Setu v Brent Smith t/a Motor Me - Reference No. MVD 079/2017 (Auckland) [2017] NZMVDT 66; [2017] NZMVT Auckland 66 (12 June 2017)

Last Updated: 18 July 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT Auckland 66 Reference No. MVD 079/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	FAAOSO SETU
		Purchaser
	AND	BRENT SMITH TRADING AS MOTOR ME
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 17 May 2017
DATE OF DECISION 12 June 2017
APPEARANCES
Mr F Setu, Purchaser Mrs S Setu, witness for the Purchaser
No appearance for the Trader

ORDERS

1. Mr Setu’s application to reject the vehicle is upheld.
2. The collateral finance agreement between Mr and Mrs Setu and Instant Finance Limited dated 27 January 2017 (“the collateral finance agreement”) shall vest in the trader as from 2 February 2017 and Brent Smith shall as from that date discharge all of Mr and Mrs Setu’s obligations under the collateral finance agreement.

100. Brent Smith shall, within 10 working days of the date of this decision, pay Mr Setu the following sums:
     • (i) The capital component of all payments made by the purchaser under the collateral finance agreement as from 27 January 2017 to 2 February 2017; and
     • (ii) All payments of principal and interest made by the purchaser to Instant Finance under the collateral finance agreement after 2 February 2017.
     • (iii) $25, being the cost of the replacement oil purchased by Mr Setu.

DECISION

[1] The vehicle did not comply with the guarantee as to acceptable quality in s 6 of the Consumer Guarantees Act 1993 (“the Act”). A reasonable consumer would not expect a vehicle to lose oil, overheat and suffer engine damage on the day of purchase. See paragraphs [11] to [14].
[2] The vehicle’s faults are a failure of substantial character. A reasonable consumer would not have acquired the vehicle if it had known the vehicle to have no oil and overheat on the day of purchase, causing it to suffer significant engine damage as a result of being driven with no oil. See paragraphs [15] to [18].
[3] Mr Setu is entitled to reject the vehicle and Mr Setu is entitled to remedies under the Act as set out in the Orders above. See paragraphs [19] to [27].

REASONS

Introduction

[4] On 28 January 2017, Faaoso Setu purchased a 2006 Nissan Serena registration number KJH369 for $6,490 from Brent Smith trading as Motor Me. The vehicle had travelled 134,125 kms at the date of purchase. Mr Setu, together with his wife Sesalina Setu, borrowed $10,573.66 from Instant Finance Limited to fund the purchase.
[5] Mrs Setu drove the vehicle home to Beachhaven from Mr Smith’s yard in Onehunga. While crossing the Harbour Bridge three of the vehicle’s warning lights illuminated and the vehicle lost power. Mrs Setu managed to exit the motorway onto Onewa Road, where the vehicle’s engine stopped.
[6] Mr Setu then checked the vehicle’s oil levels and found none. He purchased five litres of oil and replenished the vehicle’s sump. Mr Setu then drove the vehicle home. The vehicle was sluggish and reached speeds of only 30 to 40 km/h. The airbag and engine maintenance warning lights remained illuminated.
[7] Mr Setu drove the vehicle the next day. Initially the airbag and engine maintenance warning lights remained on and the vehicle was sluggish. However, shortly into the drive the engine maintenance light switched off and the vehicle regained power. The airbag light remained on.
[8] Mr Setu was unhappy with the vehicle he had purchased. Mr Setu rejected the vehicle on 2 February 2017 and returned it to Brent Smith. Mr Setu has now applied to the Tribunal for orders upholding his rejection of the vehicle. Brent Smith failed to attend the hearing.

The Issues

[9] The following issues arise:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Act?
• (b) Were the vehicle’s failures of a substantial character within the meaning of s 21 of the Act?
• (c) What remedy is Mr Setu entitled to under the Act?

Did the vehicle comply with the guarantee of acceptable quality?

Relevant law

[10] 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.
[11] 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.”

[12] 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.

The vehicle did not comply with the acceptable quality guarantee

[13] 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 has not been as durable as a reasonable consumer would expect.
[14] I acknowledge the vehicle was an inexpensive, 11 year old vehicle, which had travelled 134,125kms. However a reasonable consumer would not expect a vehicle of this price, age and mileage to lose power, have no oil, overheat and suffer engine damage on the day of purchase.

Are the defects with the vehicle a failure of a substantial character?

Relevant law

[15] Mr Setu says that the damage to the vehicle amounts to a failure of a substantial character as 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.”

The engine damage is a failure of a substantial character

[16] I am satisfied that the vehicle’s faults are a failure of a substantial character. The vehicle had no oil and overheated shortly after purchase. Further, the Tribunal’s assessor considers that the vehicle is likely to have suffered significant damage to the engine’s crankshaft and bearings as a result of being driven with no oil and overheating. The assessor considers that the engine would have been damaged by the time the vehicle first stopped on Onewa Road, so any further use of the vehicle by Mr Setu is unlikely to have contributed to the engine damage.
[17] The extent of the engine damage is unknown, but the Tribunal’s assessor says that the engine will have significant damage as a result of being driven without oil. The assessor says that the engine could fail at any time as a result.
[18] I am satisfied that a reasonable consumer would not have purchased the vehicle if it had known that vehicle had no oil, would overheat and suffer what is likely to be significant engine damage on the day of purchase.

What remedy is Mr Setu entitled to under the Act?

Relevant law

[19] 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.”

[20] Mr Setu has the right to reject the vehicle under s 18(3)(a) of the Act because the vehicle’s faults are a failure of a substantial character.
[21] The Tribunal upholds Mr Setu’s rejection. Further, Brent Smith appears to have already accepted Mr Setu’s rejection.
[22] Mr Smith failed to appear at the hearing, so I have not had the opportunity to hear from him. However, by his actions, Mr Smith appears to have accepted Mr Setu’s rejection of the vehicle.
[23] Mr Setu returned the vehicle to Mr Smith on 2 February 2017. On 15 March 2017 Mr Setu received a letter from the NZ Transport Agency advising him that the vehicle had been sold or disposed of and that Mr Setu is no longer the registered owner of the vehicle. Mr Setu has also provided a CarJam report to the Tribunal, which shows that the vehicle was transferred to an unknown person in March 2017. Mr Setu gave evidence that he did not authorise this change of ownership.
[24] I consider the most likely explanation for this transfer is that, following rejection of the vehicle, Brent Smith performed the transfer without Mr Setu’s knowledge. Accordingly, by these actions in transferring the vehicle’s ownership, I am satisfied that Mr Smith has accepted the rejection of this vehicle.
[25] Under s 23A(2) of the Act, the Tribunal orders that the collateral finance agreement between Mr and Mrs Setu and Instant Finance, shall vest in Brent Smith as from 2 February 2017 and Brent Smith shall as from that date, discharge all of Mr and Mrs Setu’s obligations under the collateral finance agreement.
[26] Brent Smith shall also within 10 working days of the date of this decision, pay Mr Setu:

• (a) the capital component of all payments made by Mr and Mrs Setu under the collateral finance agreement as from the date the collateral agreement was entered into to 2 February 2017; and
• (b) the total amount of all payments of principal and interest made by the Mr and Mrs Setu to Instant Finance under the collateral finance agreement after 2 February 2017.

[27] Brent Smith shall also pay Mr Setu $25, being the cost of purchasing replacement oil on the date he purchased the vehicle.

DATED at AUCKLAND this 12th day of June 2017

B.R. Carter
Adjudicator