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Lipski v Scott t/a Scott Base Motors Reference No. MVD 178/2018 [2018] NZMVDT 161 (11 July 2018)

Last Updated: 17 August 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL

[2018] NZMVDT 161
Reference No. MVD 178/2018

IN THE MATTER of the Motor Vehicle Sales Act 2003

AND

IN THE MATTER of a dispute

BETWEEN OWEN STUART LIPSKI

Purchaser

AND WILLIAM MURDOCH SCOTT T/A SCOTT BASE MOTORS

Trader

MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

R C Dixon – Assessor

HEARING at Christchurch on 13 June 2018

DATE OF DECISION 11 July 2018
APPEARANCES

O S Lipski, Purchaser
I Lipski, Purchaser's Wife
S Carson, Witness for Purchaser (by telephone)
W M Scott, Trader


DECISION

  1. Owen Lipski's rejection of the vehicle is upheld.
  2. Mr Lipski’s obligations under the collateral credit agreement dated 20 October 2017 between him and Fair City Finance (a division of Instant Finance Limited) are vested in William Scott, with effect from 31 October 2017.
  1. Mr Scott must pay Mr Lipski $1,161 plus all of Mr Lipski’s payments of interest and principal under the Fair City Finance Collateral Credit Agreement from 31 October 2017 to the date of this decision. These payments must be made no later than 25 July 2018.
  1. Once Mr Lipski has received these payments from Mr Scott in full, Mr Scott must collect the vehicle from Mr Lipski at Mr Scott’s cost.

REASONS

Introduction

[1] Owen Lipski experienced several problems with the supercharged Holden Commodore that he purchased from William Scott in October 2017. Mr Lipski drew these problems to the attention of Mr Scott, who then claimed to carry out various repairs on several occasions. However, Mr Lipski continued to experience problems with the vehicle and remained dissatisfied with it. He attempted to cancel the credit agreement under which the vehicle was financed before notifying Mr Scott that he was rejecting it.
[2] Mr Scott does not accept that Mr Lipski is entitled to reject the vehicle. Mr Scott says that he has fixed the defects that Mr Lipski raised with him and he remains willing to fix any further problems. However, Mr Scott disputes that some of the alleged problems are legitimate. Mr Scott also points out that Mr Lipski has continued to drive the vehicle even after rejecting it, without evidence of any further problems arising with the vehicle.
[3] From this background, the following issues arise for determination:

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

[4] 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.
[5] "Acceptable quality" is defined in s 7 of the Act (as far as is relevant) as follows:
  1. 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.

[6] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[7] Mr Lipski decided to buy a vehicle from Mr Scott because his wife had previously purchased a vehicle from him. Mr Lipski visited Mr Scott’s yard in Fitzgerald Avenue, Christchurch where he trades under the name Scott Base Motors. Here, the Holden Commodore which Mr Lipski purchased was displayed for sale.
[8] The date of the sale of the vehicle to Mr Lipski was on or around 16 October 2017. There was no documentation confirming the precise date. Mr Scott did not dispute that he sold the vehicle to Mr Lipski but, again, there was nothing produced to the Tribunal confirming in writing that Mr Scott was the vendor.
[9] The vehicle is a 2000 Holden Commodore with an odometer reading of approximately 231,500 km on the date of purchase. I am only able to give an approximate mileage because the purchase transaction was very poorly documented and the Tribunal was not presented with any record of the exact odometer reading as at the date of purchase.

