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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 18 December 2018
BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
[2018] NZMVDT 266
Reference No. MVD 318/2018
IN THE MATTER of the Motor Vehicle Sales Act 2003
AND
IN THE MATTER of a dispute
BETWEEN AKRAM SHAFISHAHRAEI
Purchaser
AND PORIRUA MOTORS 2009 LIMITED
Trader
MEMBERS OF TRIBUNAL
J S McHerron, Barrister – Adjudicator
D Binding – Assessor
HEARING at Wellington on 15 October 2018
DATE OF DECISION 15 November
2018
APPEARANCES
A Shafishahraei, Purchaser (by AVL)
C Basham, Purchaser's partner (by
AVL)
M R Dwen, Director of Trader
K Randle, Office Manager of Porirua 2009
Automotive & Tyres Ltd
DECISION
REASONS
Introduction
[1] In April 2017, Akram Shafishahraei and her partner Cyrus Basham purchased a 2007 Toyota Vitz with 34,833 km on the odometer for $9,000 from Porirua Motors 2009 Ltd (Porirua Motors).[1] Mr Basham alleges the vehicle has a faulty CVT transmission which requires replacement. He alleges he told Porirua Motors in the first week or so after acquiring the vehicle that it had a rattling noise coming from its engine. He alleges Porirua Motors got its mechanic to check the vehicle, but asserted to him that nothing was wrong with it.
[2] It was only after Mr Basham and Ms Shafishahraei moved to Auckland in early 2018, and the rattling noise continued, that they got further advice from a different mechanic that the transmission was faulty and required replacement. Mr Basham continued to seek Porirua Motors' assistance with repairs. Porirua Motors initially denied any liability, then it arranged for Mr Basham to get a report on the transmission from an Auckland mechanic. But Porirua Motors did not make or authorise any repairs to the vehicle.
[3] Now, Porirua Motors is willing to make a contribution to the cost of repairs, but it continues to deny liability due to the time elapsed and distance travelled in the vehicle since purchase. In addition, Porirua Motors alleges that Mr Basham did not initially complain to it about an engine rattle or any other transmission problems with the vehicle, but that he only mentioned a burning smell. The burning smell was traced to a faulty water pump, which was eventually replaced at Mr Basham's and Ms Shafishahraei's expense.
[4] From the background set out above, the following issues arise:
- (a) Did the vehicle fail to comply with the guarantee of acceptable quality?
- (b) If so, did Porirua Motors refuse or neglect to remedy the failure?
- (c) If so, what is the appropriate remedy?
Issue one: Did the vehicle fail to comply with the guarantee of acceptable quality?
[5] 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.
[6] "Acceptable quality" is defined in s 7 of the Act (as far as is relevant) as follows:
- 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.
[7] 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.
[8] About a week after purchasing the vehicle, Mr Basham became aware of a rattling noise coming from the engine and he also noticed a burning smell. He took the vehicle back to Porirua Motors twice and was referred by the trader to its associated mechanic, Porirua 2009 Automotive and Tyres Ltd.
[9] Ms Kendra Randall, the office manager for Porirua 2009 Automotive and Tyres, prepared a report stating that Mr Basham brought the vehicle into the workshop a week after purchase. Ms Randall explained that Mr Basham had brought the vehicle back because “this is his first car and he does not know how to work all the gears, lights etc”.
[10] Indeed, as Mr Basham's driving instructor, Stephen Khan-Evans, explained in a letter produced to the Tribunal, Mr Basham was a refugee, just starting to find his feet in New Zealand. This was his first car and he had only recently learned how to drive.
[11] Ms Randall reported that she and the workshop technicians showed Mr Basham how to work everything in the car.
[12] Ms Randall reported that Mr Basham brought the car back to the workshop again the following week, complaining of a burning smell when going up a hill. Ms Randall reported that no burning smell was present when Porirua 2009 Automotive and Tyres took the vehicle for road tests, and nor was this issue picked up when the workshop later did a service and warrant check on 28 April 2017.
[13] Ms Randall denied that Mr Basham mentioned a rattling noise. She also made the point that no rattle was picked up in the warrant of fitness checks.
