Peck v Motormart Limited - Reference No. MVD 372/2017 [2018] NZMVDT 17 (2 February 2018)

Last Updated: 16 March 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 017 Reference No. MVD 372/2017
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	BRUCE JOHN PECK
		Purchaser
	AND	MOTORMART LIMITED
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 17 January 2018
DATE OF DECISION 2 February 2018
APPEARANCES
Mr B J Peck, Purchaser
Mr G Blyth, for the Trader

ORDERS

1. Bruce Peck’s application to reject the vehicle is upheld.
2. Motormart Limited shall, within 10 working days of the date of this decision, pay $7,105.12 to Bruce Peck.

100. Once Motormart Limited has paid that sum in full, Bruce Peck shall make the vehicle available to be uplifted by Motormart Limited, at its cost.

DECISION

[1] The parties have not contracted out of the Consumer Guarantees Act 1993 (“the Act”). The vehicle was not acquired in trade and Bruce Peck is not in trade.
[2] The vehicle’s radiator failed less than five months after purchase, causing significant damage to the vehicle’s engine. The vehicle has not been as durable as a reasonable consumer would find acceptable.
[3] Mr Peck is entitled to reject the vehicle and obtain a refund of all amounts paid in respect of the vehicle. He is also entitled to be compensated for the cost of recovering the vehicle and having its faults assessed.

REASONS

Introduction

[4] On 14 June 2017, Bruce Peck purchased a 2005 Nissan Murano, registration number FWN742 for $6,810 from Motormart Limited. The vehicle had an odometer reading of 196,700 kms at the time of sale.
[5] On 5 November 2017, the vehicle’s radiator top tank failed, causing damage to the vehicle’s engine due to a sudden loss of coolant. The engine now requires significant overhaul or replacement.
[6] Mr Peck has rejected the vehicle under s18(3) of the Act and seeks a refund of all amounts paid in respect of the vehicle.
[7] Motormart Limited has declined to accept Mr Peck’s rejection of the vehicle. It says that the parties have agreed to contract out of the Act. It also says that the damage to the engine was caused by the radiator failing, which is a maintenance issue and the engine damage could have been avoided if Mr Peck had noticed the early warning signs that the radiator had failed.
[8] On 15 January 2018, the Tribunal received an email from Motormart expressing its disappointment at receiving an email notifying it that the hearing was proceeding on 17 January 2018. Motormart Limited said that it would be unable to produce additional evidence at the hearing because of the time constraints.
[9] I note that Motormart Limited received notification of the hearing on 22 December 2017, when, as required by s 142 of the Motor Vehicle Sales Act 2003, a Notice of Hearing was sent to the company at its address for service. Motormart made no application for an adjournment and the matter proceeded as scheduled.

The Issues

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

• (a) Have the parties contracted out of the Act?
• (b) Does the vehicle have faults that breach the acceptable quality guarantee in s 6 of the Act?
• (c) Are the vehicle’s faults a failure of a substantial character sufficient to justify rejection?
• (d) What remedy is Mr Peck entitled to under the Act?

Have the parties contracted out of the Act?

[11] Motormart Limited alleges that the parties have agreed to contract out of the Act. It points to a clause in the Vehicle Offer and Sale Agreement, (“the exclusion clause”) which was signed by Mr Peck. The clause states that the vehicle was acquired for the purposes of the purchaser’s business and accordingly the parties agree that the provisions of the Act will not apply.
[12] Parties who are in trade may contract out of the Act, provided the provisions in s 43(2) of the Act, which sets out the rules for contracting out of the Act, are complied with:

“43 No contracting out except for business transactions

(2) However, despite subsection (1), parties to an agreement may include a provision in their agreement to the effect that the provisions of this Act will not apply to that agreement, provided that—

(a) the agreement is in writing; and

(b) the goods or services are, or (in connection only with the guarantee of acceptable quality in section 7A) the gas or electricity is, supplied and acquired in trade; and

(c) all parties to the agreement—

(i) are in trade; and

(ii) agree to contract out of the provisions of this Act; and

(d) it is fair and reasonable that the parties are bound by the provision in the agreement.

(2A) If, in any case, a court is required to decide what is fair and reasonable for the purposes of subsection (2)(d), the court must take account of all the circumstances of the agreement, including—

(a) the subject matter of the agreement; and

(b) the value of the goods, services, gas, or electricity (as relevant); and

(c) the respective bargaining power of the parties, including—

(i) the extent to which a party was able to negotiate the terms of the agreement; and

(ii) whether a party was required to either accept or reject the agreement on the terms and conditions presented by another party; and

(d) whether all or any of the parties received advice from, or were represented by, a lawyer, either at the time of the negotiations leading to the agreement or at any other relevant time.”

