Storer v Best Motors Limited - Reference No. MVD 131/2017 (Auckland) [2017] NZMVDT 92 (19 July 2017)

Last Updated: 16 August 2017

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2017] NZMVDT 92 Reference No. MVD 131/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	COBEN JEREMIAH STORER
		Purchaser
	AND	BEST MOTORS LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Tauranga on 27 June 2017
DATE OF DECISION 19 July 2017
APPEARANCES
Mr C Storer, Purchaser
Mr I M Bhatti, for the Trader
Ms M D Manohar, Witness for the Trader

ORDERS

A. Mr Storer’s application is dismissed.

DECISION

[1] The vehicle has had faults with its battery, tyres and transmission that mean it has not complied with the guarantee as to acceptable quality in s 6 of the Consumer Guarantees Act 1993 (“the Act”). The fault with the vehicle’s powertrain control module (“PCM”) does not breach s 6 of the Act.
[2] Mr Storer is not entitled to reject the vehicle. Although the transmission fault was a failure of a substantial character for the purposes of s 18(3) of the Act, Mr Storer has lost the right to reject the vehicle by waiting seven months to reject it, and having the fault repaired in the meantime.
[3] Mr Storer is not entitled to any other remedies under the Act. Under s 18(2)(a) of the Act, Mr Storer must give Best Motors the opportunity to repair the faults with the vehicle. Mr Storer did not do this. Mr Storer repaired the faults with the battery, tyres and transmission without first giving Best Motors an opportunity to perform those repairs.

REASONS

Introduction

[4] On 4 February 2016, Coben Storer purchased a 2006 Nissan Elgrand 2.5 Highway Star for $12,345 from Best Motors Limited. The vehicle had an odometer reading of 135,010 kms at the time of sale.
[5] In December 2016 Mr Storer rejected the vehicle, claiming that the vehicle had faults with its battery, tyres, transmission and PCM that amounted to a failure of a substantial character under the Act.
[6] Best Motors did not accept Mr Storer’s rejection of the vehicle, so Mr Storer has applied to the Tribunal for orders upholding his rejection.

The Issues

[7] The issues requiring consideration is this case are:

• (a) Does 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 under s 21 of the Act?
• (c) What remedy, if any is Mr Storer entitled to under the Act

Does the vehicle fail to comply with the guarantee of acceptable quality in s 6 of the Act?

[8] 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.
[9] 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.”

[10] 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 Storer’s subjective perspective.

What faults does the vehicle have?

[11] The evidence presented at the hearing shows that, since the vehicle was purchased by Mr Storer, it has had the following faults:

• (a) A fault which caused the vehicle’s PCM to flood.
• (b) A faulty battery that required replacement.
• (c) Tyres that were not durable and required replacement.
• (d) A fault with the vehicle’s transmission.

[12] Mr Storer may be entitled to a remedy under the Act if any of these faults breach the acceptable quality guarantee in s 6 of the Act.

The PCM fault is not a breach of the acceptable quality guarantee

[13] I am satisfied that the vehicle has a fault with its PCM. In October 2016, West Auckland Nissan discovered that the PCM had become flooded and now requires replacement.
[14] The PCM is essential to the operation of the vehicle. The PCM controls functions of both the engine and transmission. The PCM also stores any fault codes the engine or transmission may have.
[15] The evidence presented at the hearing suggests that the PCM fault has two possible causes. The first is that the PCM has, at some time, been opened up and then inadequately re-sealed, allowing water to flood the PCM. The second possible cause is that rodents have eaten away at the wiring harness in the engine bay, enabling water to travel along the harness and into the PCM.

The damage to the PCM was not caused by rodents

[16] I am not satisfied that the PCM has become flooded due to rodents eating the wiring harness. Certainly, West Auckland Nissan considers there to be evidence of rats eating the wiring harness. However, Brad Bagnall Automotive assessed the vehicle in June 2017 and found no evidence of damage to the wiring in the vehicle. Further, the photographs provided by Mr Storer do not show any damage to the vehicle’s wiring.
[17] Even if I am wrong and it is subsequently shown that rodent damage to the vehicle’s wiring has contributed to the PCM fault, Mr Storer has not proven that the damage to the wiring existed when he purchased the vehicle. The PCM fault occurred more than seven months after he purchased the vehicle, and there is a real likelihood that any rodent damage, if it exists, was caused when the vehicle was already in Mr Storer’s ownership.

