Prout v Spot One Ltd - Reference No. MVD 204/2018 [2018] NZMVDT 246 (30 October 2018)

Last Updated: 15 November 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 246 Reference No. MVD 204/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	BRYDON PROUT
		Purchaser
	AND	SPOT ONE LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor
HEARING at Auckland on 17 July 2018, 11 September 2018 and 17 October 2018
DATE OF DECISION 30 October 2018
APPEARANCES
B Prout, Purchaser (by audio-visual link) R E Birchall, T Smithson and T Prout (by audio-visual link), witnesses for the Purchaser
P Tweedie, for the Trader A Imran, S Tweedie and K Pemberton, witnesses for the Trader (all by telephone)

ORDERS

1. Brydon Prout’s application is dismissed.

DECISION

[1] The vehicle does not breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (the Act). Taking account of the price, age and mileage of the vehicle at the time of sale, the length of Mr Prout’s ownership before the engine damage occurred, and the distance driven in that time, the vehicle has been as durable as a reasonable consumer would consider acceptable.

REASONS

Introduction

[2] On 11 March 2017, Mr Prout purchased a 2009 Volkswagen Golf GTi for $17,990 from Spot One Ltd. In February 2018, the vehicle suffered significant engine damage.
[3] Mr Prout has rejected the vehicle, claiming the damaged engine means the vehicle has not been of acceptable quality as required by s 6 of the Act and amounts to a failure of substantial character sufficient to justify rejection.
[4] Spot One says that the damage to the engine was not caused by any fault with the vehicle but rather unsuitable oil, or an unsuitable additive, being added to the vehicle causing its engine to become starved of oil. Spot One says that it should not have responsibility for this damage.

The Issues

[5] Against this background, the issues requiring consideration in this case are:

• (a) What caused the damage to the vehicle’s engine?
• (b) What caused the vehicle’s oil supply to become restricted?
• (c) Does the engine damage mean the vehicle has not been of acceptable quality for the purposes of s 6 of the Act?
  

What caused the damage to the vehicle’s engine?

[6] Both parties agree that the vehicle suffered damage to the top end of its engine that will cost many thousands of dollars to rectify. However, they disagree as to the cause of that damage.

Spot One’s position

[7] Paul Tweedie, a Director of Spot One, says that the damage was caused by oil starvation due to an unsuitable oil or an unsuitable additive being put into the vehicle that caused the molybdenum levels and viscosity of the oil in the vehicle to be too high. Mr Tweedie says that the damage to the engine was caused by the high molybdenum levels or the thick oil not reaching the top end of the engine
[8] Karl Pemberton, an experienced automotive engineer and vehicle assessor, gave evidence on behalf of Spot One. Mr Pemberton advised that, in his capacity as an insurance assessor, he frequently sees VW Golf vehicles with this type of engine damage. Mr Pemberton considered that the engine damage was caused by insufficient oil reaching the top end of the engine. Although he was unable to pinpoint the precise cause of the oil restriction, he noted that in many cases he has seen, the oil restriction is caused by a blockage of the relief valve, which commonly occurs because of sludge or metal particles in the vehicle’s oil.

Mr Prout’s position

[9] Mr Prout says the damage was caused by a fault with the vehicle rather than the quality of the vehicle’s oil. Mr Prout says that the only oil put into the vehicle during his ownership was oil used by Birchall & Maunder, a Rotorua based repairer with considerable experience in servicing VW vehicles. Mr Prout says that Birchall & Maunder used the correct oil and that he has never put oil or an additive into the vehicle.
[10] Timothy Smithson, an automotive machinist and engineer with 47 years experience in the automotive industry, gave evidence on behalf of Mr Prout. Mr Smithson considered that the damage to the engine was most likely caused by progressive deterioration of the affected camshafts and bearings due to a small contaminant causing premature wear to the affected parts. Mr Smithson considered that the damage was not caused by a restriction to the oil supply, as he considered that the physical evidence showed that the affected components were receiving “plenty of lubrication”. In support of this position, he advised that the rest of the vehicle’s engine components, including pistons and bearings, remained in good condition, which is inconsistent with oil starvation. Mr Smithson advised that the progressive deterioration will have been audible for a period of time (possibly approximately 100 km to 200 km of driving) before failure.
[11] Mr Smithson also presented a theory suggesting that the vehicle’s engine may have been damaged by thermal overload, caused by a fault with the vehicle’s exhaust system. Mr Smithson did not actively pursue this theory as the cause of the engine failure and advised that he considered that the primary cause of the engine damage was progressive deterioration due to a contaminant or foreign particle causing wear to the affected components, rather than thermal overload.
[12] Ross Birchall of Birchall & Maunder, an experienced mechanic with expertise in VW vehicles, also gave evidence on behalf of Mr Prout. At the hearing on 17 July 2018, Mr Birchall initially advised that he considered that the damage was caused by restricted oil supply to the top end of the engine. Mr Birchall considered that the damage was most likely caused by the vehicle having a poor service history, meaning that the vehicle’s oil pickup was likely to have become blocked with contaminants that restricted the oil supply to the top end of the engine. Those contaminants would not have been present if the vehicle had been regularly serviced.
[13] At the hearing on 17 October 2018, Mr Birchall’s evidence developed somewhat. Mr Birchall appeared to support Mr Smithson’s theory as to the cause of the damage, and considered it more likely that the engine damage was caused by a contaminant or foreign object (such as the gauze from the non-return valve) becoming detached from the engine and working its way in to the affected components, causing wear to those components. However, later in the hearing, Mr Birchall appeared to return to his initial position by stating that he was of the view that the damage was caused by oil starvation.

