the warrant of fitness inspection, gave evidence that the vehicle had visible corrosion at the rear of its chassis that was “pretty bad” and that the chassis was “pitted” with corrosion. Mr Roeske said that the chassis has been painted with under seal, which could be disguising more extensive corrosion than the corrosion he saw. In his opinion, the vehicle needs a new chassis.
[21] I am satisfied, on the evidence of Mr Roeske, who I found to be a straightforward witness, that the vehicle has significant structural corrosion.
[22] I am also satisfied that the corrosion was present when the vehicle was sold to Mr Chandler. Mr Haynes, the Tribunal’s Assessor, advises that corrosion to the extent described by Mr Roeske could not have developed during Mr Chandler’s ownership. Mr Haynes says that rust of this nature takes much longer to develop.
[23] Further, Mr Chandler provided photographs of the vehicle’s chassis after the hearing. Fortis Cars suggested that the photographs showed dried sand or mud, which may have contributed to the corrosion during Mr Chandler’s ownership. Mr Haynes advises that the photograph shows historic corrosion pitting and holes in the chassis that could not have developed during Mr Chandler’s ownership. Mr Haynes notes that this corrosion has covered with under seal. Mr Haynes advises that a chassis is not usually painted with under seal, and painting a chassis with under seal is a way of concealing corrosion.
[24] In concluding that the vehicle had pre-existing structural corrosion, I am conscious of the fact that the vehicle was inspected by Vehicle Testing New Zealand (“VTNZ”) on 20 April 2017, and the vehicle did not fail that inspection due to corrosion. Fortis Cars pointed to this fact in support of its submission that the corrosion has arisen during Mr Chandler’s ownership.
[25] Mr Haynes advises that a warrant of fitness inspection is visual only, and the inspector is not able to do invasive testing to determine the extent of corrosion in the vehicle. I note Mr Roeske’s evidence that the vehicle’s chassis has been painted with under seal, and in light of Mr Hayne’s advice that this corrosion could not have developed during Mr Chandler’s ownership, I consider it likely that the chassis had been painted with under seal to disguise the chassis rust, meaning that the corrosion was not visible when the vehicle was assessed by VTNZ.
[26] I am therefore satisfied that the corrosion in the vehicle’s chassis breaches the acceptable quality guarantee in s 6 of the Act. A reasonable consumer would not expect a vehicle of this price, age and mileage to have significant structural corrosion, sufficient to cause the vehicle to fail a warrant of fitness inspection, at the time of purchase.
[27] I note for completeness that I am not suggesting the Fortis Cars was responsible for concealing the vehicle’s corrosion. There is no evidence to support that conclusion. Indeed, the evidence suggests that Fortis Cars was itself deceived by the concealment of this corrosion when it purchased the vehicle.
The faulty brake booster
[28] Avonhead Automotive also found a fault with the vehicle’s brake booster, which causes the vehicle’s brakes to lose vacuum.
[29] Mr Haynes advises that a brake booster is an enhanced master cylinder setup and is used to reduce the amount of pedal pressure needed for braking. The brake booster usually uses vacuum from the engine intake, but as a diesel engine does not produce vacuum it is supplied to the brake booster via a pump that is attached to the back of the engine’s alternator and connected by a series of vacuum lines. Mr Haynes advises that the vehicle is likely to be losing vacuum because of a faulty vacuum pump or a faulty line to the brake booster.
[30] This fault was present when the vehicle was sold to Mr Chandler. When VTNZ inspected the vehicle on 20 April 2017 the vehicle failed the warrant of fitness inspection for two faults, one of which was a faulty brake booster. It appears that the fault was not repaired before the vehicle was sold to Mr Chandler.
[31] This vehicle’s brake booster has a fault that causes it to lose vacuum, making the brake pedal less responsive. I am satisfied that the faulty brake booster breaches the acceptable quality guarantee in s 6 of the Act. A reasonable consumer would not expect a vehicle of this price, age and mileage to have a faulty brake booster, sufficient to cause the vehicle to fail a warrant of fitness inspection, at the time of purchase.
The faulty number plate light
[32] The other fault that caused the vehicle to fail the VTNZ warrant of fitness inspection was a faulty rear number plate light. That fault has not been repaired, and was identified by Avonhead Automotive on 4 December 2017.
[33] This does not appear to be a serious fault on its face, but it nonetheless causes the vehicle to fail a warrant of fitness inspection. I am satisfied that the fault breaches the acceptable quality guarantee in s 6 of the Act. A reasonable consumer would not expect a vehicle of this price, age and mileage to have a faulty number plate light, sufficient to cause the vehicle to fail a warrant of fitness inspection, at the time of purchase.
The faulty starter motor
[34] Shortly after Mr Chandler purchased the vehicle, he replaced the starter motor because the vehicle would not start.
[35] I am satisfied that the faulty starter motor also breaches the acceptable quality guarantee in s 6 of the Act, because it has not been as durable as a reasonable consumer would expect. A reasonable consumer would not expect the starter motor on a vehicle of this price, age and mileage to fail shortly after purchase.
The other alleged faults do not breach the acceptable quality guarantee
[36] I am not satisfied that the other faults alleged by Mr Chandler breach the acceptable quality guarantee.
[37] Mr Chandler has provided no independent evidence to support his allegation that the vehicle’s four-wheel drive hubs have been removed or that the vehicle’s odometer is faulty. Mr Chandler did have the hubs assessed by Buller Hydraulics, but the report prepared by Buller Hydraulics provides no information at all as to the nature or existence of any fault.
[38] Likewise, Mr Chandler has not proven that the vehicle’s cab has been unlawfully raised. Indeed, the evidence from Avonhead Automotive was that the cab was not raised.
