Ryan v Starter Cars Limited - Reference No. MVD 350/2016 (Auckland) [2017] NZMVDT 65; [2017] NZMVT Auckland 65 (6 June 2017)

Last Updated: 19 July 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 65 Reference No. MVD 350/2016
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	HOLLY ROSANNA RYAN
		Purchaser
	AND	STARTER CARS LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Hamilton on 10 May 2017
DATE OF DECISION 6 June 2017
APPEARANCES
Ms H R Ryan, Purchaser Mr H Ryan, witness for the Purchaser
Mr D T Walmsley, for the Trader

ORDERS

1. Starter Cars must pay Ms Ryan $1,300 within ten working days of the date of this decision.

DECISION

[1] The vehicle had a number of faults that breached the guarantee as to acceptable quality in s 6 of the Consumer Guarantees Act 1993 (“the Act”). See paragraphs [19] to [24].
[2] The engine damage is not a breach of the acceptable quality guarantee in s 6 of the Act. The damage to the vehicle’s engine was caused by Ms Ryan’s continued use of an overheating vehicle. See paragraphs [25] to [28].
[3] Ms Ryan is entitled to recover the cost of replacement tyres and the cost of the infringement fines, imposed because the loan vehicle supplied by Starter Cars was unregistered. See paragraphs [29] to [34].
[4] Ms Ryan is not entitled to recover any loss she suffered on the resale of the vehicle. See paragraphs [35] and [36].

REASONS

Background

[5] On 25 July 2015, Holly Ryan purchased a 1996 Nissan Safari for $8,000 from Starter Cars Limited.
[6] Ms Ryan immediately noticed problems with the vehicle. The air conditioning and tachometer were not working and the central locking functioned intermittently.
[7] Ms Ryan returned the vehicle to Starter Cars on 1 August 2015 for repairs. Starter Cars provided Ms Ryan with a loan vehicle to use until the repairs were complete.
[8] The loan vehicle’s registration expired while it was in Ms Ryan’s possession. Starter Cars received two infringement notices, of $200 each, for the loan vehicle.
[9] Quite remarkably, rather than take responsibility for failing to renew the registration of its own vehicle, Starter Cars instead advised Baycorp that Ms Ryan was liable for the debt. Starter Cars then provided Ms Ryan’s personal details to Baycorp. After receiving repeated demands for payment from Baycorp, and after Starter Cars refused to pay the fines, Ms Ryan paid the infringement notices to avoid affecting her credit rating.
[10] Ms Ryan’s vehicle was returned to her on 9 September 2015. A few weeks later Ms Ryan noticed that the air conditioning had stopped working. She also noticed that the vehicle’s engine was overheating.
[11] On 29 September 2015, the vehicle was assessed by Michies Automotive in Takapuna. Ms Ryan told Michies Automotive that the vehicle was overheating. Michies Automotive found no fault. Michies Automotive did tell Ms Ryan to bring the vehicle back in if the overheating continued.
[12] Michies Automotive also identified that the vehicle’s tyres were worn and required replacement. Ms Ryan gave evidence that Michies Automotive told her the tyres would have failed a warrant of fitness inspection. In November 2016 Ms Ryan purchased new tyres for the vehicle for $900. She had previously spoken with Starter Motors who had indicated that it would be prepared to help Ms Ryan to pay for the new tyres.
[13] The overheating continued and Ms Ryan did not take the vehicle to Michies Automotive, or any other mechanic, for assessment. Instead, she continued driving despite noticing the vehicle overheat on at least four occasions between October and December 2015.
[14] On 31 December 2015, the vehicle overheated again. Ms Ryan waited for the engine to cool and then continued driving. The next day the vehicle overheated again and the vehicle’s engine failed.
[15] The vehicle was towed to Michies Automotive who say that the vehicle had a blown head gasket and that two cylinders had very low compression. Michies Automotive estimated that it would cost approximately $6,000 to repair. Michies Automotive says the overheating was caused by a leaking frost plug.
[16] Ms Ryan then sold the vehicle for parts, receiving $1,200. She has applied to the Tribunal to recover the loss she made on the sale of the vehicle and to recover the cost of new tyres, the infringement notices and of towing the vehicle.
[17] Starter Cars failed to appear at the hearing. Daniel Walmsley, an associate of John Hamblin, a director of Starter Cars did appear. Mr Walmsley was of some assistance to the Tribunal, particularly in relation to the circumstances surrounding the infringement notices, but otherwise could not assist the Tribunal in understanding Starter Cars’ position on other aspects of Ms Ryan’s claim.