Deficiencies in the sales documentation for the vehicle

[10] Mr Lipski told the Tribunal that there was no window card (CIN) on the vehicle at the time of purchase.[1] Likewise, there was no written acknowledgment that Mr Lipski had received a copy of a CIN.[2] The Tribunal asked Mr Scott to supply the CIN for the vehicle, but he failed to do so. Mr Scott asserted in the hearing that a CIN had been supplied with the vehicle, but that he no longer had a copy of it. Even if I was to accept Mr Scott's assertion that a CIN existed, he has still breached his obligation to keep a copy of the CIN and the buyer's written acknowledgment.[3] But I did not find Mr Scott's assertion that a CIN existed in respect of the vehicle to be credible and, in the absence of any other evidence that such a document existed, I reject that assertion.
[11] Mr Lipski produced a record from the Commerce Commission's enforcement response register recording that, in 2015, Mr Scott was issued two infringement notices for breaching s 28 of the Fair Trading Act 1986 by failing to comply with the CIN requirements for used motor vehicles.[4] Mr Lipski's experience in the present case suggests that Mr Scott has continued to breach those legal requirements. For this reason, I will forward this decision to the Commerce Commission for it to determine if any further steps should be taken.
[12] There was no documented contract for sale of the vehicle. A handwritten receipt dated 27 October 2017 and signed by Mr Scott on behalf of "Devon Lea Farm" records that the vehicle's full price was $7,350 and that Mr Scott received a $1000 deposit from Mr Lipski, with the remaining "$6,350 paid by finance co". If this receipt was intended to operate as a contract for sale, it failed to include the following information required by law:
[13] A consumer credit contract between Mr Lipski and Fair City Finance, dated 20 October 2017, was produced to the Tribunal. It records a loan to Mr Lipski for the principal sum of $6,350. Mr Lipski's evidence was that this credit contract was arranged through a broker by the name of Tim McNeill, who was introduced to Mr Lipski by Mr Scott. I am satisfied that this credit contract is “associated” with the contract for the sale of the motor vehicle and is a collateral credit agreement for the purposes of s 89(2) and (3) of the Motor Vehicle Sales Act 2003.
[14] Apart from his signature on the receipt described above, Mr Scott’s name or his motor vehicle trader registration number does not appear on the sales documentation for the vehicle.[6] A possible reason for the latter omission is that Mr Scott’s motor vehicle trader registration, number M269229, expired on 2 May 2017, nearly six months prior to the sale of the vehicle to Mr Lipski.
[15] Nor was there any information provided to Mr Lipski concerning the effect of s 58 of the Personal Property Securities Act 1999.[7]

Deficiencies in the warrant of fitness and repair documentation for the vehicle

[16] When Mr Lipski first agreed to purchase the vehicle, it apparently had no warrant of fitness. Mr Scott offered to obtain a warrant of fitness for it, but Mr Lipski said there was some initial difficulty in obtaining the warrant of fitness because of a warning light that had illuminated in the vehicle, signifying a problem with the ABS braking system that was difficult to fix.
[17] Mr Lipski asked Mr Scott to supply him with the warrant of fitness check-sheet for the vehicle several times but Mr Scott did not do so. The Tribunal also requested Mr Scott to obtain and provide the warrant of fitness check-sheet prior to the hearing but, again, he failed to do so. This meant it was difficult for the Tribunal to assess the validity of the original warrant of fitness and whether any other concerns had been identified in the inspection process.
[18] The Tribunal also requested Mr Scott to supply copies of all invoices and job sheets for repair work he had done on the vehicle. Mr Scott failed to provide any receipts to verify the work that he allegedly carried out on the vehicle, either prior to its sale to Mr Lipski or subsequently up to the time Mr Lipski rejected the vehicle. This prevented the Tribunal from verifying or even evaluating the repairs that Mr Scott asserted he had carried out on the vehicle.

