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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 16 March 2018
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BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
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Reference No. MVD 392/2017
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IN THE MATTER
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of the Motor Vehicle Sales Act 2003
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AND
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IN THE MATTER
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of a dispute
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BETWEEN
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HALEY JANE HOBSON
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Purchaser
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AND
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MOTO LIMITED
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Trader
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Gregory, Assessor
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HEARING at Auckland on 31 January 2018
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DATE OF DECISION 15 February 2018
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APPEARANCES
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Ms H J Hobson, Purchaser
Mr B Mellor, Witness for the Purchaser
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No appearance for the Trader
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ORDERS
DECISION
[1] The vehicle has, or has had, faults with its transmission, suspension airbags and front tyres and a leak from its power steering rack that breach the acceptable quality guarantee in s 6 of the Consumer Guarantee Act 1993 (“the Act”).
[2] Those faults cumulatively amount to a failure of a substantial character for the purposes of s 21(a) of the Act. Accordingly, Haley Hobson is entitled to reject the vehicle under s 18(3) of the Act.
[3] The collateral credit agreement between Ms Hobson and Finance Now Limited shall vest in Moto Limited as from the date of this decision and Moto Limited shall, as from that date, discharge all of Ms Hobson’s obligations under the collateral credit agreement.
[4] Moto Limited must also pay costs.
REASONS
Introduction
[5] On 30 August 2017, Haley Hobson purchased a 2005 Mercedes-Benz ML500, registration number DQD353, for $19,995 from Moto Limited. The vehicle had an odometer reading of approximately 188,000 kms at the time of sale. Ms Hobson also purchased an extended mechanical warranty from Autosure for $2,000.
[6] Ms Hobson funded the purchase of the vehicle through a loan from Finance Now Limited, dated 30 August 2017 (“the collateral credit agreement”).
[7] In October 2017, the vehicle developed a fault with its transmission solenoid valve. The vehicle has developed several further faults, including faulty rear suspension airbags and badly worn tyres and a leak form the power steering rack that would cause the vehicle to fail a warrant of fitness inspection.
[8] Ms Hobson has now applied to the Tribunal seeking to reject the vehicle.
[9] Moto Limited failed to attend the hearing, despite receiving a Notice of Hearing. The hearing proceeded without Moto Limited.
The Issues
[10] 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) Do those faults amount to a failure of a substantial character sufficient to justify rejection?
- (c) What remedy is Ms Hobson entitled to under the Act?
Does the vehicle have faults that breaches the acceptable quality guarantee?
[11] 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.
[12] 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.”
[13] 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 Ms Hobson’s subjective perspective.
The transmission fault
[14] The vehicle had a fault with its transmission that breached the acceptable quality guarantee.
[15] Within six weeks of purchasing the vehicle, Ms Hobson heard a bang while driving and noticed the vehicle start to shudder. The transmission also stuck in first gear. She had the vehicle assessed by Autohaus Auckland Limited, who diagnosed a fault with the vehicle’s transmission.
[16] Ms Hobson contacted Moto Limited, who advised her to make a claim against the Autosure extended mechanical warranty. Ms Hobson did so, and the vehicle was repaired in November 2017 by Ingham Motor Holdings Limited, trading as Mercedes-Benz Auckland. Mercedes-Benz Auckland found that the clutch solenoid valve had failed, and repaired that fault by replacing the transmission valve body. Moto Limited contributed $828.82 towards the cost of that repair.
[17] I am satisfied that the transmission fault breaches the acceptable quality guarantee in s 6 of the Act. Within two months of purchase, the vehicle developed a costly fault that caused its transmission to fail. I am satisfied that this vehicle has not been as durable as a reasonable consumer would consider acceptable.
The damaged tyres, faulty suspension and steering rack leak
[18] In January 2018, Ms Hobson had the vehicle assessed by Auto Avantgarde Limited, who found the following faults:
- (a) The right front tyre was worn to the second layer of tread, sufficient to cause the vehicle to fail a warrant of fitness inspection, and the left front tyre was worn on the inner edge. Auto Avantgarde considered that the tyre wear was caused by torn front lower control arm rear bushes.