The damage was caused by a restriction to the vehicle’s oil supply

[14] The evidence presented by the parties, together with advice from Mr Gregory, the Tribunal’s Assessor, satisfies me that the damage to the engine was caused by the top end of the engine receiving a restricted supply of oil.
[15] Mr Tweedie, Mr Birchall and Mr Pemberton each considered that the engine damage was consistent with restricted oil supply. Mr Gregory also advises that, although the precise cause of the damage to the engine has not been ascertained, it is highly likely that the engine was damaged because insufficient oil was being distributed to the top end of the engine. Mr Gregory advises that the damage to the affected camshafts and cylinder head is entirely consistent with a lack of lubrication to the top end of the engine. Mr Gregory notes that the most significant damage is at the far end of the intake camshaft and cylinder head, which is furthest away from the oil source, with less damage to the parts of the camshaft and cylinder head closer to the oil source. Mr Gregory says this is consistent with the engine block receiving a restricted amount of oil, causing damage to the parts of the engine that are furthest away from the oil supply.
[16] In reaching this conclusion, I note that the “progressive deterioration” theory led by Mr Smithson is not strongly supported by the evidence. Both Mr Smithson and Mr Birchall suggested that gauze from the non-return valve may have been the contaminant that caused the engine damage. However, there was no evidence of any contaminant in the engine, with Mr Tweedie advising that the gauze was still attached to the non-return valve when he disassembled the engine. Further, Mr Smithson was adamant that the progressive deterioration would be audible (for approximately 100 km to 200 km of driving before failure), but there was no evidence of the vehicle making any unusual noises other than noises consistent with detonation due to the wrong fuel being used (as discussed later in this decision), and the squealing noise heard by Mr Prout immediately before the engine failed, which Mr Gregory advises is consistent with engine failure due to a restricted oil supply.

What caused the restriction to the oil supply?

[17] Spot One submitted that the restriction to the oil supply was caused by either:

• (a) the oil being too thick, thus restricting the oil flow to the top end of the engine; and/or
• (b) the elevated molybdenum content in the oil.