The PCM fault was caused by a substandard repair

[18] I am however satisfied that the PCM has been opened and inadequately re-sealed, which has caused water to leak into it. Mr Gregory, the Tribunal’s Assessor has viewed photos of the PCM and advises that PCM has been poorly re-sealed using excessive amounts of the incorrect sealant type and the PCM is now not watertight.
[19] Despite being satisfied that the vehicle’s PCM has flooded and requires repair or replacement, I am not satisfied that this fault is a breach of the acceptable quality guarantee or that Best Motors should have any responsibility for it. This is because the PCM most likely became flooded because the PCM was inadequately re-sealed when Mr Storer had the vehicle’s transmission repaired in mid 2016. Mr Storer advised that the transmission repairer had some difficulty in identifying the cause of the transmission fault, and as part of his diagnosis he opened and then re-sealed the PCM.
[20] Mr Storer appears to have experienced no problems with the PCM before it was opened and then re-sealed by the transmission repairer. I do not think it a coincidence that the PCM fault then arose shortly after this transmission repair. Instead, I consider it highly likely that the PCM was flooded because the transmission repairer inadequately re-sealed the PCM in mid 2016 and water has then made its way into the PCM.
[21] Accordingly, I do not consider that Best Motors should have any liability for the PCM fault or that Mr Storer is entitled to any remedy for this fault under the Act.

The other faults mean the vehicle has not been of acceptable quality

[22] The vehicle’s battery failed within two months of purchase. I am satisfied that a reasonable consumer would not expect a vehicle’s battery to fail within two months of purchase.
[23] The vehicle’s tyres also had different load bearing ratings. Mr Storer claimed that the different load bearings made the vehicle difficult to handle and dangerous. I am satisfied that the vehicle’s handling could have been affected by the tyres different load bearing ratings and therefore the tyres are likely to have caused the vehicle to breach the acceptable quality guarantee. I am satisfied that a reasonable consumer would not expect the vehicle to have mismatched tyres that caused handling problems.
[24] However, Mr Storer has presented no evidence to support his claim that the tyres made the vehicle dangerous. Mr Gregory advises that tyres with different load ratings are not necessarily unsafe. A vehicle will only fail a Warrant of Fitness assessment where the load rating for tyres on the same axle differs by more than two indices. Mr Storer has failed to provide evidence to show that was the case here.
[25] Finally, Mr Storer advised that the vehicle’s transmission developed a fault in May 2016, and that the transmission was replaced in August 2016. Mr Storer says the vehicle was sticking in first gear and would only shift at very high revs.
[26] I am satisfied that the vehicle had a fault with its transmission that required repair and that a reasonable consumer would not expect such a fault to develop so shortly after purchase. Mr Gregory advises that those symptoms are evidence of a significant fault with the vehicle.

The vehicle did not comply with the acceptable quality guarantee

[27] I am satisfied that the vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act because it has not been as durable as a reasonable consumer would expect.
[28] The vehicle was 10 years old and had travelled 135,010 kms when it was purchased by Mr Storer. I am satisfied that a reasonable consumer would not regard the faults with its battery, tyres and transmission, as discussed in paragraphs [22] to [26], as acceptable taking account of the age, price and mileage of the vehicle.

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

[29] 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.”

The transmission fault is a failure of a substantial character

[30] The faults with the battery and tyres are not failures of a substantial character. They were minor faults and were easily repaired.
[31] The transmission fault is a failure of a substantial character. The vehicle had a significant fault with its transmission that required repairs costing in excess of $3,000 within six months of purchase. I am satisfied that a reasonable consumer would not have purchased the vehicle if it had been aware of the nature and extent of the fault with the vehicle’s transmission.
[32] Mr Storer has repaired the transmission fault. He made a claim against his Mainstream Insurance Mechanical Breakdown Insurance policy. Mainstream Insurance paid $2,500 (its claim limit) towards the repair. Mr Storer contributed the remaining $813.14. It has since been shown that Mr Storer may have contributed too much to this repair, and that Mainstream Insurance may have had an obligation to have contributed an additional $663.14 to the repair. Best Motors undertook to try and correct any mistake that may have occurred and I am heartened to have seen correspondence from Mainstream Insurance where it has agreed to refund that amount to Mr Storer.

What remedy is Mr Storer entitled to under the Act?

