Caie v Sinclair and Pryor Motors Limited t/a Eastland Toyota - Reference No. MVD 053/2017 (Auckland) [2017] NZMVDT 74; [2017] NZMVT Auckland 74 (28 June 2017)

Last Updated: 18 July 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT Auckland 74 Reference No. MVD 053/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	AARON PAUL CAIE
		Purchaser
	AND	SINCLAIR AND PRYOR MOTORS LIMITED TRADING AS EASTLAND TOYOTA
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 25 May 2017
DATE OF DECISION 28 June 2017
APPEARANCES
Mr P A Caie, Purchaser
Ms S Walton, Witness for the Purchaser
Mr A Hellman, for the Trader
Mr D Croskery, Witness for the Trader

ORDERS

A. Mr Caie’s application is dismissed.

DECISION

[1] The vehicle has engine damage caused by a partially blocked or damaged fuel injector. The blockage in the fuel injector was most likely caused by contaminants in the vehicle’s fuel. See paragraphs [12] to [14].
[2] The vehicle does not have any fault that breaches the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the CGA”). The vehicle did not have a pre-existing fault that caused the engine damage and has been as durable as a reasonable consumer would expect. See paragraphs [15] to [24].
[3] Eastland Toyota has engaged in conduct that breaches s 9 of the Fair Trading Act 1986 (“the FTA”). Mr Caie was misled by pre-purchase representations that the vehicle’s service history was known and good. However, Mr Caie’s loss was not caused by that misleading conduct. Instead, his loss was caused by contaminated fuel entering the vehicle and blocking or damaging the vehicle’s fuel injectors. See paragraphs [25] to [40].

REASONS

Introduction

[4] On 4 November 2015, Aaron Caie purchased a 2007 Toyota Hilux 3.0TD from Sinclair and Pryor Motors Limited trading as Eastland Toyota for $25,990. The vehicle had an odometer reading of 201,797 kms at the date of purchase.
[5] In February 2017, 15 months and approximately 28,000 kms later, the vehicle suffered significant engine failure that will cost nearly $9,000 to repair.
[6] Mr Caie says the vehicle had a pre-existing fault that has caused the engine damage and that the vehicle has not been as durable as a reasonable consumer would expect. Mr Caie also alleges that he was misled by Eastland Toyota’s pre-purchase representation that the vehicle’s service history was known and good. Mr Caie alleges the service history was neither known, nor good.
[7] Eastland Toyota considers that the vehicle did not have a pre-existing fault and that it has been as durable as a reasonable consumer would expect. Eastland Toyota also denies misleading Mr Caie about the vehicle’s service history.

The Issues

[8] The following issues arise in this case:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the CGA?
• (b) Has Eastland Toyota engaged in conduct that breaches s 9 of the FTA?
• (c) If so, what if any remedy is Mr Caie entitled to?

Did the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the CGA?

[9] Section 6 of the CGA imposes on suppliers and manufacturers of consumer goods "a guarantee that the goods are of acceptable quality." Section 2 of the CGA defines "goods" as including vehicles.
[10] 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.”

[11] 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 CGA 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.

What is the nature of the fault with the vehicle?

[12] The vehicle’s engine has suffered piston failure in its number one cylinder. This failure has also potentially caused damage to the vehicle’s turbo charger, which may require replacement. Hawke’s Bay and Taupo Toyota have provided an estimate of $8,963.10 to repair the engine damage.
[13] The Tribunal’s assessor, Mr Gregory, advises that the piston failure was likely to have been caused by a partially blocked or damaged fuel injector. The vehicle uses diesel fuel. Diesel injectors atomise fuel and spray it evenly throughout the cylinder or pre-combustion chamber. Mr Gregory advises that, if the injector nozzle is partially blocked or damaged due to contaminants in the fuel, the diesel may be directed to only one part of the cylinder or pre-combustion chamber. That resulting jet of diesel can, over time, produce a hole in the piston. It does so by causing hot spots in the piston crown and induces diesel knock.
[14] Mr Gregory considers that the injector has most likely become blocked or damaged due to contaminants in the vehicle’s fuel. Water and other contaminants break down the lubricating properties of the diesel fuel causing rapid abrasive wear and corrosion. Common rail systems (such as that found in this vehicle) require almost perfect filtration, and just a small amount of water or contaminant will quickly damage injectors.

