Pac Imports & Exports Limited v Auckland Auto Collection Limited t/a Manukau Nissan & Nissan New Zealand Limited Reference No. MVD 21/2018 [2018] NZMVDT 107 (10 May 2018)

Last Updated: 18 June 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 107 Reference No. MVD 021/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	PAC IMPORTS & EXPORTS LIMITED
		Purchaser
	AND	AUCKLAND AUTO COLLECTION LIMITED T/A MANUKAU NISSAN & NISSAN NEW ZEALAND LIMITED
		Traders
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 8 March 2018
DATE OF DECISION 10 May 2018
APPEARANCES
P S Maharaj, for the Purchaser V R Prasad, Witness for the Purchaser
J Martin, for the Auckland Auto Collection Limited S Bavin, the Nissan New Zealand Limited

ORDERS

1. Pac Imports & Exports Limited’s application to reject the vehicle is dismissed.

DECISION

[1] The vehicle has an undiagnosed fault that causes it to vibrate, which breaches the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (the Act).
[2] Auckland Auto Collection Limited, trading as Manukau Nissan (Manukau Nissan) and Nissan New Zealand Limited have failed to repair the fault within a reasonable time, and under s 18(2)(b)(ii) of the Act, Pac Imports & Exports Limited is entitled to reject the vehicle.
[3] However, under s 20(1)(a) of the Act, Pac Imports & Exports has lost the right to reject the vehicle because it did not exercise the right within a reasonable time, and because the vehicle has now been repossessed and sold, the Tribunal makes no order requiring the traders to rectify the fault.

REASONS

Introduction

[4] On 19 June 2015, Pac Imports & Exports purchased a new Nissan Navara NP300 for $70,215, including on road costs and accessories from Manukau Nissan. Pac Imports & Exports borrowed money from Nissan Financial Services New Zealand Pty Limited (Nissan Financial Services) to purchase the vehicle.
[5] Pac Imports & Exports quickly noticed a vibration in the vehicle. It advised Manukau Nissan but did not take the vehicle to Manukau Nissan for assessment until late December 2016.
[6] By that time the vibration had worsened and, in February 2017, Manukau Nissan and Nissan New Zealand replaced the vehicle’s transmission. Pac Imports & Exports says that the vibration in the vehicle reduced after the transmission replacement but nonetheless remained. Pac Imports & Exports then repeatedly asked Manukau Nissan to rectify the vibration. By 4 May 2017 Manukau Nissan had failed to do so, and Pac Imports & Exports rejected the vehicle. Pac Imports & Exports then stopped making payments on the loan it entered into to purchase the vehicle. The vehicle has since been repossessed and sold to a motor vehicle trader in Taranaki.
[7] Pac Imports & Exports has applied to the Tribunal seeking to have its rejection of the vehicle upheld and to recover the purchase price.
[8] Manukau Nissan and Nissan New Zealand say that Pac Imports & Exports was not entitled to reject the vehicle. They say that the vehicle has no ongoing fault with its transmission, and that the vibration that remains in the vehicle is “within spec”.

The Issues

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

• (a) Does the vehicle have a fault that breaches the acceptable quality guarantee in s 6 of the Act?
• (b) Have Manukau Nissan and Nissan New Zealand failed to repair the fault within a reasonable time?
• (c) Has Pac Imports & Exports lost the right to reject the vehicle?
• (d) What remedy is Pac Imports & Exports entitled to under the Act?

Does the vehicle have a fault that breaches the acceptable quality guarantee?