[14] The Tribunal's Assessor, Mr Binding, advises that if there was a noise coming from the vehicle's transmission, it is unlikely to have been noted in a warrant of fitness check. A vehicle's transmission is not normally checked as part of a warrant of fitness inspection, which is not a general mechanical assessment of a vehicle. Rather, a warrant of fitness inspection focuses on the specific matters contained in the Vehicle Inspection Requirements Manual, which generally relate to vehicle safety.[2]
[15] Porirua 2009 Automotive and Tyres carried out a further oil and filter change on the vehicle in November 2017 and Ms Randall reported that there was no mention of any noise, nor any burning smell on that occasion either.
[16] In the hearing, when asked whether the transmission was checked by Porirua Motors or Porirua 2009 Automotive and Tyres on any occasion in 2017, Porirua Motors' director, Mr Dwen, and Ms Randall, acknowledged that the transmission had been checked by driving the vehicle up a hill. Mr Dwen confirmed that a slight noise was heard coming from the transmission.
[17] This is consistent with Mr Khan-Evans's letter. Mr Khan-Evans records that the week after Mr Basham purchased the vehicle, he and Mr Basham did a trip in the vehicle to Wellington with Mr Basham driving and himself as a passenger. Mr Khan-Evans reports that the vehicle behaved reasonably well, but coming up the Ngauranga Gorge on State Highway 1:
It really, really struggled with a lack of torque and power. It made a lot of noise, but it would not change gear ratio and zip up the hill as expected. It seemed to want to stay in too high a ratio. There was a smell of something burning and a rattling noise (like a loose chain perhaps).
[18] Mr Khan-Evans did a test drive himself in the vehicle the following week and found its performance and acceleration was adequate on level ground with a light load, but that the vehicle struggled with long uphill gradients. Mr Khan-Evans recommended that Mr Basham take the vehicle back to Porirua Motors for a check-up, which Mr Basham did. However, Mr Basham told Mr Khan-Evans that the mechanic took a look at the vehicle and told Mr Basham it was fine.
[19] Mr Khan-Evans reports that, a few weeks later, he and Mr Basham made a longer trip that included the Wainuiomata hill road. Again, the vehicle performed badly and they noticed the burning smell. Mr Khan-Evans advised Mr Basham to take the vehicle back to Porirua Motors again. Mr Khan-Evans understands that generally Mr Basham was doing short trips on level ground. That was why, according to Mr Khan-Evans, the gearbox problems were not obvious every time.
[20] At the beginning of 2018, Mr Basham and Ms Shafishahraei moved to Auckland for study. The two problems they had identified with the vehicle, the rattling noise and the burning smell, persisted.
[21] Mr Basham visited a mechanic in Auckland who told him that the vehicle’s transmission was worn out. While in Wellington in early 2018 to collect his furniture, Mr Basham visited Porirua Motors and relayed to Mr Dwen what the mechanic in Auckland had told him about the transmission.
[22] A series of texts between Mr Basham and Mr Dwen from late January 2018 onwards, suggests that Mr Dwen initially attempted to deny any liability on the basis that Porirua Motors only supplied a two-month warranty with the vehicle.
[23] For example, on 31 January 2018, Mr Dwen texted Mr Basham to say "Yes nine months warranty only two months". Despite the lack of punctuation, in context this text indicates that it was nine months since Mr Basham purchased the vehicle, but the vehicle only came with a two-month warranty. An earlier text from Mr Dwen asked Mr Basham to identify his "autoshore [sic] book and reg number". This was intended to be a reference to Autosure, one of the main providers of mechanical breakdown insurance. It can be inferred that, from Mr Dwen's point of view when sending these texts, that unless Mr Basham or Ms Shafishahraei had purchased mechanical breakdown insurance (which they did not), Porirua Motors was purporting to limit their "warranty" in respect of the vehicle to two months after the date of purchase.
[24] Contrary to Mr Dwen's approach as set out in his texts, the guarantees under the Act do not expire after a prescribed period of time. Rather, they apply for a reasonable period. A trader should assess each reported fault with a vehicle on its merits. Mr Dwen's texts appear to be a false and misleading attempt to deflect Mr Basham from pursuing a remedy under the Act by misinforming him that his "warranty" had expired. Porirua Motors should be aware that it is an offence under the Fair Trading Act 1986 to make a false or misleading misrepresentation concerning the existence of a warranty, guarantee, right, or remedy, including in relation to any guarantee, right, or remedy available under the Act.[3] For that reason, I propose to refer this decision to the Commerce Commission for it to consider any further action.
