Senior v NZ Budget Cars Limited Reference No. MVD 143/2018 [2018] NZMVDT 129 (7 June 2018)

Last Updated: 16 July 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2018] NZMVDT 129
Reference No. MVD 143/2018

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN NATASHA KAY SENIOR

Purchaser

AND NZ BUDGET CARS LIMITED

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

S N Haynes – Assessor

HEARING at Auckland on 18 May 2018

DATE OF DECISION 7 June 2018
APPEARANCES

N K Senior, Purchaser
D Sharov, Director of Trader
D Brijs, Witness for Trader

DECISION

Natasha Senior's rejection of her Mini Cooper S is not upheld. NZ Budget Cars Limited must pay Ms Senior a total of $1,606.38 no later than 21 June 2018. Ms Senior has leave to request a telephone conference (no later than 28 June 2018) if NZ Budget Cars Limited fails to comply with this order.

REASONS

Introduction

[1] Natasha Senior has experienced several problems with her 2007 Mini Cooper S within the first few months after purchasing it from NZ Budget Cars Limited. These problems include a leaking cooling system, faulty air conditioning system, worn tyres and the car breaking down and going into limp mode. Recently, the car has been diagnosed as needing new coils and spark plugs. Ms Senior rejected the vehicle in March 2018 and asks the Tribunal to uphold her rejection. NZ Budget Cars says Ms Senior’s claim should be dismissed as it agreed to replace the vehicle’s high pressure fuel pump in settlement of her claim.
[2] From this background, the following issues arise:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality?
• (b) Have the parties settled Ms Senior’s claim?
• (c) What remedy (if any) is Ms Senior entitled to?

Issue one: Did the vehicle fail to comply with the guarantee of acceptable quality?

[3] Section 6(1) of the Consumer Guarantees Act 1993 (the Act) provides that "where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”. According to s 2 of the Act, “goods” includes vehicles.
[4] "Acceptable quality" is defined in s 7 of the Act (as far as is relevant) 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.

[5] Whether a vehicle is of acceptable quality is considered from the point of view of a hypothetical "reasonable consumer" who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[6] Within four months of purchasing her vehicle, in October 2017, it developed a coolant leak and Ms Senior noticed that its air conditioning was not working properly. She contacted NZ Budget Cars, but was told by it that the coolant system parts were not covered under the warranty supplied with the vehicle. Ms Senior had the leaking water pipe and a coolant cross pipe replaced by Auckland Mini Garage. Ms Senior had also paid for a new thermostat and housing from Auckland City BMW at a cost of $360.88, but the invoice from Auckland Mini Garage does not indicate whether these parts were replaced.
[7] Ms Senior also paid $1,514.73 to have four run-flat tyres replaced by Auckland Mini Garage as she had been advised by it that the tyres on the vehicle were unsafe and illegal. The Mini had a new warrant of fitness at the time of purchase. But Ms Senior cannot understand how the tyres could have passed a warrant of fitness just four months previously, after she had only driven approximately 4,000 km in the vehicle. The Tribunal directed NZ Budget Cars to provide the warrant of fitness check sheet to prove the tyres were compliant at the time of purchase, but it did not do so. It might therefore be possible to infer from that failure to disclose this information that NZ Budget Cars was attempting to conceal something in respect of the tyres. However, Ms Senior herself said at the hearing that the tyres looked “okay” when she purchased the vehicle. It is likely that the tyres were just above minimum tread level at the time the pre-purchase warrant of fitness was obtained. This could explain how they quickly wore to beneath minimum tread levels. There is insufficient evidence to establish that the tyres were in a dangerous or illegal condition at the time of purchase.
[8] On 7 March 2018, after Ms Senior had driven approximately 7,000 km in the vehicle, its engine management light came on and it went into limp mode. Because she was near her home, Ms Senior took the vehicle to her local garage, which performed a diagnostic check. This confirmed the vehicle had a faulty high pressure fuel pump. After NZ Budget Cars initially denied liability to replace the high pressure fuel pump, Ms Senior rejected the vehicle and commenced her claim in the Tribunal. After that, the parties agreed that NZ Budget Cars would pay to replace the high pressure fuel pump plus towing fees.
[9] DBR Autos carried out this repair. However, when Ms Senior collected the vehicle on 24 April 2018, it broke down on the way home. She had the vehicle towed to Auckland Mini Garage, which diagnosed multiple misfires that were migrating between the cylinders. Auckland Mini Garage concluded that the vehicle requires four new ignition coils and new spark plugs. It quoted Ms Senior $1,285.98 to replace these parts. Auckland Mini Garage also re-gassed the air conditioning at this time.
[10] In assessing whether the vehicle failed to comply with the guarantee of acceptable quality, it is necessary to have regard to its age, mileage and price. This was certainly not a new vehicle, being a 2007 model. It also has a moderately high mileage, 118,000 km at the time of purchase. Ms Senior paid $12,545 for the vehicle, which is a reasonably significant outlay for a vehicle of this age and mileage. She is entitled to expect the vehicle would be durable for a reasonable period after purchase. This vehicle was clearly not durable, developing a significant coolant leak and air conditioning problems within four months of ownership.
[11] The more recent concerns regarding the coils and high pressure fuel pump have arisen after a somewhat longer period, approximately nine months after purchase. However, Ms Senior only drove the vehicle a relatively modest 7,000 km before those problems arose. Her relatively limited use of the vehicle is the primary factor that prompts me to conclude that the vehicle failed to comply with the guarantee of acceptable quality. The coolant leak and air conditioning problems, the defective high pressure fuel pump, and the misfiring problem, requiring replacement of the coils, within a reasonably short distance, are all examples of the vehicle's failure to comply with that guarantee.
[12] However, I do not regard the vehicle's worn tyres and spark plugs as being included within its failure to comply with the guarantee of acceptable quality. These defects are matters of wear and tear that a reasonable consumer would expect to have to address from time to time as part of ordinary vehicle maintenance. The exception to that would be if these parts required replacement immediately or very soon after purchase of the vehicle. However, the evidence is that the tyres only required replacement four months after purchase and the spark plugs nine months. This is too long to trigger a breach of the statutory guarantee. As such, I conclude that Ms Senior is not entitled to any remedy in respect of these items.