The fault was not pre-existing

[15] Mr Caie alleged during the hearing that a rattling noise the vehicle had made since purchase is indicative that the vehicle had engine damage when he purchased it. Mr Caie advised that, throughout the time he has owned the vehicle, its vehicle’s engine rattled when cold. He called it the death rattle. Mr Caie stated that he was told by a mechanic when he purchased the vehicle that this rattling noise could be related to a problem with the vehicle’s injectors. Mr Caie says he was reassured by Eastland Toyota that the vehicle’s injectors had been reconditioned before the vehicle was sold to him, so he took the matter no further.
[16] Mr Gregory considers it unlikely that the vehicle had a pre-existing fault that caused the engine damage. In response to Mr Caie’s suggestion that the engine’s rattling noise was indicative of a pre-existing fault, Mr Gregory advises that Toyota Hiluxes frequently rattle when cold and that the engine rattle alone is not indicative of any underlying fault with the vehicle. Mr Gregory also notes that the vehicle’s injectors had been reconditioned prior to the vehicle being sold to Mr Caie and it is unlikely that those reconditioned injectors would have been faulty at the time of sale.
[17] Mr Gregory advises that the fault is likely to have arisen during Mr Caie’s ownership when the vehicle’s fuel became contaminated. Mr Caie gave evidence that the vehicle’s fuel filter light came on in March or April 2016. Mr Gregory considers that the vehicle’s fuel filter light coming on is indicative of the filter being blocked with contaminants.
[18] The contamination is likely to have come from an external source. Mr Gregory advises that none of the evidence before the Tribunal shows that the vehicle has any fault that would cause the fuel to become contaminated. Although the contaminant has come from an external source, Mr Gregory also advises that contaminated fuel does not necessarily suggest misuse by Mr Caie. He advises that contaminants can enter fuel in a number of ways, including through fuel contaminated with water or dirt being purchased from a service station.
[19] On the basis of the evidence at the hearing, and Mr Gregory’s advice, I am satisfied that the engine damage was caused by contaminants in the vehicle’s fuel and that the vehicle did not have a pre-existing fault that caused the engine damage.

The vehicle has been as durable as a reasonable consumer would expect

[20] The next question I must consider is whether the vehicle has been as durable as a reasonable consumer would expect.
[21] Mr Caie says that the vehicle should have lasted substantially longer than 15 months and approximately 28,000 kms of driving before it developed a significant engine fault. Mr Caie says that he was told by Eastland Toyota that Toyota Hiluxes were reliable and known to travel up to 500,000 kms without trouble and that this vehicle has not been nearly as durable as would reasonably be expected. He also emphasised that he serviced the vehicle as required and only drove the vehicle on the road.
[22] Taking account of Mr Gregory’s advice that the engine damage is likely to have been caused by external contaminants in the vehicle’s fuel, rather than any underlying defect or deficiency with the vehicle, I am satisfied that the vehicle has not lacked durability. Further, even if it is subsequently shown that this vehicle had a pre-existing fault that caused the engine damage, I would remain satisfied that the vehicle has not lacked durability.
[23] Mr Caie paid $25,990 for an eight year old Toyota Hilux with 201,000 kms on its odometer. In his 15 months of use he travelled a little less than 28,000 kms. Although the vehicle has not been as durable as Mr Caie expected it to be, I am satisfied that it has been as a durable as a reasonable consumer would expect of a used Toyota Hilux, taking account of its age, price and mileage at the date of purchase and to the extent of use that Mr Caie has had from the vehicle since.
[24] In reaching this conclusion I am mindful of the pre-purchase representations made by Eastland Toyota that Hiluxes were reliable and can travel up to 500,000 kms without trouble. However, those representations were an expression of the salesman’s opinion and are not in themselves a warranty that the vehicle will in fact travel up to 500,000 kms without trouble. This vehicle has been as durable as could reasonably be expected.