Mr Lipski's concerns about the vehicle's defects

[19] Mr Lipski returned the vehicle to Mr Scott on 17 October 2017, the day after he purchased it, because of his and his wife’s concerns:
[20] The vehicle shuttled back and forth between Mr Lipski and Mr Scott several times for repairs over the next few days. As indicated above, however, it is unclear what repair work Mr Scott actually carried out as no receipts for any repair work were produced by him despite the Tribunal asking for them.
[21] On 24 October 2017, as Mr Lipski warmed the vehicle up before work, he noticed that it was overheating and blowing blue smoke from its exhaust. He took the vehicle to work, and later that day he took it to Auto Station in Ferry Road for assessment. While there, technician Scott Carson carried out what was inaptly described as a "pre-purchase inspection". In the written report of that inspection, dated 24 October 2017, Mr Carson noted "[h]ead gasket issues (overheating)". He "[s]uspect[ed the] heads will be cracked", that the "[f]ront driveshaft uni[versal] joint [is] worn" and that the "[l]eft exhaust manifold [is] cracked[, causing an] exhaust leak".
[22] On the basis of Mr Carson's 24 October 2017 report, Mr and Mrs Lipski decided to take the vehicle back to Mr Scott. Mr Lipski texted Mr Scott to say that he needed to bring the car back that night as “it has massive issues”. Mrs Lipski told the Tribunal that on the journey between Auto Station in Ferry Road and Mr Scott’s premises in Fitzgerald Avenue, the vehicle overheated twice. She needed to pull over to the side of the road both times to let the vehicle cool down before she could proceed.
[23] Around the same time, Mr Lipski informed Mr Scott about some other matters that he was concerned about, including that the vehicle's brakes were squealing when applied, that its rear passenger window was not working, and that the lock on the driver’s side needed to be fixed.
[24] Mr Scott replied to Mr Lipski by text that he would get a tee-kay test done on the vehicle the next morning to see whether there were combustion gases in the cooling system.
[25] On 25 October 2017, Mr Lipski texted Mr Scott to say that he did not “want to be stuck with a lemon” and that he might have to pull out of the finance agreement.
[26] On 27 October 2017, the vehicle was returned to Mr Lipski. Again, no written confirmation of what repair work had been done between 25-27 October was provided to him (or to the Tribunal).
[27] By this stage, Mr Lipski had lost confidence in the vehicle. He made a phone call on 27 October 2017 to the finance broker Mr McNeill. He told Mr McNeill that he wanted to be released from the finance agreement. Mr Lipski's evidence was that Mr McNeill dissuaded him from this course of action by encouraging him to “give Scott a chance to fix it”.
[28] Mr Lipski texted Mr Scott again on 29 October 2017 to advise him that he was getting frustrated with the vehicle and did not expect it to have so many issues for a vehicle that came “from a car yard”. Mr Lipski told Mr Scott that he had concerns about an L & P bottle that was installed next to the radiator, presumably as some sort of improvised overflow catchment system. He repeated his concern about the squeak in the brakes which Mr Lipski told Mr Scott “has got to be resolved”.
[29] Mr Scott asked Mr Lipski to drop the vehicle off the following day, 30 October 2017, so he could rectify the “belt noise and brake squeak”. Mr Scott expressed doubts about whether he could replace the improvised overflow bottle. At this stage, Mr Lipski indicated he was happy for Mr Scott to “take [his] time on fixing these things”. He said “I don’t mind if I have to wait a week but I just don’t want to have to chase you up about these issues anymore”.