[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 Pac Imports & Exports’ subjective perspective.
[13] Pranav Maharaj and Vijay Prasad gave evidence for Pac Imports & Exports. Both say that the vehicle has a vibration. Mr Maharaj says that the vehicle had a noticeable vibration shortly after purchase, which worsened over time. He says that the vibration in the vehicle reduced when the transmission was replaced in February 2017, but it nonetheless remained. Mr Maharaj says that the vibration is unacceptable in a vehicle of this price, age and mileage.
[14] Steve Bavin, a technical expert from Nissan New Zealand, gave evidence as to the vibration in the vehicle. He says that, before the transmission replacement, the vibration in the vehicle was excessive, and the transmission required replacement. Records from Nissan New Zealand’s “Techline” database show that the vehicle continued to vibrate after the transmission was replaced. Mr Bavin says that the vibration that remains is “within spec” for a light commercial vehicle. In support of this submission, Mr Bavin produced test results from February 2017, which he says shows that the vehicle’s vibrations are within acceptable tolerances.
[15] Mr Gregory, the Tribunal’s Assessor, advises that the ongoing vibration is indicative of a continuing fault with the vehicle. Mr Gregory says that vehicles of this age and mileage should not vibrate in the manner described by the witnesses and as shown in the data provided by Mr Bavin.
[16] Mr Gregory considers that the true cause of the vibration has not been identified. Although Manukau Nissan has replaced the vehicle’s transmission, Mr Gregory doubts, for two reasons, that the vibration is caused by an underlying fault in the transmission. The first is that this kind of vibration is highly unusual in the transmission of an old vehicle, let alone in the transmission of a new vehicle. Second, the vibration has remained after the transmission replacement, suggesting that the underlying cause of the vibration is not in the vehicle’s transmission.
[17] Although the cause of the vibration has not been established, Mr Gregory considers that the vehicle is likely to have an unbalanced component in its engine, such as its harmonic balancer or crankshaft. Mr Gregory says that an imbalance in either of those components can lead to the symptoms described by the parties. Mr Gregory says that the vibration in the vehicle worsened over time because the underlying vibration caused components in the vehicle’s transmission to become unbalanced, which caused further vibration.
[18] Despite Manukau Nissan’s submission that the vibration is now within acceptable tolerances, I am satisfied that the vibration is a fault that breaches the acceptable quality guarantee in s 6 of the Act. A reasonable consumer would have had high expectations regarding the quality of a new, $70,215 vehicle. A reasonable consumer would not expect a new vehicle to have this vibration.

Did Manukau Nissan fail to repair the fault within a reasonable time?

[19] Pac Imports & Exports claims that it is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act because it gave Manukau Nissan and Nissan New Zealand a reasonable opportunity to rectify the vibration, but they failed to do so within a reasonable time.
[20] Section 18 provides:

“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.”

[21] I am satisfied that Manukau Nissan and Nissan New Zealand failed to rectify the vibration within a reasonable time. It first became aware of the vibration on about 22 December 2016, when Pac Imports & Exports brought the vehicle in to be serviced. Nissan New Zealand’s Techline records show that Pac Imports & Exports complained of the vehicle vibrating while in park or neutral gear and that a Manukau Nissan technician felt the vibration.
[22] On about 17 January 2017, Manukau Nissan adjusted the vehicle’s torque converter in an attempt to rectify the vibration. That did not work, and in mid-February 2017, Manukau Nissan and Nissan New Zealand replaced the vehicle’s transmission.
[23] Pac Imports & Exports continued to complain about the vibration. Manukau Nissan and Nissan New Zealand performed further testing and concluded that the vibration was within acceptable tolerances. Pac Imports and Exports maintained that Manukau Nissan and Nissan New Zealand should rectify the fault, and the Techline records show that Pac Imports & Exports spoke with Manukau Nissan “several times” in an attempt to get the fault rectified. By 4 May 2017, the vibration had not been rectified and Pac Imports & Exports rejected the vehicle.
[24] I am satisfied that this chronology of events shows that Manukau Nissan and Nissan New Zealand failed to rectify the vibration within a reasonable time. They were aware of the vibration in late December 2016 but over four months later had not rectified the vibration in the vehicle. Mr Gregory advises that four months was ample time to diagnose and rectify the cause of the vibration in the vehicle.

Has Pac Imports & Exports lost the right to reject the vehicle?

[25] The law relating to the loss of the right to reject goods is set out in s 20 of the Act, which states:

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 170 of the Contract and Commercial Law Act 2017.