Did Eastland Toyota mislead Mr Caie about the vehicle’s service history?

[25] Mr Caie alleged that Eastland Toyota made a misleading pre-purchase representation that the vehicle’s service history was known and good. Mr Caie says that Eastland Toyota did not know all of the vehicle’s service history, and what it did know shows that the vehicle’s service history was not as positive as represented.
[26] Section 9 of the FTA reads as follows:

“9 Misleading and deceptive conduct generally

No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

[27] The appropriate approach to determining whether conduct is misleading and deceptive has been considered by the Supreme Court in Red Eagle Corporation Ltd v Ellis.[1] The judgment of the Court was delivered by Blanchard J:

“It is, to begin with, necessary to decide whether the claimant has proved a breach of s 9. That section is directed to promoting fair dealing in trade by proscribing conduct which, examined objectively, is deceptive or misleading in the particular circumstances. Naturally that will depend upon the context, including the characteristics of the person or persons likely to be affected. Conduct towards a sophisticated businessman may, for instance be less likely to be objectively regarded as capable of misleading or deceiving such a person than similar conduct directed towards a consumer or, to take an extreme case, towards an individual known by the defendant to have intellectual difficulties ... The question to be answered in relation to s 9 in a case of this kind is accordingly whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established. It is not necessary under s 9 to prove that the defendant’s conduct actually misled or deceived the particular plaintiff or anyone else. If the conduct objectively had the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9. If it is likely to do so, it has the capacity to do so. Of course the fact that someone was actually misled or deceived may well be enough to show that the requisite capacity existed.”

[28] I am satisfied that Eastland Toyota has engaged in misleading conduct. It made representations to Mr Caie that the vehicle’s service history was known and good. It was neither.
[29] The evidence shows that the vehicle’s service history was not known. For a period of four years between 2011 and 2015, over which time the vehicle travelled 60,000kms, there are no records as to the vehicle’s service history.
[30] The known service history was also not particularly good. Between May 2010 and April 2011 the vehicle had a string of faults that required repair, as set out in five pages of service history provided by Eastland Toyota.
[31] The service history is then silent until September 2015, when Eastland Toyota acquired the vehicle. At that time Eastland noted that the vehicle was overdue for a service. Eastland Toyota also identified a number of faults with the vehicle that required repair before it could be offered for sale, including suspension repairs, brake repairs, repairing a transmission oil leak, clearing a blocked pickup, replacing injector seals and replacing the engine skid trays.
[32] The vehicle had been used in the forestry industry, which the parties and Mr Gregory advise me suggests that it was being driven off road and in rugged terrain. The faults identified in the vehicle’s service history are consistent with the vehicle being driven off-road in difficult terrain.
[33] Eastland Toyota did not know of the vehicle’s full service history and the known service history could not accurately be described as good. As a result, I am satisfied that, by representing that the vehicle had a known service history, and that history was good, Eastland Toyota made a misleading representation to Mr Caie.

What remedy is available to Mr Caie?

[34] The remedies available for a breach of the FTA are discretionary. They are set out in s 43 of the FTA which is as follows:

“43 Other orders

(1) This section applies if, in proceedings under this Part or on the application of any person, a court or a Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:

(a) a contravention of a provision of Parts 1 to 4A (a relevant provision):

(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:

(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:

(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:

(e) conspiring with any other person in the contravention of a relevant provision.

(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—

(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and

(b) whether or not person A made the application or is a party to the proceedings.