[30] However, Mr Lipski had a change of heart the next day, 30 October 2017. Mr Lipski took the vehicle back to Auto Station, and Mr Carson reassessed it.
[31] Mr Carson acknowledged that a number of matters on the vehicle appeared to have been replaced, including the left exhaust manifold, the radiator cap, two engine auxiliary belt idler bearings, and that the front brake rotors appeared to have been machined with the original brake pads refitted. However, in his report dated 30 October 2018, Mr Carson identified a number of outstanding concerns about the vehicle, including:
[32] Mr Carson gave evidence by telephone at the Tribunal hearing. He said that, at the time of his second report on 30 October 2017, he still thought the vehicle’s heads may be cracked but that, without pulling the engine apart, he could not be certain. Mr Carson said he told Mr Lipski that if he was going to keep the vehicle he would be likely to have problems with it. Mr Carson said that he carried out a tee kay test and that, over time, the testing fluid changed colour which indicated a presence of combustion gases in the cooling system.
[33] I asked Mr Carson what his recommendations would have been if Mr Lipski had wanted him to carry out further checks to pinpoint what may be wrong with the vehicle's cooling system. Mr Carson said that he would need to:
[34] Finally, Mr Carson also told the Tribunal that, after his 30 October 2017 report, Mr Scott had visited him to try to persuade him to "sugar coat" his report on the vehicle, and to reassure Mr Lipski that nothing was wrong with it. However, Mr Carson told Mr Scott he was unwilling to do that.
[35] Mr Scott produced video evidence of his own tee kay testing of the vehicle and his assessment that its cooling system was running adequately. In Mr Scott’s evidence, his own checks of the cooling system suggested that the vehicle was not overheating.
[36] Mr Scott was critical of the pressure testing methodology used by Mr Carson and cast doubt on the correctness of Mr Carson’s conclusion. In particular, Mr Scott submitted that Mr Carson was using the coolant pressure tester incorrectly and in a manner which had the effect of preventing the system from releasing pressure at the radiator cap, thereby causing the system to increase pressure beyond what the radiator cap would ordinarily allow. It followed that the pressure reading obtained by Mr Carson did not accurately reflect the pressure in the cooling system.
[37] After receiving Auto Station’s report, Mr Lipski texted Mr Scott asserting that the thermostat had been tampered with and that was the reason why the vehicle was no longer overheating. Mr Scott denied anyone had touched the thermostat and said that the vehicle was not overheating because he had bled the cooling system and filled it with antifreeze.
[38] In the meantime, Mr Lipski emailed Tim McNeill and Fair City Finance in a further attempt to cancel the credit contract. He told the finance company that the car was defective, that he had received two reports from an MTA approved mechanic, and that he had reported those findings to Mr Scott, who had been reluctant to remedy the faults found.
[39] No response from Fair City Finance to Mr Lipski's email was produced in evidence but it appears that Mr Lipski did not comply with s 27(1)(a) of the Credit Contracts and Consumer Finance Act 2003.[8] For that reason, Mr Lipski's attempt to cancel the loan did not take effect.

