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Holt v Hitchcock Wholesale Limited - Reference No. MVD 065/2017 (Auckland) [2017] NZMVDT 61; [2017] NZMVT Auckland 61 (1 June 2017)

Last Updated: 18 July 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL



[2017] NZMVDT Auckland 61
Reference No. MVD 065/2017


IN THE MATTER
of the Motor Vehicle Sales Act 2003


AND


IN THE MATTER
of a dispute


BETWEEN
ASHLEY HOLT


Purchaser


AND
HITCHCOCK WHOLESALE LIMITED


Trader


MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor

HEARING at Auckland on 11 May 2017

DATE OF DECISION 1 June 2017

APPEARANCES
Mr A Holt, Purchaser
No appearance for the Trader

[1]

ORDERS

  1. Hitchcock Wholesale Limited shall at its own expense, within 10 working days of the date of this decision, have the engine oil leak repaired at a MTA certified repairer.
  2. Hitchcock Wholesale Limited shall, within five working days of the date of this decision, pay Mr Holt $836.30.

DECISION

[1] The vehicle has an engine oil leak and its battery malfunctioned within two months of purchase. The vehicle was also sold without a recent warrant of fitness. See paragraphs [14] to [17].
[2] The engine oil leak and defective battery are faults that breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the Act”). See paragraphs [18] to [25]
[3] Neither the engine oil leak nor the defective battery is a failure of a substantial character sufficient to allow Mr Holt to reject the vehicle. Further, Hitchcock Wholesale Limited (“Hitchcock Wholesale”) should be given one final opportunity to remedy the engine oil leak. See paragraphs [26] to [34].
[4] Mr Holt is entitled to remedies under the Act. Hitchcock Wholesale must repair the engine oil leak and compensate Mr Holt for the cost of a replacement battery, the cost of having the vehicle’s faults assessed and the cost of obtaining a warrant of fitness for the vehicle. See paragraphs [35] to [38].
[5] Mr Holt is also entitled to recover the cost of travelling to the hearing. See paragraphs [39] to [41].

REASONS

Introduction

[6] On 27 November 2016, Ashley Holt purchased a 2007 Volkswagen Touareg registration number EKR10 from Hitchcock Wholesale for $19,250. The vehicle had an odometer reading of approximately 156,000 kms at the date of purchase.
[7] In a Trade Me listing for the vehicle, Hitchcock Wholesale described the vehicle as being “absolutely perfect” mechanically.
[8] The vehicle has not been absolutely perfect mechanically. About two months after purchase the vehicle’s battery malfunctioned and required replacement. The vehicle also has an engine oil leak that has caused the vehicle to misfire. Mr Holt has obtained two different diagnoses as to the nature of the engine oil leak. Those diagnoses suggest that the engine oil leak will cost at least $1,000 to repair.
[9] To compound matters for Mr Holt, he had to obtain a new warrant of fitness less than two months after purchase, as the vehicle was not supplied with a new warrant of fitness as is required by law.
[10] Hitchcock Wholesale has been more unreliable than the vehicle. Mr Holt has tried, without success, to have Hitchcock Wholesale address the vehicle’s faults. Hitchcock Wholesale has made promises to address the problems and to pay money to Mr Holt. Nothing has eventuated.
[11] Mr Holt’s patience with Hitchcock Wholesale has expired. He now seeks to reject the vehicle on the basis of the faults with the vehicle and the absence of a new warrant of fitness.
[12] Perhaps unsurprisingly, given its conduct in dealing with Mr Holt, Hitchcock Wholesale failed to appear at the hearing. Hitchcock Wholesale had received repeated notice of the hearing from the Tribunal, including by phone calls made on the morning of the hearing. It did not appear and the hearing proceeded without it.

The issues

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

What is the nature of the engine oil leak?

[14] The most serious fault with the vehicle is the engine oil leak. Mr Holt has had the leak assessed by two different assessors, Robertson Prestige and The Engine Room Automotive, both based in Palmerston North. Both assessors agree that there is an engine oil leak, although each has a different view as to the cause of that leak.
[15] Robertson Prestige says the vehicle has leaky rocker covers, allowing oil to leak into the coils and causing the vehicle to misfire. It also says that the vehicle has a leak coming from the rear crank cradle seal. It estimates that repairs will cost approximately $3,000.
[16] The Engine Room says that the vehicle has leaks coming from the oil filter housing seals and manifold centre plate gaskets. The Engine Room estimates that the repair will cost $1,226.14.
[17] The Tribunal’s assessor considers that the Engine Room’s assessment is likely to be more accurate than that of Robertson Prestige. The Engine Room cleaned the engine to properly identify the engines oil leak and the faults they found are common for this vehicles make and model

Do the vehicle’s faults breach the acceptable quality guarantee?

Relevant law

[18] 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.
[19] 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.”