[13] Despite the exclusion clause, I am not satisfied that the parties have validly contracted out of the Act. That is because the vehicle was not acquired in trade and Mr Peck is not in trade. The vehicle was purchased by Mr Peck for his personal use. Although Mr Peck is a Director of Projectwork 2008 Limited, a project management company, I am satisfied that the vehicle was not purchased by the company, or for use in the company’s business.
[14] Mr Peck advises that he has a company vehicle - an SV Holden - which is used for company business. Mr Peck says the vehicle he purchased from Motormart was used exclusively for personal use.
[15] In explaining why he signed the exclusion clause, Mr Peck stated that Motormart had marked the agreement with a series of asterisks, and he simply signed beside each asterisk, without reading the relevant clause.
[16] This evidence satisfies me that the parties have not validly contracted out of the Act. The vehicle was not purchased in trade as required by s 43(2)(b) of the Act and Mr Peck is not in trade, as required by s 43(2)(c)(i) of the Act.

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

[17] 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.
[18] 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.”

[19] 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 Peck’s subjective perspective.
[20] On 5 November 2017, the top tank of the vehicle’s radiator failed, causing the vehicle’s engine to immediately overheat due to a sudden loss of coolant. The vehicle’s radiator top tank requires replacement and the engine has been badly damaged and requires significant repairs or replacement.
[21] Village Valley Automotive assessed the vehicle in November 2017 and has provided an estimate of $4,443.88 to replace the engine and radiator.
[22] Mr Gregory, the Tribunal’s Assessor, advises that the vehicle has a ruptured radiator top tank and the engine has a leaking head gasket or cracked cylinder head. Mr Gregory says that the most economical repair would be to replace the radiator top tank and fit a second-hand engine.
[23] I am satisfied that the vehicle has a damaged radiator and engine that requires significant repair.
[24] The question I must then answer in determining whether those defects breach the acceptable quality guarantee is whether the faults were caused by the way in which the vehicle was used by Mr Peck. In particular, I need to consider whether Mr Peck has caused or contributed to the engine damage by continuing to drive the vehicle once warning signs were evident.
[25] That is because, under s 7(4) of the Act, the vehicle will not breach the acceptable quality guarantee if the vehicle has 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 the engine damage was caused by that use.
[26] Mr Peck says that there were no warning signs of the impending radiator and engine failure. He says the vehicle’s fluid levels were as they should be shortly before the radiator failed. Further, he says he saw no indication that the vehicle was overheating. The engine warning light did not illuminate, there was no steam or fluid from the front of the vehicle and the temperature gauge did not rise.
[27] Mr Gregory advises that the photographs provided by Mr Peck of the radiator show the top tank has ruptured leaving a sizeable hole in which the coolant could escape. Mr Peck gave evidence that the vehicle lost power and stopped on the open road. This sudden failure of the radiator top tank would have been difficult to detect at open road speeds as the coolant was rapidly lost, going underneath the vehicle. The engine would then overheat quickly causing the engine damage. Mr Gregory considers it entirely possible that the temperature gauge gave little warning. That is because there would not have been any coolant passing by the temperature sender unit to indicate the sudden rise of the engine temperature.
[28] I therefore consider that the radiator and engine defects were not caused by Mr Peck’s use of the vehicle and I am satisfied that the defects breach the acceptable quality guarantee in s 6 of the Act.
[29] In reaching this conclusion, I acknowledge that the vehicle was 12 years old, cost $6,810 and had travelled 196,700 kms at the time of sale. I also acknowledge that Mr Peck had owned the vehicle for nearly five months when the defects arose. However, I also note that the vehicle had travelled a little more than 3,000 kms in that time. Even considering the age, price and mileage of this vehicle, and the length of Mr Peck’s ownership, I am satisfied that a reasonable consumer would not expect the vehicle’s radiator and engine to suffer significant damage, costing more than $4,000 to repair, to occur after only 3,000 kms of driving.
[30] I am therefore satisfied that this vehicle has not been of acceptable quality, because it has not been as durable as a reasonable consumer would find acceptable.

Is the fault a failure of a substantial character?

[31] Under s 18(3) of the Act, Mr Peck may 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 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.”

[32] 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.
[33] I am satisfied that a reasonable consumer would not have purchased the vehicle if it had known that the radiator would fail, causing extensive engine damage, after a little more than 3,000 kms of driving.
[34] I therefore consider that the vehicle’s faults amount to a failure of a substantial character for the purposes of s 21(a) of the Act.

What remedy is Mr Peck entitled to under the Act

[35] The remedies available to Mr Peck are set out in s 18 of the Act, which 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.”

[36] Under s 18(3) of the Act, Mr Peck is entitled to reject the vehicle. Under s 23(1)(a) of the Act he is entitled to a refund of all amounts paid in respect of the vehicle.
[37] Under s 18(4) of the Act, Mr Peck is also entitled to recover any loss or damage suffered as a result of the vehicle’s failure. In that regard, Mr Peck incurred $295.12 in having the vehicle recovered and assessed by Village Valley Automotive in November 2017. Mr Peck is entitled to recover that amount.
[38] Accordingly, the Tribunal orders that Motormart Limited shall, within 10 working days of the date of this decision, pay $7,105.12 to Bruce Peck.

DATED at AUCKLAND this 2nd day of February 2018

B.R. Carter
Adjudicator