[26] Under s 20(1)(a) of the Act, Pac Imports & Exports will lose the right to reject the vehicle if it does not exercise that right within a reasonable time. For the purposes of s 20(1)(a) of the Act a "reasonable time" is a period from the time of supply of the goods in which it would be reasonable for the defect to become apparent, having regard to the factors in s 20(2)(a)–(d) of the Act.
[27] In Nesbit v Porter[1] the Court of Appeal shed some light on the statutory words in s 20(2) of the Act. The Court observed that:

“A reasonable time under s 20 must accordingly be one which suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of breakage or malfunction is not apparent, the consumer can be expected to do so by taking the goods to someone, usually and preferably the supplier, for inspection.”[2]

[28] In this case, Pac Imports & Exports became aware of the existence of the vibration in June 2015. It immediately thought the vibration was unusual, and contacted Manukau Nissan. The vibration worsened over time, but Pac Imports & Exports did not have the fault inspected until December 2016, by which time it had travelled approximately 24,000 kms in the vehicle. It then did not reject the vehicle until 5 May 2017, more than 22 months after it first became aware of the vibration.
[29] Applying s 20(1)(a), I consider that Pac Imports & Exports has failed to exercise its right to reject the vehicle within a reasonable time. This conclusion may seem harsh on Pac Imports & Exports, given it purchased a new vehicle with an inherent defect that Manukau Nissan and Nissan New Zealand then failed to repair when given an opportunity to do so. However, in Nesbit v Porter the Court of Appeal considered that there are good policy grounds for requiring the right to reject to be exercised within a reasonable time. The Court of Appeal noted:

“the Court should not lose sight of the burden which may be imposed upon a supplier by a lengthy delay in rejecting the goods, during a time when their value is likely to depreciate, particularly where depreciation is increased by further usage, as it is for motor vehicles.”[3]

[30] Such a situation arose here. Pac Imports & Exports continued to use the vehicle for 17 months and at least 24,000 kms after becoming aware of the existence of an unacceptable vibration before it required Manukau Nissan and Nissan New Zealand to rectify the fault. Given this extent of use, the vehicle will have depreciated significantly in the time it took Pac Imports & Exports to require repair and then reject the vehicle. In those circumstances, I consider it simply took too long to reject the vehicle.
[31] In reaching this conclusion, I acknowledge that Pac Imports & Exports first contacted Manukau Nissan about the fault in June 2015 and then intermittently thereafter, but Manukau Nissan did not take positive steps to diagnose or rectify the fault until December 2016. Although one may have expected Manukau Nissan to be more active in assessing the fault, it is Pac Imports & Exports who had the obligation to have the vehicle assessed and then to exercise its right to reject the vehicle in a timely way. Pac Imports & Exports should have been more active in pursuing its rights under the Act. It was not, and by waiting 22 months to do so, it has lost its right to reject the vehicle.

What remedy is Pac Imports & Exports entitled to under the Act?

[32] Under s 18(2)(a) of the Act, Pac Imports & Exports would still have been entitled to have the undiagnosed fault that causes the vibration rectified. However, the vehicle has now been repossessed and sold after Pac Imports & Exports stopped repaying its loan with Nissan Financial Services.
[33] Given the close relationship between Manukau Nissan, Nissan New Zealand and Nissan Financial Services, I query why enforcement of this loan could not have been deferred while Pac Imports & Exports’ application to the Tribunal was being considered. There was clearly merit to the application, yet Nissan Financial Services proceeded with repossession action as if the application did not exist. Given its responsible lending obligations under the Credit Contract and Consumer Finance Act 2003, Nissan Financial Services may want to reconsider its repossession practices, particularly where a genuine dispute exists, to avoid similar situations arising in the future.
[34] However, there is little this Tribunal can now do to provide relief to Pac Imports & Exports. Because the vehicle has been lawfully disposed of, I can make no orders requiring Manukau Nissan and Nissan New Zealand to rectify the fault. Any such order would now be redundant.

Conclusion

[35] The vehicle has an undiagnosed fault that causes it to vibrate, which breaches the acceptable quality guarantee in s 6 of the Act.
[36] Manukau Nissan and Nissan New Zealand have failed to repair the fault within a reasonable time, and under s 18(2)(b)(ii) of the Act, Pac Imports & Exports Limited is entitled to reject the vehicle. However, under s 20(1)(a) of the Act, Pac Imports & Exports has lost the right to reject the vehicle because it did not exercise the right within a reasonable time.
[37] Because the vehicle has been repossessed and sold, the Tribunal makes no orders under s 18(2)(a) of the Act. Accordingly, Pac Imports & Exports’ application is dismissed.

DATED at AUCKLAND this 10th day of May 2018

B.R. Carter
Adjudicator

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

[2] at [39].

[3] at [42].