(3) The orders are as follows:

(a) an order declaring all or part of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) to be void; and

(ii) if the court or the Disputes Tribunal thinks fit, to have been void at all times on and after a date specified in the order, which may be before the date on which the order is made:

(b) if an order described in paragraph (a) is made in respect of a contract that is associated with a collateral credit agreement, an order vesting in person B all or any of the rights and obligations of person A under the collateral credit agreement:

(c) an order in respect of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) varying the contract or the arrangement in the manner specified in the order; and

(ii) if the court or the Disputes Tribunal thinks fit, declaring the varied contract or arrangement to have had effect on and after a date specified in the order, which may be before the date on which the order is made:

(d) if an order described in paragraph (c) is made in respect of a contract that is associated with a collateral credit agreement, and if that order results in person A no longer having property in the goods that are the subject of the contract, an order vesting in person B the rights and obligations of person A under the collateral credit agreement:

(e) an order directing person B to refund money or return property to person A:

(f) an order directing person B to pay to person A the amount of the loss or damage:

(g) an order directing person B, at person B’s own expense, to repair, or to provide parts for, goods that have been supplied by person B to person A:

(h) an order directing person B, at person B’s own expense, to supply specified goods or services to person A.

(4) In subsection (3) (a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—

(a) is arranged or procured by the supplier of the goods; and

(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.

(5) An order made under subsection (3) (a) to (d) does not prevent proceedings being instituted or commenced under this Part.

(6) This section does not limit or affect—

(a) the Illegal Contracts Act 1970; or

(b) section 317 of the Accident Compensation Act 2001.”

[35] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43. The Tribunal must consider whether:

• (a) The purchaser was in fact misled or deceived; and
• (b) If so, was the trader’s conduct the effective cause or an effective cause of the purchaser’s loss or damage?

[36] I find that Mr Caie was misled. He bought the vehicle thinking its service history was known and good. It was not.
[37] However, I am not satisfied that Eastland Toyota’s misleading conduct was an effective cause of Mr Caie’s loss.
[38] Mr Caie may not have purchased the vehicle if he had known of its true service history. In that sense, there is an indirect connection between the misleading conduct and his loss, in that Mr Caie would not have suffered loss if he did not own the vehicle. But this indirect connection is not sufficient to conclude that the representations about the vehicle’s service history were an effective cause of Mr Caie’s loss. To succeed in a claim under s 9 of the FTA, I consider that Mr Caie must show that the vehicle had a fault related to its service history, and that the fault caused, or contributed to, the engine damage.
[39] The evidence presented during the hearing shows that the cause of the engine damage was a fuel injector becoming partially blocked or damaged. The evidence does not show that the injector became blocked or damaged because of a lack of past servicing or the manner in which the vehicle had previously been used. The blockage or damage to the injector was most likely due to fuel becoming contaminated while the vehicle was in Mr Caie’s possession – a fault that is not attributable to the vehicle’s service history.
[40] On this basis I am satisfied that Eastland Toyota’s misleading conduct was not an effective cause of Mr Caie’s loss. Mr Caie is therefore not entitled to recover the cost of repairing the vehicle under the FTA.

Conclusion

[41] The vehicle has engine damage caused by a partially blocked or damaged fuel injector. The blockage or damage in the fuel injector was most likely caused by contaminants in the vehicle’s fuel. That fault does not breach the acceptable quality guarantee in s 6 of the CGA. The vehicle did not have a pre-existing fault that caused the engine damage and has been as durable as a reasonable consumer would expect. As a result, Mr Caie is not entitled to any remedy under the CGA.
[42] Mr Caie was misled by Eastland Toyota in breach of s 9 of the FTA. Mr Caie was misled by pre-purchase representations that the vehicle’s service history was known and good. However, because Mr Caie’s loss was not caused by that misleading conduct he is not entitled to any remedy under the FTA.
[43] Accordingly, I dismiss Mr Caie’s application.

DATED at AUCKLAND this 28th day of June 2017

B.R. Carter
Adjudicator

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[1] Red Eagle Corporation Ltd v Ellis [2010] NZLR 492.