Henderson v Mars Motors Limited Reference No. MVD 361/2018 [2018] NZMVDT 271 (20 November 2018)

Last Updated: 18 December 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 271 Reference No. MVD 361/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	PAUL DEAN HENDERSON
		Purchaser
	AND	MARS MOTORS LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 12 November 2018
DATE OF DECISION 20 November 2018
APPEARANCES
P D Henderson, Purchaser
V Ning and J Ma, for the Trader

ORDERS

1. Paul Henderson’s application to reject the vehicle is upheld.
2. Mars Motors Ltd shall, within 10 working days of the date of this decision, pay to Mr Henderson:
   1. $19,280, being the purchase price of the vehicle;
   2. $431, being the cost of fees paid to Heartland Bank Ltd to enter into the loan to purchase the vehicle;
   100. $310.50, being the cost of having the vehicle’s faults assessed;
   4. $80, being the cost of having the vehicle towed on 26 January 2018; and
   5. all payments of interest made by Mr Henderson under the loan agreement with Heartland Bank Ltd from 9 June 2018 until the date of this decision.

DECISION

[1] The vehicle had a fault with its turbo, and has an ongoing fault that causes it to be low on power, which breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (the Act).
[2] Mars Motors has failed to rectify the fault that causes the vehicle to be low on power within a reasonable time. Accordingly, under s 18(2)(b)(ii) of the Act, Mr Henderson is entitled to reject the vehicle and recover the cost of purchasing the vehicle, the cost of entering into the loan agreement with Heartland Bank Ltd and the cost of having the vehicle’s faults diagnosed.

REASONS

Introduction

[3] On 16 November 2017, Mr Henderson purchased a 2013 Mazda Atenza, registration number LAQ31, for $19,280. The vehicle had an odometer reading of 103,367 km of the time of sale. Mr Henderson entered into a consumer credit contract with Heartland Bank Ltd dated 15 November 2017 (the loan agreement) to purchase the vehicle.
[4] On or about 25 January 2018, the vehicle lost power and broke down. Mr Henderson returned the vehicle to Mars Motors and, over the ensuing months, Mars Motors replaced the vehicle’s turbo, cleaned the diesel particulate filter (DPF) and replaced the air fuel ratio sensor, O2 sensor and the vehicle’s battery. The repairs did not rectify the fault that cause the vehicle to be low on power, but Mars Motors nonetheless attempted to return the vehicle to Mr Henderson.
[5] Mr Henderson did not want vehicle back and rejected it. Mars Motors refused to accept this rejection, so Mr Henderson filed this claim with the Tribunal. Since filing his claim, Mr Henderson advises that the vehicle has been damaged while in possession of Mars Motors.
[6] Mars Motors says that Mr Henderson is not entitled to reject the vehicle. It says that it has performed repairs, and because the vehicle was free of defects when it was sold to Mr Henderson, it should have no further liability under the Act.

The Issues

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

• (a) Does the vehicle have faults that breaches the acceptable quality guarantee in s 6 of the Act?
• (b) Has Mars Motors failed to rectify the faults with a reasonable time?
• (c) Has Mr Henderson lost the right to reject the vehicle?
• (d) What remedy is Mr Henderson entitled to under the Act?

Does the vehicle have faults that breaches the acceptable quality guarantee?

[8] 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.
[9] 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.

[10] 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 Henderson’s subjective perspective.
[11] On about 26 January 2018, the vehicle lost power and broke down. The vehicle has since been assessed by a range of different repairers, and it is evident that the vehicle has had a fault with its turbo and an undiagnosed fault that causes it to be low on power.

The turbo fault

[12] Mars Motors had the vehicle assessed by Diesel Tune & Turbo Chargers Ltd on about 26 February 2018. Diesel Tune & Turbo Chargers found that a shaft in the turbo had broken and recommended that Mars Motors replace the turbo. Mars Motors advises that the turbo was then replaced by S C Autos.
[13] The evidence satisfies me that the vehicle had a fault with its turbo that breached the acceptable quality guarantee in s 6 of the Act. Although no evidence was presented to show how the turbo fault was caused, I am satisfied that a reasonable consumer would not expect the vehicle of this price, age and mileage to develop a fault that would require its turbo to be replaced within three months of purchase. Accordingly, I am satisfied that this vehicle has not been as durable as a reasonable consumer would consider.