Issue two: Have the parties settled Ms Senior’s claim?

[13] Section 18 of the Act provides that where a failure to comply with the guarantee of acceptable quality can be remedied, the consumer may require the supplier to remedy the failure within a reasonable time. However, the Act also acknowledges that a consumer who has a claim under the Act may agree to settle or compromise that claim.[1] If the parties settle or compromise the claim, the Tribunal will respect and uphold such settlement, so long as it is lawful.
[14] In the present case, NZ Budget Cars argues that, following Ms Senior’s rejection of the vehicle and her commencement of her claim in the Tribunal, her claim was settled by NZ Budget Cars agreeing to replace the vehicle’s high pressure fuel pump at its cost.
[15] NZ Budget Cars produced a number of emails between it and Ms Senior in order to establish that a settlement agreement was reached.
[16] First, it produced an email dated 16 April 2018 setting out its offer to tow the vehicle to DBR Autos to have the high pressure fuel pump issue diagnosed and, if necessary, replaced at its cost.
[17] Following that, Ms Senior emailed NZ Budget Cars on 17 April to say:

I am willing to accept the offer you have proposed. ... On diagnosis and confirmation that the repairs have commenced, I will reply to the Ministry of Justice that the issue is being resolved.

[18] There was some further discussion about the wording of Ms Senior’s acceptance of this settlement proposal. NZ Budget Cars’ director, Mr Sharov, asked her to rephrase her acceptance, which she did in an email dated 20 April 2018, stating:

Please accept this e-mail as confirmation that once the high pressure fuel pump has been replaced with a new one, in my opinion you have fulfilled the obligation which we agreed upon and I will confirm with the Motor Vehicle Disputes Tribunal that the matter is resolved and I am happy with the outcome. Also, provided that the fuel pump is a new one and that the work is carried out to a high and careful standard, I accept that you have helped me all you could with the issue and any separate faults or faulty parts in the pressure fuel system will not be brought back to you in this claim.