[18] Mr Tweedie advises that, when Spot One inspected the vehicle, it discovered that the vehicle’s oil appeared too thick. Spot One considered that the damage to the engine was most likely caused by the oil being too thick and thereby being unable to properly lubricate the top of the cylinder head.
[19] Spot One sent a sample of the oil to ALS, a specialised oil testing laboratory, for testing. A Certificate of Analysis dated 22 March 2018 from ALS shows that the sample sent to it by Spot One had a viscosity reading of 244, which it considered to be high for the 5W30 grade oil recommended for use in this vehicle.
[20] At the first hearing, Mr Prout alleged that Spot One had tampered with the oil sample, meaning that the first ALS test result was not indicative of the true condition of the vehicle’s oil. As part of the evidence at the first hearing, Spot One produced parts from the vehicle’s dismantled engine. One of those parts was the vehicle’s oil filter. After the hearing, Mr Gregory inspected the parts provided by Spot One, including by cutting open the oil filter. Mr Gregory found that the oil filter contained approximately 100 ml of oil, which in Mr Gregory’s opinion would have been difficult to tamper with and was likely to be representative of the oil that was in the vehicle’s engine when the damage occurred.
[21] In the ordinary course of events, the Tribunal would have proceeded to prepare a written decision after the hearing on 17 July 2018. However, because the issue of whether the oil sample had been tampered with by Spot One was important to Mr Prout’s claim, the Tribunal convened a teleconference with the parties to discuss Mr Gregory’s findings. Following that teleconference, the parties agreed that the oil sample from the oil filter should be tested.
[22] The subsequent test results are quite different from the results of the first test, as they record that the oil’s viscosity is within the acceptable range for the 5W30 oil that should be used in this vehicle. Although I have been unable to reconcile the discrepancy between the two test results, I do not feel I need to reconcile that difference to determine this case.
[23] That is because Mr Gregory advises that, even if the viscosity of the vehicle’s engine oil was 244 as suggested by the first ALS test result, the vehicle’s oil supply would not have been restricted to the top end of the engine in a manner sufficient to cause the damage evident in this engine. Mr Gregory says a viscosity reading of 244 means the oil was roughly the equivalent of 50 SAE engine oil, and oil of that grade would still have been distributed evenly throughout the entire engine because the vehicle’s oil pump and galleries are sufficient to distribute oil of that viscosity throughout the engine.
[24] Accordingly, even if I were to accept the results of the first test by ALS as being reflective of the true condition of the vehicle’s oil, I am not satisfied that the damage to the vehicle’s engine was caused by the oil being too thick.
[25] Spot One also alleged that the damage could have been caused by the high molybdenum levels in the vehicle’s oil. Both tests from ALS show elevated molybdenum levels. Spot One submitted that the oil approved by the manufacturer has no molybdenum at all, and that oil should have been used. Although Spot One could provide no firm evidence in support of this position, it submitted that the molybdenum levels could have affected the lubricating properties of the vehicle’s oil, thus causing the damage to the top end of the engine.
[26] Mr Gregory advises that the molybdenum present in the vehicle’s oil was highly unlikely to have caused any damage to the vehicle’s engine. Mr Gregory advises that the molybdenum is designed to enhance lubrication, rather than to reduce it. Further, Mr Gregory advises that if the molybdenum was to cause any faults with the vehicle, those faults are likely to arise in the emissions systems, as molybdenum can interfere with the proper function of the oxygen sensors and catalytic converter. In his experience, the presence of low levels of molybdenum in this vehicle’s oil will not lead to any damage to the engine.
[27] Instead, Mr Gregory advises that the oil restriction most likely occurred because the vehicle’s oil pickup became partially blocked, preventing sufficient oil from entering the engine block.
[28] Mr Pemberton and Mr Birchall both gave evidence that the engines in VW Golf’s can become starved of oil where the oil pickup or relief valve becomes partially blocked due to contaminants in the vehicle’s oil (such as sludge or metal particles). Mr Gregory does not consider it likely that the oil restriction was caused by sludge or metal particles. Mr Gregory says that, given the pristine condition of the vehicle’s oil pickup and the lack of evidence to prove any blockage in the relief valve, it is most likely that the oil restriction was caused by the broken plastic tensioner guide found in the vehicle’s sump. Mr Gregory considers that it is possible that the tensioner guide became drawn into the oil pickup intake, temporarily restricting the flow of oil through the pickup. Mr Gregory advises that the tensioner guide only needed to restrict oil flow for a short period of time for significant damage to have occurred in the engine.
[29] Mr Gregory notes that Mr Pemberton considered it unlikely that the tensioner guide could have restricted the flow of oil into the pickup. Mr Gregory disagrees and considers it entirely possible that the tensioner guide could have been temporarily drawn into the pickup, and he believes that it is the likely cause of the restriction of the oil flow to the vehicle’s engine.
[30] On the basis of the evidence that I heard from both parties and their experts, along with Mr Gregory’s advice as to the cause of the fault, I am satisfied that the top end of the vehicle’s engine was damaged because of a restricted oil supply. That restricted oil supply was not caused by the condition of the vehicle’s oil or any additive to that oil. Instead, it was most likely caused by the broken plastic tensioner guide restricting the flow of oil through the oil pickup.

Does the engine damage cause the vehicle to breach the acceptable quality guarantee?

[31] 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.
[32] 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.

