Horschig v Austin MC Limited Reference No. MVD 287/2018 [2018] NZMVDT 196 (30 August 2018)

Last Updated: 17 September 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 196 Reference No. MVD 287/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	OLIVER JOSEF ALBERT HORSCHIG
		Purchaser
	AND	AUSTIN MC LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 28 August 2018
DATE OF DECISION 30 August 2018
APPEARANCES
O J A Horschig, Purchaser N Heyer, Witness for the Purchaser
No appearance for the Trader

ORDERS

1. Josef Horschig’s application to reject the vehicle is upheld.
2. Austin MC Ltd shall, within 10 working days of the date of this decision:
   1. pay $2,972.50 to Mr Horschig; and
   2. pay costs of $650 to the Crown (payable to Ministry of Justice, Tribunals Unit, Level 1, Chorus House, 41 Federal Street, Auckland 1010).

DECISION

[1] The vehicle has significant engine damage, which means the vehicle has not been of acceptable quality guarantee as required by s 6 of the Consumer Guarantees Act 1993 (the Act).
[2] The significant engine damage is a failure of a substantial character for the purposes of s 21(a) of the Act. Consequently, under s 18(3) of the Act, Mr Horschig is entitled to reject the vehicle and obtain a refund of the purchase price. Austin MC Ltd must also pay costs.

REASONS

Introduction

[3] On 18 June 2018, Mr Horschig purchased a 1995 Mazda Bongo, registration number CDT951, for $2,600 from Austin MC Ltd. The vehicle had an odometer reading of 186,904 km at the time of sale.
[4] About one week later, the vehicle started smoking badly. Mr Horschig has had the vehicle assessed, and the vehicle has been diagnosed with significant engine damage - most likely a blown head gasket or a cracked cylinder head. Mr Horschig has since rejected the vehicle and seeks a refund of the purchase price, together with other costs.
[5] Austin MC Ltd, despite a Notice of Hearing being sent to its registered office notifying it of the time, date and location of the hearing, failed to attend the hearing. The hearing proceeded without Austin MC Ltd.

The Issues

[6] 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) Is the fault a failure of a substantial character?
• (c) What remedy is Mr Horschig entitled to under the Act?

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

[7] 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.
[8] 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.

[9] 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”.
[10] About one week after he purchased the vehicle, Mr Horschig noticed smoke coming from the vehicle. Mr Horschig says the vehicle then overheated and was low on coolant fluid.
[11] Mr Horschig had the vehicle assessed by Automotive Top Services who performed a “tee kay” test on the vehicle. Automotive Top Services, after performing the “tee kay” test, considered that the vehicle had a blown head gasket and/or a cracked head. Automotive Top Services provided an estimate of $2,875 to fit a replacement cylinder head.
[12] Mr Haynes, the Tribunal’s Assessor, advises that a “tee kay” test is designed to check for the presence of combustion gases in the cooling system. Mr Haynes notes that the “tee kay” test performed by Automotive Top Services found combustion gases in the cooling system, and that the presence of combustion gases in the cooling system is evidence of significant engine damage, such as a blown head gasket or a cracked head. Mr Haynes says that Automotive Top Services’ findings, together with the symptoms described by Mr Horschig, are consistent with the vehicle having a blown head gasket and/or cracked head.
[13] On the basis of Mr Horschig’s evidence, the evidence from Automotive Top Services and the advice from Mr Haynes, I am satisfied that the vehicle has a blown head gasket and/or a cracked head. Mr Haynes advises that the vehicle’s engine requires significant overhaul, and that the estimate from Automotive Top Services is a reasonable one.
[14] Notwithstanding that the vehicle is an inexpensive 23-year-old vehicle that has travelled more than 186,000 km at the time of sale, I am satisfied that the damage to the engine means the vehicle has not been of acceptable quality for the purposes of s 6 of the Act. A reasonable consumer would not expect such a vehicle to have significant engine damage so shortly after its purchase.

Is the fault a failure of a substantial character?

[15] Under s 18(3) of the Act, Mr Horschig 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. 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.

[16] 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.
[17] I am satisfied that the engine damage is a failure of a substantial character. The vehicle’s engine requires significant overhaul and the estimated cost of that work exceeds the value of the vehicle. A reasonable consumer would not have purchased this vehicle if it had known that it had significant pre-existing engine damage that would cost more than $2,800 to repair.

What remedy is Mr Horschig entitled to under the Act?

[18] The remedies relevant to this claim 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), 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.

[19] Under s 18(3)(b) of the Act, Mr Horschig is entitled to reject the vehicle because the vehicle has a fault that amounts to a failure of a substantial character. Under s 23(1)(a) of the Act, Mr Horschig is entitled to a refund of the purchase price.
[20] Under s 18(4) of the Act, Mr Horschig is also entitled to recover $172.50, being the cost of having the vehicle assessed by Automotive Top Services.

Costs

[21] Under cl 14(1)(a)(ii) and (b) of Sch 1 to the Motor Vehicle Sales Act 2003 (the MVSA), the Tribunal may award costs against a party where that party either fails to participate in pre-hearing settlement discussions or, after receiving notice of the hearing, fails to attend the hearing without good cause.
[22] I am satisfied that Austin MC Ltd, after being served with notice of the hearing, failed to attend the hearing without good cause. Indeed, Austin MC Ltd provided no excuse for its non-attendance. I am also satisfied that Austin MC Ltd failed to participate in pre-hearing settlement discussions. Accordingly, under cl 14(2)(b) of Sch 1 to the MVSA, Mr Horschig is entitled to recover $50, being the filing fee for this application. Mr Horschig also seeks to recover $270.24 for wages lost because he took a day off work to attend the hearing. Given that the hearing took less than an hour, and was completed by 10 am, I am not satisfied that Mr Horschig is entitled to recover a full day’s lost wages. I am, however, prepared to award $150 to Mr Horschig, which is a reasonable estimate of the loss he suffered in taking unpaid leave to attend the hearing.
[23] Further, under cl 14(2)(a)(i) of Sch 1 to the MVSA, I also order that Austin MC Ltd pay $650, being the reasonable costs of the Tribunal hearing.

Conclusion

[24] The vehicle has a significant fault with its engine that breaches the acceptable quality guarantee in s 6 of the Act.
[25] The engine fault amounts to a failure of a substantial character for the purposes of s 21(a) of the Act and Mr Horschig is entitled to reject the vehicle and obtain a refund of the purchase price. Austin MC Ltd must also pay costs.
[26] Accordingly, the Tribunal orders that Austin MC Ltd shall, within 10 working days of the date of this decision:

• (a) pay $2,972.50 to Mr Horschig; and
• (b) pay costs of $650 to the Crown (payable to Ministry of Justice, Tribunals Unit, Level 1, Chorus House, 41 Federal Street, Auckland 1010).
  

DATED at AUCKLAND this 30th day of August 2018

B.R. Carter
Adjudicator