[25] Mr Basham pointed out to Mr Dwen that he had identified these problems in the first week after purchasing the vehicle. Mr Dwen responded that Mr Basham was meant to take the car back to the mechanic to check but Mr Basham never went back. Mr Basham replied that the mechanic had checked the car and had told him nothing was wrong with it. Mr Dwen then appears to have stopped replying to Mr Basham’s texts. The relationship between the two parties further soured after Mr Basham wrote a poor review on Porirua Motors’ Facebook page. At that point, Mr Dwen suggested Mr Basham take the vehicle to Browns Bay Automotive in Auckland, which Mr Basham did on 26 March 2018. Browns Bay Automotive and Tyres confirmed there was a slight noise in the transmission at low speed.
[26] Mr Basham also took the vehicle to Motor Management NZ Services in February 2018 for a general service. Mr Basham complained about the burning smell and noise coming from the transmission. Motor Management NZ Services checked the burning smell and found it was coming from the water pump. Motor Management NZ Services recommended replacing the water pump because its bearing had failed. It carried out this repair at a cost of $290, which was paid for by Mr Basham. Motor Management NZ Services also recommended Mr Basham change the CVT oil and CVT transmission filter, but Mr Basham did not carry out this work as he told Motor Management NZ Services that the vehicle was under warranty. Presumably this was because he was, by then, pursuing a claim against Porirua Motors to replace the transmission.
[27] On 6 April 2018, Mr Basham took the vehicle to Auckland City Toyota, which reported a bearing noise when the vehicle was driving slowly. It confirmed that the noise that can be heard is coming from the CVT transmission and that most likely there are planetary gears with teeth damage. Auckland City Toyota reported that the transmission requires replacement and re-calibration to rectify. It estimates the cost of repairs to be $3,505.20 (for a used transmission assembly) or $7,487.55 (for a new transmission assembly). Both estimated prices include parts, labour and GST.
[28] Mr Basham has also obtained a report from Selwyn Auto Services Ltd, which checked the car and concluded that it requires a CVT transmission replacement. It estimates the cost of repairs involving a second-hand transmission at $3,105, including parts and labour and GST.
[29] Porirua Motors submits that it should not be liable for these repairs as the transmission noise is recent. Mr Basham had reported a burning smell, but not a transmission fault. Porirua Motors says the transmission was checked over at the time of sale and was not making any noise then, or when Mr Basham brought the vehicle in for a service six months later. Porirua Motors submits that the noise is recent as it has had no knowledge of this reported to it for over a year since purchase. Porirua Motors says that if the noise identified by Browns Bay Automotive had been present from the start “we would have fixed the problem but this was never the case nor mentioned to us until after a year of owning the vehicle”.
[30] Notwithstanding its primary submission that it is not liable, Porirua Motors has offered to pay for a replacement second-hand transmission, but only if Mr Basham pays for the labour costs of replacing the vehicle’s transmission.
[31] Porirua Motors has overstated the time between purchase and when Mr Basham reported the existence of a transmission noise. At the very latest, Mr Basham’s texts show that he reported a rattling noise to Porirua Motors in January 2018, which was only nine months after purchase. However, Mr Basham asserts that he complained about the rattling noise from the engine as early as one week after purchase. That was corroborated by Mr Dwen’s own evidence that he noticed a slight noise from the transmission when he test drove the vehicle after Mr Basham complained in April 2017. This is also supported by the evidence of Mr Khan-Evans who reported the vehicle seemed to be struggling under load and when being driven uphill.
[32] As mentioned, Mr Basham was a new refugee to New Zealand and this was his first ever car. As Porirua Motors was aware, he lacked mechanical knowledge. Moreover, the evidence shows that Porirua 2009 Automotive and Tyres failed to trace the reported burning smell to the water pump. It was not until Motor Management NZ Services assessed the vehicle in February 2018 that this fault was properly diagnosed. The fact that Porirua 2009 Automotive and Tyres missed this fault suggests it may only have done a cursory investigation of the vehicle, leading it to miss the transmission fault as well. This would be consistent with Mr Dwen's apparent strategy, described above, to deflect Mr Basham from seeking a remedy under the Act, by misleading him about the length of time for which a "warranty" applied.
[33] Two factors combine to support a finding that the vehicle failed to comply with the guarantee of acceptable quality due to its faulty transmission.
[34] First, Mr Binding considers that, overall, the evidence indicates that the transmission fault has existed since prior to purchase or shortly afterwards.
[35] Second, in Mr Binding’s view, 55,315 km (the odometer reading when Auckland City Toyota diagnosed the transmission needed to be replaced) is early in the life of this vehicle for its transmission to require replacement. I consider that a reasonable consumer would generally not find it acceptable to have to replace the transmission on a vehicle that had only done approximately 55,000 km, let alone 34,000 km.