Mr Lipski's rejection of the vehicle

[40] Mr Lipski texted Mr Scott on 31 October 2017 to advise that he had pulled out of the finance agreement, that he had asked Auto Station not to do any further work on the car, and that he would drop it back to Mr Scott that day.
[41] Mr Lipski sent several more texts to Mr Scott that day and over the subsequent days stating that he wanted a full refund, including of his deposit of $1,000, because the car was not up to standard and that he would make an application to the Tribunal if Mr Scott did not refund the money. On 31 October, Mr Lipski returned the vehicle to Scott Base Motors’ yard and left it there.
[42] Mr Scott refused to accept Mr Lipski's rejection of the vehicle. Instead, Mr Scott offered to take the vehicle to A1 Cooling System to have it “properly” checked. A report dated 1 November 2017 from the Canterbury Radiator Co was produced in evidence by Mr Scott. This report indicated that the vehicle was run for one and a half to two hours and that the temperature sat "about right" on the gauge cluster. The report said that one of the fans was cycling in and out and that the “running of the system appears to be OK”. In addition the report indicated that a pressure test of the cooling system was “OK”. Mr Scott also produced a leakdown and compression check by ChecKing which reported a “good result”.
[43] In addition, as stated above, Mr Scott produced a video of himself taking a tee kay test on the vehicle which did not show its testing fluid changing colour. Mr Scott disputed Auto Station’s testing methodology and its conclusions that there was a fault in the cooling system. Mr Scott agreed to have the vehicle’s valley gasket (the gasket on the inlet manifold) replaced, but without accepting that this repair was necessary.
[44] On or around 6 November 2017, Mr Scott advised Mr Lipski that he would treat Mr Lipski's vehicle as "abandoned" if he left it at Scott Base Motors. Mr Lipski inferred from that that Mr Scott was not accepting his rejection and that he had no choice but to collect the vehicle again, which he did on or about 9 November 2017.
[45] Mr Scott sought to rely on the fact that, after rejecting the vehicle, Mr Lipski has continued to drive it approximately 5,000 km with no further reported problems. Based on this, his submission was that although the vehicle had a few minor faults, these have all been repaired and that he has never denied the application of the Act or his obligation to repair further faults that arise.
[46] To summarise the list of faults present in the vehicle after Mr Lipski purchased it, it had:
[47] Mr Scott acknowledged the presence of some of these faults, namely those described at [46] above. Mr Scott denied that [46](e) and (f) were of any significance but did not deny their existence. Mr Scott did not acknowledge the faults described at [46]. In relation to [46] , Mr Scott did not deny that the vehicle had been overheating, but refuted Auto Station's concerns about the nature and extent of the cooling system faults, and asserted they had all been repaired by the time Mr Lipski purported to reject the vehicle. However, Mr Scott did not adequately explain what repairs he carried out to stop the vehicle from overheating, leading to considerable suspicion on the part of Mr Lipski.
[48] As is clear from the list above at [46], this vehicle had a large number of problems that emerged at or very soon after purchase. While Mr Scott has disputed the extent of some of the problems or whether they remain unfixed, he mostly does not deny their existence. It is important to recognise that the guarantee of acceptable quality does not only relate to faults that are significant on an individual basis. Rather, it includes "minor defects", aspects of safety and the overall durability of [9]he vehicle.9
[49] Of course, as Mr Scott points out, it is necessary to consider whether the vehicle was of acceptable quality in light of the fact that it was 17 years old and had travelled well over 200,000km at the date of purchase. Its purchase price of $7,350, while not high, is certainly high enough for Mr Lipski to expect that after spending that much money, he would obtain a vehicle that did not require a large number of separate items to be repaired almost immediately after purchase and for there to be ongoing concerns about the vehicle's quality, including its durability. In light of this long list of repairs, I do not consider a reasonable consumer would regard the vehicle to be acceptably free from minor defects. The fact that it overheated on several occasions within the first few days after purchase, leads to the inevitable conclusion that the vehicle was not as durable as a reasonable consumer would regard as acceptable. In addition, due to the absence of the high stop rear light, which the Tribunal's Assessor, Mr Dixon, observed appeared to have been removed because the rear spoiler had been removed, there is potentially a minor safety issue associated with that.
[50] For these reasons, I conclude that the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act.

Issue two: Was the failure of a substantial character?

[51] Having found that the vehicle failed to comply with the guarantee of acceptable quality, the Tribunal needs to consider what remedy (if any) Mr Lipski may be able to obtain from Mr Scott. The options are set out in s 18 of the Act, which provides:
  1. 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.

[52] Mr Scott emphasised his willingness to address the problems identified with the vehicle. He also argued that he had remedied all of the defects identified. In support of this submission, Mr Scott referred to the reports of the Canterbury Radiator Co and ChecKing, indicating that the cooling system was running satisfactorily and that the car passed its compression and leakdown tests. He also refers to the fact that Mr Lipski has continued to drive the vehicle for some 5,000 km without evidence of any further serious faults.
[53] I think it is fair to say that, in terms of the test in s 18(2)(b), Mr Lipski has not established that Mr Scott refused or neglected to remedy the vehicle's failures. Whether Mr Scott has succeeded in remedying the failures is less clear. There was evidence that some of the defects persisted even after Mr Scott's repairs (for example, the exhaust leak). And there was a lack of evidence as to whether some of the defects were being remedied at all (the matters identified at [46](d)-(h) and (j). Overall, I repeat my concerns that Mr Scott simply failed to provide enough information to enable the Tribunal, (let alone Mr Lipski, to have any confidence in the repairs that were allegedly carried out.
[54] On balance, however, I do not consider this is a case where the purchaser’s right to reject the vehicle is triggered under s 18(2)(b)(ii) of the Act (above).
[55] Accordingly, the Tribunal needs to consider whether the failure of the vehicle to comply with the guarantee of acceptable quality is of a substantial character under s 21 of the Act, leading to Mr Lipski having a right to reject under s 18(3). Section 21 provides:
  1. 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.