The undiagnosed fault that causes the vehicle to be low on power

[14] The vehicle also has an undiagnosed fault that causes it to be low on power. The vehicle was assessed by Autosparx Ltd on about 15 May 2018, who found that it was lacking power. Autosparx Ltd removed the EGR pipe and found that the exhaust was blocked. It appears that no repairs were performed to repair any exhaust blockage.
[15] The vehicle was then assessed by John Andrew Mazda on about 17 May 2018. John Andrew Mazda also found that the vehicle’s engine was low on power. John Andrew Mazda considered that the lack of power in the engine may be caused by faulty fuel injectors. It also considered that the vehicle was likely to have faults with is O2 sensor, air fuel ratio sensor and vacuum pump.
[16] Mars Motors then replaced the air fuel ratio sensor and the O2 sensor, but performed no repairs in relation to the fuel injectors. Those repairs did not rectify the fault that causes the vehicle to be low on power.
[17] This evidence satisfies me that the vehicle has an undiagnosed fault that causes it to be low on power. Mr Haynes, the Tribunal’s Assessor, advises that such faults can have a variety of possible causes, including a blocked exhaust system (as suggested by Autosparx Ltd), faulty fuel injectors (as suggested by John Andrew Mazda), a fault within the engine or an electrical fault. Mr Haynes advises that the evidence does not prove the precise cause of the fault, although he considers that a fault that causes the vehicle to be low on power undoubtedly exists.
[18] Although its cause remains unknown, I am satisfied that the undiagnosed fault that causes the vehicle to be low on power breaches the acceptable quality guarantee in s 6 of the Act. A reasonable consumer would not expect a vehicle of this price, age and mileage to develop a fault that causes it to be low on power so soon after purchase. Accordingly, I am satisfied that this vehicle has not been as durable as a reasonable consumer would consider acceptable.

Did Mars Motors fail to repair the fault within a reasonable time?

[19] Mr Henderson claims that he is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act because Mars Motors has failed to repair the vehicle’s faults within a reasonable time.
[20] 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), 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.

[21] Mr Henderson returned the vehicle to Mars Motors in early February 2018 for its faults to be diagnosed and repaired. Mars Motors then sent the vehicle to at least four separate repairers — Autosparx Ltd, SC Autos, Diesel Tune & Turbo Chargers and John Andrew Mazda for its faults to be diagnosed and repaired. It seems that the fault with the vehicle’s turbo has been rectified, but all the diagnosis and repair work performed by these four repairers has not rectified the fault that causes the vehicle to be low on power.
[22] Despite the fault that causes the vehicle to be low on power remaining unrepaired, Mars Motors then sought to return the vehicle to Mr Henderson in about May 2018. Mr Henderson refused to accept the return of the vehicle because the its faults not been rectified. Mars Motors has taken no further steps to rectify the fault that causes the loss of power.
[23] Against this background, I am satisfied that Mars Motors has failed to rectify the fault that causes the vehicle to be low on power within a reasonable time. It took possession of the vehicle in early February 2018 and had not rectified that fault by May 2018, when it attempted to return the vehicle to Mr Henderson. I consider that it had more than reasonable time to rectify the fault, and its failure to do so gives rise to a right to reject the vehicle under s 18(2)(b)(ii) of the Act.

Has Mr Henderson lost the right to reject the vehicle?

[24] Section 20 of the CGA sets out the circumstances in which a purchaser loses the right to reject a vehicle. Relevant to this case, s 20(1)(c) of the CGA states:

20 Loss of right to reject goods

(1) The right to reject goods conferred by this Act shall not apply if—

...

(c) the goods were damaged after delivery to the consumer for reasons not related to their state or condition at the time of supply.