- (b) The left and right rear suspension airbags were leaking.
- (c) There was an oil leak from the power steering rack, sufficient to cause the vehicle to fail a warrant of fitness inspection.
[19] I am satisfied that each of these faults breach the acceptable quality guarantee in s 6 of the Act.
[20] The torn lower control arm bushes have caused damage to the tyres, sufficient for the right front tyre to be in a condition that would now fail a warrant of fitness inspection.
[21] The rear suspension airbags are leaking, and require replacement. The airbags are an important component of the vehicle’s suspension. The airbags set the vehicles ride height replacing a conventional cars springs and, if leaking, will put extra load on other components, such as the compressor. A leaking airbag will also fail a warrant of fitness inspection. Mr Gregory, the Tribunal’s Assessor, advises that replacement suspension airbags will cost between $3,000 and $6,000, depending on whether the repairer uses genuine Mercedes-Benz or aftermarket parts.
[22] Finally, the oil leak from the power steering rack is sufficient to cause the vehicle to fail a warrant of fitness inspection because, if the system loses all its fluid, the steering wheel will become heavy and the vehicle difficult to control. Mr Gregory advises that this fault will cost approximately $1,200 to repair.
[23] Ms Hobson first notified Moto Limited of a possible fault with the suspension airbags in November 2017, and the other faults were present a little over four months after purchase, by which time Ms Hobson had driven a little more than 2,000 kms in the vehicle. I am satisfied that a reasonable consumer would not expect a vehicle of this price, age and mileage to have these faults so shortly after purchase. Accordingly, I am satisfied that these faults also mean that this vehicle has not been as durable as a reasonable consumer would consider acceptable.
Did Moto Limited fail to repair the fault within a reasonable time?
[24] Ms Hobson claims that she is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act because Moto Limited failed to repair the transmission fault within a reasonable time. In particular, she says that the fault was repaired by mid-November 2017, but the vehicle was not released to her until early January 2018 because Moto Limited delayed paying the repair invoice.
[25] Section 18 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.”
[26] Under s 18(2)(b)(ii) of the Act, Ms Hobson is entitled to reject the vehicle if, having been required to remedy the fault, Moto Limited has not succeeded in doing so within a reasonable time.
[27] I am not satisfied that Moto Limited failed to repair the fault within a reasonable time. The evidence shows that the fault was repaired by early November 2017 and that Moto Limited paid the repair invoice on 13 November 2017. Unfortunately, Mercedes-Benz Auckland appears to have then failed to release the vehicle to Ms Hobson, which seems to have been an oversight by Mercedes-Benz Auckland rather than because of Moto Limited’s failure to comply with its obligations under the Act.
[28] Accordingly, I am not satisfied that Ms Hobson is entitled to reject the vehicle because Moto Limited failed to repair the transmission fault within a reasonable time.
Is the fault a failure of a substantial character?
[29] Ms Hobson also seeks to reject the vehicle on the basis that its faults amount to a failure of a substantial character. Under s 18(3) of the Act, Ms Hobson 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.”
[30] 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.
[31] In Cooper v Ashley & Johnson Motors Limited,[1] the District Court stated that a purchaser may reject a vehicle where there had been an accumulation of minor defects, which in themselves could not be described as substantial. The Court noted that a point will eventually be reached where the purchaser could “say convincingly that he or she had no ‘confidence in the reliability of the vehicle’”.[2]
[32] I am not satisfied that any of the vehicle’s faults separately amounts to a failure of a substantial character. However, I am satisfied that the vehicle’s faults, when considered together, amount to a failure of a substantial character for the purposes of s 21(a) of the Act.
