Lee v Automax Cars Limited Reference No. MVD 177/2018 [2018] NZMVDT 152 (4 July 2018)

Last Updated: 17 August 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 152 Reference No. MVD 177/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	JEONG JOON LEE
		Purchaser
	AND	AUTOMAX CARS LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 20 June 2018
DATE OF DECISION 4 July 2018
APPEARANCES
J J Lee, Purchaser
N Koike, for the Trader M Tan and S Tariq, Witnesses for the Trader

ORDERS

1. Jeong Lee’s application to reject the vehicle is upheld.
2. Automax Cars Ltd shall, within 10 working days of the date of this decision, pay $23,460 to Mr Lee.

100. Mr Lee must then make the vehicle available to be uplifted by Automax Cars.

DECISION

[1] The vehicle has faults with its blindspot monitoring and front suspension and an undiagnosed serious engine fault that breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (the Act).
[2] Under s 18(2)(b)(ii) of the Act, Mr Lee is entitled to reject the vehicle because Automax Cars has failed to rectify the blindspot monitoring and suspension faults within a reasonable time. He is also entitled to reject the vehicle under s 18(3)(a) of the Act because the undiagnosed engine fault is a failure of a substantial character.
[3] Accordingly, Mr Lee’s rejection of the vehicle is upheld and Automax Cars must refund the purchase price together with other costs incurred by Mr Lee in diagnosing the vehicle’s faults. Mr Lee must then make the vehicle available to be uplifted by Automax Cars.

REASONS

Introduction

[4] On 20 October 2017, Mr Lee purchased a 2014 Mazda Atenza, registration number KZK145, for $23,170 from Automax Cars.
[5] Within three days of purchasing the vehicle, Mr Lee notified Automax Cars of faults with the vehicle’s blindspot monitoring and front suspension. Mr Lee returned the vehicle twice to Automax Cars, who did not rectify the faults.
[6] Mr Lee made further requests that Automax Cars rectify the blindspot monitoring and suspension faults, without success.
[7] In April 2018, Mr Lee discovered further potential faults with the vehicle’s engine. Mr Lee then rejected the vehicle and has now applied to the Tribunal to recover the purchase price together with the costs of having the faults diagnosed.
[8] Automax Cars says that Mr Lee is not entitled to reject the vehicle. It says that the delays in rectifying the faults are due to a communication breakdown and that it is prepared to rectify the vehicle’s faults.

The Issues

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

• (a) Does the vehicle have faults that breach the acceptable quality guarantee in s 6 of the Act?
• (b) Has Automax Cars failed to repair the faults within a reasonable time?
• (c) If so, what remedy is Mr Lee entitled to under the Act?