Relevant law

[33] Section 18 of the Act sets out the remedies available under the Act and 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.”

Mr Storer has lost the right to reject the vehicle

[34] Although Mr Storer had the right to reject the vehicle under s 18(3)(a) of the Act because the transmission fault is a failure of a substantial character, I consider he has lost the right to reject the vehicle.

[35] Section 20 of the Act provides that the right of rejection will be lost if it is not exercised within a reasonable time of the supply of the goods, in which it would be reasonable to expect the defect to become apparent.

20 Loss of right to reject goods
(1) The right to reject goods conferred by this Act shall not apply if—

(a) the right is not exercised within a reasonable time within the meaning of subsection (2); or

(b) the goods have been disposed of by the consumer, or have been lost or destroyed while in the possession of a person other than the supplier or an agent of the supplier; or

(c) the goods were damaged after delivery to the consumer for reasons not related to their state or condition at the time of supply; or

(d) the goods have been attached to or incorporated in any real or personal property and they cannot be detached or isolated without damaging them.

(2) In subsection (1)(a), the term reasonable time means a period from the time of supply of the goods in which it would be reasonable to expect the defect to become apparent having regard to—

(a) the type of goods:

(b) the use to which a consumer is likely to put them:

(c) the length of time for which it is reasonable for them to be used:

(d) the amount of use to which it is reasonable for them to be put before the defect becomes apparent.

(3) This section applies notwithstanding section 37 of the Sale of Goods Act 1908.

[36] The question I must answer is whether Mr Storer has rejected the vehicle within a reasonable time for the purposes of s 20(1)(a) of the Act?
[37] The lead authority on s 20 of the Act is the Court of Appeal decision in Nesbit v Porter.[1] In Nesbit v Porter, the Court said that a reasonable time under s 20 of the Act is one that is sufficient for the fault to become apparent to the consumer. A defect is not ‘apparent’ until its cause has been identified and the consumer knows what has to be done to fix it, and what that will cost.[2]
[38] Applying Nesbit v Porter, I consider Mr Storer has lost the right to reject the vehicle. The transmission fault first manifested itself in May 2016. Mr Storer did not reject the vehicle until December 2016, approximately seven months later. In that time, Mr Storer repaired the transmission fault and continued to use the vehicle. He only sought to reject the vehicle once the PCM fault became apparent.
[39] I consider that, by waiting until seven months after the fault became apparent, and over three months after he had repaired the fault, to reject the vehicle, Mr Storer has not exercised his right to reject the vehicle within a reasonable time. Accordingly, Mr Storer has lost the right to reject the vehicle.

Mr Storer is not entitled to any other remedy under the Act.

[40] Mr Storer also seeks to recover the costs he incurred in repairing the faults with the vehicle’s battery, tyres and transmission.
[41] In Acquired Holdings Ltd v Turvey,[3] the High Court found that under s 18(2) of the Act, where goods have failed to comply with the acceptable quality guarantee in s 6 of the Act, the consumer must give the supplier an opportunity to remedy the failure before it can have the fault repaired elsewhere and recover the cost. A consumer can only recover the cost of repairing the vehicle elsewhere if the trader then refuses or neglects to do so, or does not succeed in doing so.
[42] Mr Storer accepts that he did not give Best Motors the opportunity to repair the faults with the vehicle. He said he was aware of the existence of the Act, but instead chose to have the vehicle’s faults repaired under his mechanical breakdown insurance rather than to approach Best Motors.
[43] Applying Acquired Holdings, Mr Storer is not entitled to now recover those costs from Best Motors. Mr Storer did not give Best Motors the opportunity to first repair the faults.

Conclusion

[44] It is with some regret that I conclude that Mr Storer cannot get a remedy under the Act. Clearly the vehicle has had faults that breach the acceptable quality guarantee in s 6 of the Act. One of those, the transmission fault, was sufficiently serious to justify rejection.
[45] However, Mr Storer has failed to comply with his obligations under the Act to give the trader an opportunity to repair the minor faults and to promptly reject the vehicle for the more significant transmission fault. As a result I am left with no

alternative but to conclude that Mr Storer is not entitled to a remedy under the Act.

DATED at AUCKLAND this 19th day of July 2017

B.R. Carter
Adjudicator

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[1] Nesbit v Porter [2000] NZCA 288; (2000) 9 TCLR 395.

[2] Ibid at [39].

[3] Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2007) 8 NZBLC 102,107.