[20] 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 the purchaser’s subjective perspective.
[21] In Stephens v Chevron Motor Court Limited,[1] the District Court held that the correct approach to the Act was first to consider whether the vehicle was of acceptable quality. If the vehicle was not of acceptable quality, the next point to consider was whether the purchaser required the trader to remedy any faults within a reasonable time in accordance with s 19 of the Act. If the failure to comply with the guarantee of acceptable quality is of a “substantial character” within the meaning of s 21, or if the faults cannot be remedied, the Tribunal is directed to ask whether the purchaser exercised its right to reject the vehicle within a reasonable time.

The defective battery was a breach of the acceptable quality guarantee

[22] The defective battery meant that the vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act because it was not free of defects at the time of sale.
[23] Mr Holt replaced the vehicle’s battery on 3 February 2017. I am satisfied that a reasonable consumer would not expect a recently purchased vehicle of this age, price and mileage to have a defective battery.

The engine oil leak was a breach of the acceptable quality guarantee

[24] The engine oil leak also means the vehicle has not complied with the acceptable quality guarantee.
[25] A reasonable consumer would not expect a vehicle of this price, age and mileage to develop a leak in the oil filter housing seals and manifold centre plate within three months of purchase.

Is Mr Holt entitled to reject the vehicle?

Relevant law

[26] Section 18(3) of the Act sets out the circumstances in which Mr Holt can reject the vehicle. Section 18 of the Act provides as follows:

“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.”

[27] In the circumstances of this case, Mr Holt may reject the vehicle under s 18(3) of the Act if:

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

“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.”

The vehicle’s faults are not a failure of a substantial character

[28] I am not satisfied that the faults with this vehicle amount to a failure of a substantial character.
[29] The battery malfunction is minor and easily remedied. Likewise, the Tribunal’s assessor advises that the engine oil leak is not a major fault and can also be easily remedied. The assessor also considers that the engine oil leak is the type of fault that can arise in vehicles of this age and mileage.
[30] Although the engine oil leak is clearly a breach of the acceptable quality guarantee, I consider that it is not a failure of a substantial character. I am not satisfied that a reasonable consumer would not have purchased this vehicle for the price paid by the purchaser if it had known of the nature and extent of the oil leak.

Has Hitchcock Wholesale failed to remedy the engine oil leak?

[31] Despite Hitchcock Wholesale’s general disinterest in remedying the engine oil leak, I am not satisfied that its failure to remedy the fault is sufficient to warrant rejection of the vehicle.
[32] This is because Hitchcock Wholesale has not yet been asked to address the actual cause of the engine oil leak. The cause of the leak was not identified until 10 May 2017, when Mr Holt had the vehicle assessed by The Engine Room.
[33] Hitchcock Wholesale had only been asked to perform, or at least pay for, the repairs suggested by Robertson Prestige. Although it has failed to perform or pay for those repairs, I consider, based on the Tribunal assessor’s advice, that the repairs suggested by Robertson Prestige were unnecessary and would not have remedied the fault. This is because the cause of the engine oil leak was misdiagnosed by Robertson Prestige.
[34] I therefore consider that the cause of the engine oil leak was not known until 10 May 2017, and Hitchcock Wholesale has not been given a full opportunity to remedy that cause. I acknowledge that Hitchcock Wholesale has shown no genuine interest in addressing the engine oil leak. However, now that the cause of the leak is known, Hitchcock Wholesale should be given one final opportunity to address it before Mr Holt can reject the vehicle.

What remedies are available to the purchaser under the Act?

[35] Under s 18(2)(a) of the Act, Mr Holt is entitled to have the engine oil leak repaired by Hitchcock Wholesale within a reasonable time.
[36] Mr Holt is also entitled to recover the cost he has incurred in purchasing a new battery and in having the vehicle’s faults assessed by Robertson Prestige. Mr Holt is also entitled to recover the cost of obtaining a warrant of fitness in January 2017. The vehicle should have been supplied with a new warrant of fitness and was not.
[37] The Tribunal accordingly orders that Hitchcock Wholesale shall, at its own expense and within 10 working days of the date of this decision, have the engine oil leak repaired at a MTA certified repairer.
[38] Hitchcock Wholesale must also, within five working days of the date of this decision, pay Mr Holt:

What other remedies are available to the purchaser?

[39] Hitchcock Wholesale received notice of the hearing and failed to attend. The Tribunal has not heard from Hitchcock Wholesale as to its absence, so no good cause for the absence has been established.
[40] Under cl 14(1)(b) and (2)(b of sch 1 to the Motor Vehicle Sales Act, the Tribunal may order Hitchcock Wholesale to pay the reasonable costs of Mr Holt in connection with these proceedings where Hitchcock Wholesale, after receiving notice of the hearing, fails to attend the hearing without good cause.
[41] Mr Holt travelled from Fielding to Auckland to attend the hearing. The Tribunal therefore orders Hitchcock Wholesale to pay Mr Holt’s travel expenses of $108.

DATED at AUCKLAND this 1st day of June 2017

B.R. Carter
Adjudicator


[1] Stephens v Chevron Motor Court Limited [1996] DCR1.

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