Does the vehicle have faults that breach 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 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 Lee’s subjective perspective.
[13] Within three days of purchasing the vehicle, Mr Lee noticed that the blindspot monitoring only worked intermittently and that the vehicle made a noise from its front suspension. The vehicle was inspected by South Auckland Motors Ltd on 1 December 2017, who confirmed the existence of the blindspot monitoring and suspension faults. It tightened bolts on the top suspension strut in an unsuccessful attempt to rectify the suspension noise and recommended that the vehicle’s rear vehicle monitoring (RVM) module be replaced to rectify the blindspot monitoring fault.
[14] Mr Lee has subsequently obtained estimates for the required repairs. South Auckland Motors have estimated that the repair to the suspension fault will cost $817.68 and replacing the RVM module will cost $1,288.30.
[15] Mr Gregory, the Tribunal’s Assessor, advises that the evidence shows that the vehicle has a fault with its top strut suspension bearing which will require repair and that the RVM module requires replacement to rectify the blindspot monitoring fault. Mr Gregory advises that the South Auckland Motors estimates for these repairs are reasonable.
[16] The evidence from South Auckland Motors, combined with Mr Lee’s evidence as to the existence of these faults, satisfies me that the vehicle has an intermittent fault with its blindspot monitoring system and a noise from its suspension that will cost more than $2,000 to repair. Both faults were present at the time Mr Lee purchased the vehicle. I am satisfied that these faults mean the vehicle was not of acceptable quality when supplied to Mr Lee, in breach of s 6 of the Act. A reasonable consumer would not expect a vehicle of this price, age and mileage to have these pre-existing faults that will cost more than $2,000 to repair.
[17] On 5 April 2018, Mr Lee had the vehicle assessed by North Harbour Mazda. Mr Lee provided a copy of North Harbour Mazda’s technician’s notes, which identified the vehicle’s turbo was noisy and that the fuel injectors appear to be faulty. On 17 May 2018, North Harbour Mazda then concluded that it could not fault the vehicle’s turbo, but instead considered that the vehicle may have a problem with its exhaust cam. That potential fault with the exhaust cam has not been further diagnosed. North Harbour Mazda also noted that the vehicle’s oil level was very high. On 12 June 2018, the vehicle was then assessed by Alltech Diesel & Turbocharger Ltd, who found a noise from the secondary turbocharger that it said required further investigation.
[18] Although the various assessments of the vehicle do not identify the precise cause of the fault, I am satisfied that the evidence presented shows that it is likely that the vehicle has an undiagnosed fault with its engine.
[19] Mr Gregory says that the symptoms described by Mr Lee, particularly the oil warning light illuminating, the engine noise and the increased oil levels (which suggest that the oil is contaminated with diesel), are clear evidence that the vehicle has a significant fault with its engine. Mr Gregory says that although the evidence does not confirm the precise fault, the symptoms show that the vehicle has either a worn turbo, a worn camshaft or a blocked oil pickup, all of which are serious faults.
[20] Mr Gregory’s advice satisfies me that the vehicle also has a significant engine fault that breaches the acceptable quality guarantee in s 6 of the Act. That fault first became apparent in April 2018, approximately six months after purchase, by which time Mr Lee had travelled less than 6,000 km in the vehicle. Taking account of the price, age and mileage of this vehicle, the length of Mr Lee’s ownership and the distance he has travelled in the vehicle, I am satisfied that the significant engine fault means the vehicle has not been as durable as a reasonable consumer would consider acceptable.

Did Automax Cars fail to repair the faults within a reasonable time?

[21] Mr Lee claims that he is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act because Automax Cars has failed to rectify the blindspot monitoring and suspension faults within a reasonable time. Section 18 of the Act 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), the 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.

[22] Mr Lee first contacted Automax Cars three days after he purchased the vehicle, notifying it that the vehicle had an intermittent fault with its blindspot monitoring and a noise from its front suspension. He returned the vehicle to Automax Cars on 24 October 2017. Automax Cars did not rectify the faults. Mr Lee again returned the vehicle to Automax Cars on 31 October 2017. On 9 November 2017, he was advised by Automax Cars that the suspension noise had been fixed, but that it could not fix the blindspot monitoring fault because the fault was being caused by an aftermarket stereo head unit, and that the aftermarket head unit would require replacement to rectify the fault.
[23] The noise from the suspension had not been rectified, and on 1 December 2017, Mr Lee had the vehicle assessed by South Auckland Motors, who found that the blindspot monitoring fault was not caused by the aftermarket head unit, but instead by a faulty RVM module which required replacement, and that the vehicle still had a fault with its front suspension.
[24] On 8 December 2017, Mr Lee emailed Automax Cars asking it to rectify the vehicle’s faults by 5 January 2018. On 15 December 2017, Automax Cars contacted Mr Lee and offered to organise repairs to the vehicle. Mr Lee replied on 19 December 2017, but received no further response. Mr Lee again contacted Automax Cars on 1 January 2018 asking it to rectify the vehicle’s faults. He again received no response. On 19 January 2018, Mr Lee then spoke with Manfred Tan, a salesperson from Automax Cars. Mr Tan took Mr Lee’s number and undertook to call him back. Mr Lee received no further response. On 7 April 2018, Mr Lee rejected the vehicle.
[25] This background satisfies me that Mr Lee gave Automax Cars a reasonable opportunity to rectify the vehicle’s faults. He returned the vehicle to Automax Cars twice for repairs to be performed and Automax Cars did not rectify the faults. Further, he repeatedly made contact with Automax Cars in December 2017 and January 2018, but Automax Cars made no meaningful effort to engage with Mr Lee or to rectify the faults. Mr Tan says that he contacted Mr Lee after 19 January 2018 to organise repairs for the vehicle, but he was not able to provide any evidence to prove that contact, and I accept Mr Lee’s evidence that no such contact was made.
[26] Automax Cars says that it has always intended to rectify the faults, but there was a communication breakdown between it and Mr Lee. Automax Cars says that “Nick”, the salesperson who sold the vehicle to Mr Lee, initially dealt with Mr Lee’s complaint but then went on leave over the Christmas/New Year period and did not return. Nami Koike, a director of Automax Cars, advised that another staff member was supposed to cover for Nick, but that staff member either did not see, or did not act on, Mr Lee’s email correspondence. Ms Koike says that once she became aware of Mr Lee’s ongoing problems in April 2018, she immediately made efforts to rectify the vehicle’s faults.
[27] I found Ms Koike to be a credible and reliable witness and do not doubt her intention to rectify the vehicle’s faults. However, I am satisfied that Automax Cars has had sufficient opportunity to rectify the blindspot monitoring and suspension faults and failed to do so. Consequently, Mr Lee is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act.