[39] Further, some of the faults identified by Avonhead Automotive, although sufficient to cause the vehicle to fail a warrant of fitness inspection, do not breach the acceptable quality guarantee. Mr Haynes advises that the faulty sway bar links, leaking hub seals, worn wheel bearings, indicators and window washers are all faults that are likely to have developed during Mr Chandler’s ownership (because they were not identified in the VTNZ inspection on 20 April 2017), and are not unexpected in a vehicle of this price, age and mileage seven months after purchase. Accordingly, I am satisfied that, in relation to those faults, the vehicle has been as durable as a reasonable consumer would expect.
Do any of the faults amount to a failure of a substantial character?
[40] Under s 18(3) of the Act, Mr Chandler may reject the vehicle if it has a fault that amounts 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.”
[41] 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.
[42] I am satisfied that the structural corrosion in this vehicle is a failure of a substantial character. I consider that a reasonable consumer would not have paid $15,995 for a 23-year-old vehicle that had travelled nearly 245,000 kms at the date of purchase if it knew that it had pre-existing structural corrosion that would cause it to fail a warrant of fitness inspection, and require substantial repairs.
[43] I am also satisfied that, when the accumulated defects with the vehicle are considered together, they amount to a failure of a substantial character for the purposes of s 18(3)(a) of the Act.
[44] 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]
[45] This vehicle has numerous faults that breach the acceptable quality, many of which would have caused the vehicle to fail a warrant of fitness inspection. I am satisfied that, when those faults are considered together, the accumulation of faults are such that Mr Chandler could convincingly say that he has no confidence in the reliability of the vehicle.
[46] Mr Chandler is therefore entitled to reject the vehicle under s 18(3) of the Act.
Has Mr Chandler lost the right to reject the vehicle?
[47] Section 20 of the Act sets out the circumstances in which a purchaser loses the right to reject a vehicle. Relevant to this case, s 20(1)(c) of the Act states:
20 Loss of right to reject goods
(1) The right to reject goods conferred by this Act shall not apply if—
...
(c) the goods were damaged after delivery to the consumer for reasons not related to their state or condition at the time of supply.
The vehicle was damaged after it was sold to Mr Chandler
[48] The vehicle has been damaged after it was supplied to Mr Chandler, in that the left front guard flare requires repair. However, that damage was caused by the front wheel falling off, which I have found to have been a fault with the vehicle.
[49] Therefore, although the vehicle has suffered damage since it was supplied to Mr Chandler, he has not lost the right to reject the vehicle because the damage was related to the vehicle’s condition at the time of supply – in that the damage was caused by a fault that was present in the vehicle.
[50] At the end of the second hearing, Fortis Cars noted that it has not had an opportunity to inspect the vehicle and determine its condition. Although I have seen no evidence that Fortis Cars had previously asked to inspect the vehicle to determine whether it had been damaged since Mr Chandler purchased it, I considered that the Tribunal would be assisted in making its decision by understanding the current condition of the vehicle.
[51] I therefore directed Mr Chandler to provide colour photographs of the vehicle’s exterior and interior sufficient to enable the Tribunal to determine the current condition of the vehicle. Those photographs show that the vehicle is in acceptable condition and does not appear to have been damaged while in Mr Chandler’s possession.
[52] Accordingly, Mr Chandler has not lost the right to reject the vehicle.
What remedy is Mr Chandler entitled to under the Act?
[53] 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.”
[54] Mr Chandler is entitled to reject the vehicle and obtain a refund under s 18(3)(a) of the Act as the corrosion amounts to a failure of a substantial character. Further, the accumulated defects amount to a failure of a substantial character. Accordingly, I order that Fortis Cars must, within 10 working days of the date of this decision, pay $15,995 to Mr Chandler.
[55] Under s 18(4) of the Act, Mr Chandler is also entitled to recover $40, being the cost of the Avonhead Automotive inspection. Mr Chandler also seeks to recover $350, being the cost of a replacement starter motor. Mr Chandler has provided no evidence to prove that he incurred this cost. As a result, I decline to make that order.
Did Fortis Cars coerce Mr Chandler into purchasing the vehicle?
[56] Given my finding above that Mr Chandler is entitled to reject the vehicle and obtain a refund of the purchase price and other costs incurred, I do not need to determine whether Fortis cars has coerced Mr Chandler into purchasing the vehicle.
[57] That is because, even if I did make that finding – which I will stress I have not – Mr Chandler would not be entitled to any further remedy over and above the remedies he is entitled to under the Consumer Guarantees Act – i.e. compensation for the loss or damage he has suffered as a result of Fortis Cars’ conduct. Mr Chandler had asked for orders punishing Fortis Cars for its alleged conduct. I cannot make that award under any of the laws that fall within the Tribunal’s jurisdiction. If Mr Chandler wishes to pursue this aspect of his claim he will need to do so in another jurisdiction.
Conclusion
[58] The vehicle has several faults that breach the acceptable quality guarantee in s 6 of the Act.
[59] The corrosion in the chassis is a failure of a substantial character sufficient to justify rejection of the vehicle under s 18(3) of the Act. Likewise, when all the vehicle’s faults are considered together they amount to an accumulation of defects sufficient to justify rejection of the vehicle.
[60] Although the vehicle was damaged after it was delivered to Mr Chandler, he has not lost the right to reject it. That is because the damage was caused by a fault with the vehicle.
[61] Mr Chandler is entitled to reject the vehicle and recover all amounts paid in respect of it. Consequently, the Tribunal orders that Fortis Cars Limited shall, within 10 working days of the date of this decision, pay $16,035 to Kevin Chandler.
DATED at AUCKLAND this 18th day of December 2017
B.R. Carter
Adjudicator
[1] Cooper v Ashley & Johnson Motors Limited [1996] 7 TCLR 407.
[2] Ibid, at 417.
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