[33] 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 Prout’s subjective perspective.
[34] The evidence shows that the fault was not pre-existing. Although Mr Prout led evidence as to the existence of other faults, such as oil leaks and the rattling noise from the engine, I am satisfied that those issues are unrelated to the engine damage. The restricted oil flow that caused the engine damage was not due to any oil leak. Further, the rattling noise heard by Mr Prout was caused by detonation in the vehicle’s engine due to the use of 91 octane fuel, rather than the required 95 octane or higher. Neither of those issues are related to, or caused, the engine damage.
[35] Because the engine fault was not pre-existing, but instead developed during Mr Prout’s ownership, the vehicle will breach the acceptable quality guarantee if it has been as durable as a reasonable consumer would consider acceptable. In assessing the durability of the vehicle, I note that the acceptable quality guarantee applies for only as long as is reasonable in the circumstances of each case, taking account of factors such as the price, age and mileage of the vehicle, the length of ownership and the distance driven during that ownership, and the manner in which the vehicle has been used.
[36] Mr Prout paid $17,990 for an eight-year-old vehicle that had travelled 69,032 km at the time of sale. The engine damage occurred in early February 2018, nearly 11 months after purchase, by which time Mr Prout had driven more than 19,000 km in the vehicle.
[37] A reasonable consumer who purchases a vehicle of this price, age and mileage must understand that the protections in the Act are not indefinite, and will only last for a limited time. In the circumstances of this case, I consider that the vehicle has been as durable as a reasonable consumer would consider acceptable. In particular, I consider that the length of Mr Prout’s ownership (11 months) combined with the distance he travelled during that time (19,000 km) is sufficient to conclude that the protections in the Act no longer apply to a vehicle of this price, age and mileage. Accordingly, I am not satisfied that this vehicle has breached the acceptable quality guarantee in s 6 of the Act.
[38] Further, I note that Mr Prout used the incorrect fuel throughout his ownership of the vehicle. This vehicle has a high-performance engine, and Mr Gregory advises that 95 octane fuel or higher must be used in this vehicle. Mr Burchill also confirmed that fuel of 95 octane or higher must be used. Mr Gregory advises that it is essential that 95 octane fuel or higher is used in this vehicle, as use of lower grade fuel can lead to detonation in the engine, which can cause extensive engine damage. Mr Gregory advises that symptoms described by Mr Prout, including the rattling in the engine under acceleration, were caused by detonation occurring in the engine. Mr Gregory says that the rattling sound is the sound of damage occurring to the engine and that in addition to the damage caused by the restricted oil supply, this vehicle’s engine is also likely to now have considerable damage caused by that detonation. Indeed, Mr Gregory advises that the vehicle’s engine could easily have failed because of detonation before the fault caused by the oil restriction occurred.
[39] Mr Prout advised that he used only 91 octane fuel in the vehicle. He advises that he was not told by Spot One or anyone else that he needed to use higher octane fuel. He says that Spot One should have told him to use higher octane fuel.
[40] I do not consider that Spot One had an obligation to tell Mr Prout the vehicle required 95 octane fuel. I do not consider that a motor vehicle trader has a positive obligation to disclose such information, and neither would a reasonable consumer have an expectation that the information will be disclosed to it. I consider that it is the consumer’s responsibility to make the necessary enquiries to determine what type of fuel should be used in the vehicle, in much the same way as they should make enquiries as to the type of oil, brake fluid or transmission fluid that should be used if they are putting those substances into the vehicle. Certainly, if Mr Prout had asked Spot One what fuel should be used, Spot One would have had an obligation to advise him that he should use 95 octane fuel or higher, but Mr Prout asked no such question.
[41] I consider that a reasonable consumer who uses the wrong grade of fuel should have very limited expectations as to the durability of the vehicle’s engine. Accordingly, even if, on the analysis set out in paragraphs [35]–[37] above, I had concluded that the vehicle had not been as durable as a reasonable consumer would consider acceptable, once I take account of Mr Prout’s use of the wrong grade of fuel, I consider that the vehicle has significantly exceeded the durability that a reasonable consumer would consider acceptable.

Conclusion

[42] The vehicle’s engine has suffered considerable damage caused by restricted oil flow to the top end of the engine. That damage was caused by a fault with the vehicle, rather than the condition of the vehicle’s oil or any additive added to the vehicle.
[43] Despite the engine damage, the vehicle does not breach the acceptable quality guarantee in s 6 of the Act. Taking account of the price, age and mileage of the vehicle at the time of sale, the length of Mr Prout’s ownership before the engine damage occurred and the distance driven in that time, the vehicle has been as durable as a reasonable consumer would consider acceptable.
[44] Mr Prout’s application is therefore dismissed.

DATED at AUCKLAND this 30th day of October 2018

B.R. Carter
Adjudicator