[36] I adopt Mr Binding's assessment in respect of both of these factors.
[37] The facts that Mr Basham and Ms Shafishahraei have now travelled nearly 30,000 km in the vehicle and that it took some time to get a categorical diagnosis that the transmission needed replacing, might be thought to count against a conclusion that the vehicle failed to comply with the guarantee of acceptable quality. Moreover, the vehicle still seems to be capable of being driven, although Mr Basham indicated that he was reluctant to take it on long journeys. However, Mr Basham has now received two conclusive recommendations that the transmission requires replacement. If Porirua Motors had taken his concerns more seriously from the outset, rather than deflecting his complaints, then it is likely the problem requiring the transmission's replacement would have been diagnosed much sooner. The evidence also shows that the vehicle's performance has been impaired by the faulty transmission, which has affected Mr Basham's and Ms Shafishahraei's use of their vehicle.
[38] Porirua Motors also points to the fact that Motor Management NZ Services had recommended that Mr Basham should change the CVT oil and transmission filter. Mr Binding does not think that servicing the transmission would have changed the conclusion that the transmission needed to be replaced. In his view, once a transmission starts making the kind of noise that was reported soon after purchase, there is nothing that can be done by way of servicing it to avoid the need for a replacement.
[39] Accordingly, I conclude that a reasonable consumer would not find acceptable the need to replace the transmission so soon after purchasing a $9,000 vehicle that had only travelled approximately 34,000 km at the time of purchase. It follows that the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act.
Issue two: Did Porirua Motors refuse or neglect to remedy the failure?
[40] Section 18(2)(b) of the Act provides:
(2) Where the failure can be remedied, the consumer may—
(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.
[41] Mr Basham has established through the text messages he produced that he made multiple attempts to obtain the assistance of Porirua Motors to rectify the problem with the transmission and water pump. Although it was compounded by the fact that Mr Basham moved to Auckland, I consider that Porirua Motors did not provide Mr Basham with adequate assistance in getting these problems rectified in the latter part of 2017 when he still lived in Wellington. It knew that Mr Basham was a new arrival in New Zealand and did not have great familiarity with motor vehicles. It should have provided him with more assistance in assessing the vehicle and identifying any faults. It may be that Porirua Motors innocently failed to identify the cause of the problems that had been reported by Mr Basham. Either way, it is now responsible to have the failure remedied in the vehicle. I find that, in terms of s 18(2)(b) of the Act (above), Porirua Motors has refused or neglected to remedy the failure in Mr Basham’s vehicle.
Issue three: What is the appropriate remedy?
[42] As discussed, Porirua Motors has now offered to source and supply a second-hand transmission with approximately equivalent mileage (or less). It is not willing, however, to pay for the installation costs. Section 18 of the Act envisages that the trader should pay for the complete cost of repairs, not just the cost of parts. Section 18(2)(b)(i) makes it clear that the consumer is entitled to "all reasonable costs incurred in having the failure remedied".
[43] Accordingly, I direct Porirua Motors to identify and supply a suitable secondhand transmission with warranty and with approximately equivalent mileage or less. It will be required to pay for the installation of this transmission in Auckland by a suitable MTA assured repairer. The transmission is to be obtained and supplied and the repairs are to be carried out within a month of this decision. If Porirua Motors does not comply with this order, Mr Basham is entitled to request a telephone conference at which the Tribunal will consider making any further orders that may be necessary.
[44] In addition, Porirua Motors is to pay Mr Basham the costs of having the vehicle inspected by Auckland City Toyota in the sum of $145 and the cost of replacing the water pump by Motor Management NZ Services in the sum of $290. These payments must be made within fourteen days of the date of this decision.
J S McHerron
Adjudicator
[1] The vehicle sale and purchase agreement is in the name of Ms Shafishahraei only, which is why only her name appears as a party to the application. However, Mr Basham appears to have been the person who mainly dealt with Porirua Motors in relation to the vehicle and most of the correspondence relating to the dispute was in his name. He also presented the oral submissions at the hearing, with support from Ms Shafishahraei.
[2] New Zealand Transport Agency “Vehicle Inspection Requirements Manual: In-Service Certification (WOF and COF)”.
[3] Fair Trading Act 1986, ss 13(i) and 40(1).
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2018/266.html