The vehicle was damaged after it was sold to Mr Henderson

[25] I am satisfied that the vehicle has been damaged since it was sold to Mr Henderson. Mr Henderson says that, after rejecting the vehicle in May 2018, he left it with Mars Motors. He says in July 2018, he went to inspect the vehicle and was told it was no longer at Mars Motors’ premises. He eventually tracked it down to what he called a “trucking yard”, where he discovered that the vehicle had been damaged, with minor dents and scratches to its front and rear bumpers. Mr Henderson says that he was told by the owner of the trucking yard that the vehicle had broken down outside the premises, and that somebody had collided with the vehicle while it was parked there.
[26] Mr Henderson produced photographs of the damage to the vehicle. I am satisfied, from those photographs, that the vehicle has suffered damage. However, I am not satisfied that Mr Henderson has lost the right to reject the vehicle because of that damage. The damage was caused when the vehicle was in possession of Mars Motors and I am certain that Parliament could not have intended that a consumer could lose the right to reject the vehicle for damage caused while it was in possession of the trader after the vehicle had been returned to appears to be performed.
[27] Further, I am satisfied that the damage occurred after Mr Henderson had validly rejected the vehicle. Under s 22 of the Act, a consumer who rejects vehicle has an obligation to communicate that rejection to the trader and then to return the vehicle. If the purchaser complies with these obligations, s 22(3) of the Act deems that the ownership vehicle revests in the trader.
[28] In this case, although Mr Henderson continued to allow Mars Motors an opportunity to rectified the vehicle’s faults during May 2018, he unequivocally rejected the vehicle in a letter sent by his lawyers, Duncan King Law Ltd, on 8 June 2018, by which time Mr Henderson had returned the vehicle to Mars Motors. Accordingly, Mr Henderson had complied with its obligations to reject the vehicle, and the subsequent damage to the does not affect that right. Accordingly, I am not satisfied that Mr Henderson has lost the right to reject the vehicle. The damage occurred while vehicle was in Mars Motors’ possession, and after Mr Henderson had validly rejected the vehicle.

What remedy is Mr Henderson now entitled to under the Act?

[29] Under s 18(2)(b)(ii) of the Act, Mr Henderson is entitled to reject the vehicle, because Mars Motors has failed to rectify the vehicle’s faults within a reasonable time. Under s 23(1)(a) of the Act, Mr Henderson is entitled to a refund of all money paid in respect of the vehicle. In that regard, he is entitled to recover the purchase price of $19,280.
[30] Further, under s 18(4) of the Act, Mr Henderson is entitled to recover the amounts paid to Heartland Bank Ltd to enter into the loan agreement, all interest paid under the loan agreement since 8 June 2018 (the day that Mr Henderson unequivocally rejected the vehicle), the cost of having the vehicle’s faults assessed and the cost of towing the vehicle after it broke down. I am satisfied that these are all reasonably foreseeable losses, which result from the vehicle’s faults and Mars Motors’ failure to rectify those faults.

Conclusion

[31] The vehicle had a fault with its turbo, and has an ongoing fault that causes it to be low on power, which breach the acceptable quality guarantee in s 6 of the Act.
[32] Mars Motors has failed to rectify the fault that causes the vehicle to be low on power within a reasonable time. Accordingly, under s 18(2)(b)(ii) of the Act, Mr Henderson is entitled to reject the vehicle and recover the cost of purchasing the vehicle, the cost of entering into the loan agreement with Heartland Bank Ltd and the cost of having the vehicle’s faults diagnosed.
[33] The Tribunal therefore orders that Mars Motors Ltd shall, within 10 working days of the date of this decision, pay to Mr Henderson:

• (a) $19,280, being the purchase price of the vehicle;
• (b) $431, being the cost of fees paid to Heartland Bank Ltd to enter into the loan agreement;
• (c) $310.50, being the cost of having the vehicle’s faults assessed;
• (d) $80, being the cost of having the vehicle towed on 26 January 2018; and
• (e) all payments of interest made by Mr Henderson under the loan agreement from 9 June 2018 until the date of this decision.
  

DATED at AUCKLAND this 20th day of November 2018

B.R. Carter
Adjudicator