Is the engine fault a failure of a substantial character?

[28] Under s 18(3)(a) of the Act, Mr Lee may also reject the vehicle if it has a fault that amounts to a failure of a substantial character. A failure of a substantial character is defined in s 21 of the Act:

21. 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.

[29] Section 21(a) of the Act applies to this case. The question I must answer is whether the faults that this vehicle has, are such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle.
[30] I am satisfied that the undiagnosed engine fault is a failure of a substantial character. As noted above, Mr Gregory says that the symptoms show that the vehicle has either a worn turbo, a worn camshaft or a blocked oil pickup, all of which are serious faults. Mr Gregory says that, irrespective of which of these potential faults is the actual cause of the vehicle’s problems, the engine will require significant overhaul or replacement, at an estimated cost of between $5,000 and $7,000.
[31] I consider that a reasonable consumer would not have purchased this vehicle if it had known that the vehicle would suffer significant engine damage that will cost at least $5,000 to repair, so shortly after purchase. Accordingly, Mr Lee is also entitled to reject the vehicle because the undiagnosed engine fault amounts to a failure of a substantial character.

What remedy is Mr Lee entitled to under the Act?

[32] Having rejected the vehicle, under s 23(1)(a) of the Act, Mr Lee is entitled to a refund of all amounts paid in respect of the vehicle.
[33] Under s 18(4) of the Act, Mr Lee is also entitled to recover the cost of diagnosing the vehicle’s faults. In that regard, he may recover:

• (a) $134.70 – being the cost of having the vehicle’s faults assessed by South Auckland Motors on 1 December 2017; and
• (b) $155.30 – being the cost of having the vehicle’s faults assessed by North Harbour Mazda on 5 April 2018.

Conclusion

[34] The vehicle has faults with its blindspot monitoring and front suspension and an undiagnosed serious engine fault that breach the acceptable quality guarantee in s 6 of the Act.
[35] Under s 18(2)(b)(ii) of the Act, Mr Lee is entitled to reject the vehicle because Automax Cars has failed to rectify the blindspot monitoring and suspension faults within a reasonable time. He is also entitled to reject the vehicle under s 18(3)(a) of the Act because the undiagnosed engine fault is a failure of a substantial character.
[36] Accordingly, Mr Lee’s rejection of the vehicle is upheld and the Tribunal orders that Automax Cars shall, within 10 working days of the date of this decision, pay $23,460 to Mr Lee.
[37] Mr Lee must then make the vehicle available to be uplifted by Automax Cars.

DATED at AUCKLAND this th day of July 2018

B.R. Carter
Adjudicator