[56] In the present case, s 21(a) is relevant. The Tribunal needs to consider whether this vehicle would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of its failures. In the present case, there was an accumulation of several defects including with the brakes, exhaust, various belts and bearings requiring replacement and the overheating issues as described above.
[57] When taken together, these various problems, all arising within the first few days of purchase, comprise a large collection of diverse defects. This is sometimes referred to as a “congeries" of defects, a concept derived from Canadian law, in which the Courts have held that individual problems, which themselves may be relatively minor and readily repaired, can collectively constitute a substantial breach of the warranty entitling a consumer to reject the goods. This approach has been accepted by the Courts in New Zealand, including in Cooper v Ashley & Johnson Motors Ltd in which the District Court said:[10]

In the congerie situation a point will eventually be reached where the consumer could say convincingly that he or she had no “confidence in the reliability of the vehicle”. It is unlikely that the Court would tolerate a lapse of years before this point was reached but certainly several months may well elapse depending upon a number of minor problems and the periods in which the vehicle operates satisfactorily. In such a case the consumer would be fully informed because he would have a full knowledge of the history of the minor faults and would be expected to reject immediately at the point where he could be said to have lost confidence in the reliability of the vehicle.

[58] I consider that the accumulated defects in Mr Lipski’s vehicle, including the ad hoc soft drink bottle in the cooling system, the exhaust leaks, the problems with the brakes, the idler bearings and air conditioner pump pulley and the cooling system issues that led to the vehicle overheating on several occasions while in Mr Lipski’s ownership, as well as the lack of a high stop light and the other matters identified, have all contributed to Mr Lipski’s loss of confidence in the vehicle’s reliability. This loss of confidence is perhaps best summed up in Mr Lipski’s text of 31 October 2017 to Mr Scott, in which he stated:

I had the car in my possession for only 4days out of the 10 legal days I owned it..you have had the car 3x over the remaining 6days to fix the issues that were stated by a reputable mechanic which you refused to do... ...

[59] Mr Lipski’s loss of confidence in the vehicle’s reliability has been exacerbated by:
[60] In addition, Mr Scott’s argumentative and overbearing manner has not encouraged Mr Lipski to place much, if any, trust in what he claims to have done in relation to the car. I record four examples of Mr Scott's behaviour that individually and collectively have contributed to Mr Lipski's lack of confidence in the vehicle:
[61] In light of this behaviour, I conclude that Mr Lipski was entitled to place greater weight on the view of his own mechanic, Mr Carson, who told him that "I can see you're going to have problems with this vehicle if you're going to keep it," than on Mr Scott's assertions about the vehicle. Within a very short space of time, less than a fortnight, Mr Lipski realised that the vehicle's faults were so numerous that he no longer wanted to keep it. Mr Scott's response was insufficiently informative about what steps he was taking to remedy the vehicle's defects. A reasonable consumer would not have been assured that their acquisition of the vehicle was sound. Rather, a reasonable consumer who was fully acquainted with the nature and extent of the vehicle's failures, is unlikely to have purchased it at all.
[62] I therefore conclude that the failure of the vehicle to comply with the guarantee of acceptable quality was of a substantial character in terms of s 21(a) of the Act.

Issue three: Is Mr Lipski entitled to reject the vehicle?