[19] Ms Senior’s evidence was that, after sending that email, she received a telephone call from Mr Sharov, who asked her to rephrase her email again to confirm that she would not come back on any other issue. Ms Senior told the Tribunal she felt under some pressure to agree to Mr Sharov’s request because the vehicle was at the mechanic, she was having trouble getting to work and she wanted the vehicle back. Accordingly, later on 20 April 2018, she agreed to Mr Sharov’s request and wrote:

To confirm that the work agreed upon in my previous e-mail, once completed, will be the resolution to this claim and no further claims will be made to iSell Motors or yourself on the vehicle.

[20] On the basis of this email, Mr Sharov submitted that the dispute was completely resolved and that Ms Senior was not entitled to bring any further claims in relation to the vehicle, such as her claim to recover the expenses she is now facing to replace its coils and spark plugs.
[21] I do not accept that Mr Sharov's analysis is correct, however. While it is perfectly acceptable for parties to settle or compromise claims under the Act, this can only occur in respect of claims that have actually been made at the time of the settlement. I do not consider it is possible for parties to agree that no further claims under the Act will be made, unless they are doing so as part of a valid agreement to contract out of the Act under s 43. Such an agreement would not have been possible in the present case because Ms Senior did not acquire the vehicle “in trade”.[2]
[22] Section 43(7) provides:

43. No contracting out except for business transactions

...

(7) Nothing in subsection (1) prevents a consumer who has a claim under this Act from agreeing to settle or compromise that claim.

[23] The reference to “a claim” and “that claim” in subs (7) indicates the claim that is being settled must exist at the time of the settlement. That interpretation is confirmed by the narrow and restrictive grounds in s 43 on which parties can lawfully contract out of the Act. In particular, unlawful contracting out is an offence under s 13(i) of the Fair Trading Act 1986. This prohibition on contracting out, unless it is within the tight parameters set out in s 43, promotes the Act's purpose of contributing to a trading environment in which the interests of consumers are protected.[3]
[24] Accordingly, because Ms Senior’s claim relating to the coils and spark plugs was not a claim that she had made at the time she entered into the settlement agreement with NZ Budget Cars, I conclude that it is not included within that settlement agreement. This is reinforced by Mr Brijs’s evidence that the misfiring issue, leading to Auckland Mini Garage’s recommendation that the coils and plugs need to be replaced, is “completely unrelated” to the problems that led to its recommendation that the high pressure fuel pump be replaced.
[25] Because the claim in respect of the coils was a new claim, I allowed Mr Sharov the opportunity to have extra time to respond to that claim if he needed it. Mr Sharov confirmed in the hearing that he did not need any extra time and that he was happy for the Tribunal to proceed to determine that claim.
[26] For these reasons, I conclude that the parties have settled Ms Senior’s claim in respect of the costs she faced relating to the coolant leak and air conditioning problems, as well as the high pressure fuel pump, but not her claim in relation to the misfiring issue that occurred subsequently, leading to Auckland Mini Garage’s current recommendation to replace the coils.

Issue three: What remedy (if any) is Ms Senior entitled to?

[27] Because the earlier components of Ms Senior’s claim have been settled, as discussed above, I conclude she is not entitled to reject the vehicle. That is because the misfiring problem requiring the coils and spark plugs to be replaced can hardly be regarded as a failure of a substantial character within the meaning of s 21 of the Act.
[28] Ms Senior is, nevertheless, entitled to obtain from NZ Budget Cars her reasonable costs of having the misfiring problem remedied, apart from the cost of replacing the spark plugs. The Tribunal’s Assessor, Mr Haynes, advises that the cost of replacing four Mini Cooper spark plugs is $234.60, which I will deduct from the estimate provided by Auckland Mini Garage ($1,285.98), leaving a total of $1,051.38. To this I will add the cost of diagnosing the misfiring fault, $345, plus the costs incurred by Ms Senior having the vehicle towed to Auckland Mini Garage on 15 May 2018, $210.
[29] Accordingly, I order NZ Budget Cars Limited to pay Ms Senior a total of $1,606.38 within 14 days of the date of this decision.

J S McHerron
Adjudicator

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[1] Section 43(7) of the Act.

[2] Section 43(2)(b) of the Act.

[3] Section 1A(1)(a) of the Act.