The Issues

[18] The following issues arise:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Act?
• (b) What remedy, if any is available to the purchaser?

Did the vehicle comply with the guarantee of acceptable quality?

Relevant law

[19] 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.
[20] 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.”

[21] 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.
[22] 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 vehicle was not of acceptable quality

[23] I am satisfied that the vehicle was not of acceptable quality as it had a number of faults that arose shortly after purchase. The vehicle’s air conditioning and tachometer did not work and the central locking worked only intermittently. The vehicle had a leaking frost plug that caused it to intermittently overheat. The vehicle also had worn tyres that required replacement two months after purchase.
[24] These faults mean 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 and was not durable. I am satisfied that a reasonable consumer would not expect a vehicle of this age, price and mileage to have these faults so shortly after purchase.

The engine failure was not a breach of the acceptable quality guarantee

[25] I am satisfied that the engine damage is not a breach of the acceptable quality guarantee.
[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.
[27] I am satisfied that the engine damage was caused by Ms Ryan’s continued driving of an overheating vehicle. The Tribunal’s assessor advises that, if Ms Ryan had ceased driving the overheating vehicle and had the leaking frost plug repaired, it is highly likely that the vehicle would not have suffered the irreparable engine damage.
[28] In September 2015 Michies Automotive told Ms Ryan to return the vehicle to it if the overheating recurred. Ms Ryan did not do so. Instead she drove for three months, and 2,831 kms, in a vehicle that was continuing to intermittently overheat. In the circumstances, I consider Ms Ryan’s continued use of the vehicle to have been inconsistent with the manner in which a reasonable consumer would have used the vehicle.

What remedy is Ms Ryan entitled to?

Relevant law

[29] Section 18 of the Act sets out the remedies available to a purchaser where goods fail to comply with guarantees. 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.”

Ms Ryan is entitled to recover the cost of replacement tyres

[30] As set out above, the vehicle had worn tyres that breached the acceptable quality guarantee. Ms Ryan gave evidence that she contacted Starter Motors, who agreed to assist her in paying for replacement tyres. I therefore consider that Ms Ryan has complied with s 18(2)(a) by requiring Starter Motors to remedy the failure. Starter Motors agreed to allow the fault with the tyres to be remedied elsewhere, with it contributing to the cost.
[31] Ms Ryan is therefore able to recover $900 from Starter Motors, being the cost of the replacement tyres.

Ms Ryan is also entitled to a remedy under s 18(4) of the Act

[32] As noted above, the faulty air conditioning and tachometer were breaches of the acceptable quality guarantee. Under s 18(4) of the Act, a purchaser can recover the reasonably foreseeable loss or damage that results from a breach of a guarantee.
[33] Ms Ryan was using the loan vehicle because of the faults with her vehicle. She has suffered loss because of this use. That loss was reasonably foreseeable, in that it is unsurprising that an unregistered vehicle may accrue infringement fines. Starter Cars is responsible for that loss. It had an obligation to maintain the vehicle’s registration and is highly likely to have received reminders from NZTA about the pending lapse of the registration.
[34] Ms Ryan has therefore suffered loss by using the loan vehicle – she has paid $400 in infringement fines imposed because the vehicle’s registration had expired.

Ms Ryan is not entitled to recover the loss on resale of the vehicle or towing costs

[35] Ms Ryan sold the vehicle for $6,800 less than she paid for it. She sold the vehicle because of the engine damage, which would cost approximately $6,000 to repair.
[36] Ms Ryan now seeks an order to recover that loss. I cannot make that order as I have found that the engine damage was not a breach of any of the Act’s guarantees. Instead the engine damage, and therefore Ms Ryan’s loss, was caused by her continued driving of an overheating vehicle.

DATED at AUCKLAND this 6th day of June 2017

B.R. Carter
Adjudicator

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