[63] Section 22(1) of the Act provides that a consumer who wishes to reject a vehicle must do so by “notifying the supplier of the decision to reject the goods and of the ground or grounds for rejection”. Mr Lipski’s texts to Mr Scott on 31 October 2017 clearly set out his wish to reject the vehicle and the grounds for rejection. Mr Lipski notified the rejection to Mr Scott within about two weeks of purchasing the vehicle, which is certainly within a "reasonable time" for the purposes of s 20(1)(a) of the Act. I do not consider there is any basis for concluding that Mr Lipski lost his right of rejection for any of the other reasons set out in that provision.
[64] Mr Scott submitted that Mr Lipski’s continued use of the vehicle disqualifies him from rejecting it. Continuing to use a vehicle after rejection is not ideal and might be thought to count against the underlying good faith of the rejection. Ordinarily, a purchaser should park the vehicle up and not use it until any contested rejection is resolved by the Tribunal. However, I am satisfied that there are some special considerations in the present case that justify a more lenient approach.
[65] Mr Lipski explained that, as the finance company would not accept his cancellation of the credit contract and Mr Scott would not accept his rejection of the vehicle, he was essentially stuck with it. Mr Lipski had attempted to return the vehicle to Mr Scott, but Mr Scott required him to collect it after threatening to treat it as being abandoned. In addition, Mr Scott had no other means of transport that he could use to get to work or to transport his and Mrs Lipski's eight children.
[66] I also note that, in the period since his rejection, Mr Lipski has not travelled an excessive distance in the vehicle, approximately 5,000 km in the last six months or so. All the while, Mr Lipski has maintained his right to reject the vehicle and has not acquiesced in Mr Scott's dismissal of his entitlement to exercise that right.
[67] Accordingly, in these circumstances, I will uphold Mr Lipski’s rejection of the vehicle with effect from 31 October 2017, with the following consequential orders.
[68] Mr Lipski’s obligations under the collateral credit agreement dated 20 October 2017 between him and Fair City Finance are vested in William Scott, with effect from the date Mr Lipski first notified Mr Scott that he wished to reject the vehicle, being 31 October 2017.
[69] Mr Scott must refund Mr Lipski his deposit of $1,000 as well as all of Mr Lipski’s payments of interest and principal under the Fair City Finance Collateral Credit Agreement from 31 October 2017 to the date of this decision. Mr Lipski is also entitled to recover $161 in respect of the two assessments of the vehicle carried out by Auto Station.
[70] These payments must be made to Mr Lipski within 14 days of the date of this decision. Once Mr Lipski has received these payments from Mr Scott in full, Mr Lipski must allow Mr Scott to collect the vehicle from him at Mr Scott’s cost.
[71] If there is any disagreement as to the calculation of the amounts payable as set out above, leave is granted to either party to refer that dispute to the Tribunal for determination, with the unsuccessful party paying the Tribunal’s costs. Mr Lipski also has leave to request a telephone conference within three weeks of the date of this decision if Mr Scott does not comply with any of the above orders.
[72] Finally, in light of the lack of a CIN and the fact that Mr Scott sold the vehicle long after his registration as a motor vehicle trader had expired, I will refer a copy of this decision to the Commerce Commission and to the Registrar of Motor Vehicle Traders for them to take whatever further action they consider appropriate.

J S McHerron
Adjudicator

[1] Contrary to Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 6(1), which requires the CIN to be "firmly attached to the motor vehicle in a prominent position" and s 28(1) of the Fair Trading Act 1986.

[2] Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 8(2)(a).

[3] Motor Vehicle Sales Act 2003, s 16; Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 8(2)(b).

[4] Commerce Commission “Enforcement Response Register” (23 August 2017) <http://www.comcom.govt.nz/fair-trading/enforcement-response-register/detail/884> .

[5] Motor Vehicle Sales Regulations 2003, reg 4(c)(ii), (iii) and (iv).

[6] A motor vehicle trader's name, address and contact information and motor vehicle trader number are required information on the CIN: Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 7(1)(c) and sch 2.

[7] This section sets out the circumstances in which a buyer or lessee of a motor vehicle for value takes the motor vehicle free of any security interest. A statement setting out the effect of s 58 is required by the Motor Vehicle Sales Act 2003, s 15 to be contained in a notice attached to a used motor vehicle. This information is included in the prescribed form for the CIN: Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 7(1) and sch 1.

[8] Section 27(1)(a) provides that a debtor under a consumer credit contract seeking to cancel the contract during the five working day cooling off period must pay the cash price of the property or service to the creditor within 15 working days of the day that any notice of cancellation is given to the creditor.

[9] Consumer Guarantees Act 1993, s 7(1)(c)-(e).

[10] Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407 (DC) at 417.

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