[33] Within the first four months of Ms Hobson’s ownership, during which time Ms Hobson drove a little more than 2,000 kms, the vehicle developed a significant transmission fault, leaking suspension airbags that will cost between $3,000 and $6,000 to repair, and faults with its tyres and power steering rack that will cause the vehicle to fail a warrant of fitness inspection.
[34] Notwithstanding that this is a high mileage used European vehicle, which has a real likelihood of developing faults, I am nonetheless satisfied that no reasonable consumer would have purchased this vehicle if it had known the nature and extent of the vehicle’s faults. These faults are much more than a consumer could reasonably expect to encounter so shortly after purchase. I am therefore satisfied that the faults with this vehicle are such that a reasonable buyer could now say that he or she has lost all confidence in the reliability of the vehicle.
What remedy is Ms Hobson entitled to under the Act?
[35] Under s 18(3) of the Act, Ms Hobson is entitled to reject the vehicle, because its faults amount to a failure of a substantial character for the purpose of s 21(a) of the Act. Under s 18(4) of the Act, Ms Hobson is also entitled to recover $342.34, being the cost of assessment of the vehicle’s faults by Auto Avantgarde.
[36] Ms Hobson is also entitled to have her obligations under the collateral credit contract assigned to Moto Limited because, for the purposes of s 23A of the Act, I am satisfied that Moto Limited arranged or procured the collateral credit agreement and the agreement was entered into to enable Ms Hobson to purchase the vehicle. Under s 23A(2) of the Act, I may assign the collateral credit agreement to Moto Limited.
[37] In making this order, I note that Blair Mellow, Ms Hobson’s partner, advised that the vehicle was initially offered for sale for $13,995, but Moto Limited offered to raise the price to $19,995 to enable Ms Hobson to borrow sufficient funds from Finance Now Limited to pay off an existing debt on Mr Mellor’s personal vehicle. By choosing to take this approach, Moto Limited has left itself liable for the entire amount of the loan, irrespective of the fact that the vehicle may have been worth substantially less than the principal amount borrowed by Ms Hobson.
Costs
[38] Under cl 14(1)(b) of Sch 1 to the Motor Vehicle Sales Act 2003, the Tribunal may award costs against a party where that party, after receiving notice of the hearing, fails to attend without reasonable cause.
[39] I am satisfied that Moto Limited received notice of the hearing and failed to attend without reasonable cause.
[40] Accordingly, under cl 14(2)(a)(i) of Sch 1 to the Motor Vehicle Sales Act, I order Moto Limited to pay $650 to the Crown, being the reasonable costs of the Tribunal hearing. Under cl 14(2)(b) of Sch 1 to the Motor Vehicle Sales Act, I also order that Moto Limited pay $50 to Ms Hobson, being the cost of filing her Tribunal application.
Conclusion
[41] I am satisfied that the vehicle has several faults that breach the acceptable quality guarantee in s 6 of the Act, and that those accumulated faults amount to a failure of a substantial character justifying rejection under s 18(3) of the Act.
[42] I therefore order that the collateral credit agreement between Ms Hobson and Finance Now Limited shall vest in Moto Limited as from the date of this decision and Moto Limited shall, as from that date, discharge all of Ms Hobson’s obligations under the collateral credit agreement.
[43] Further, Moto Limited shall, within 10 working days of the date of this decision, pay Ms Hobson:
- (a) the capital component of all payments made by Ms Hobson under the collateral credit agreement as from the date the collateral credit agreement was entered into until the date of this decision;
- (b) $392.34, being the costs Ms Hobson incurred in having the vehicle’s faults assessed and in filing this application.
[44] Moto Limited shall also, within 10 working days of the date of this decision pay costs of $650 to the Crown (Ministry of Justice, Tribunals Unit, Level 1, Chorus House, 41 Federal Street, Auckland 1010).
DATED at AUCKLAND this 15th day of February 2018
B.R. Carter
Adjudicator
[1] Cooper v Ashley & Johnson Motors Limited (1996) 7 TCLR 407 (DC).
[2] Ibid, at 417.
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