Police v Minami Motors Limited Reference No. MVD 396/2018 [2018] NZMVDT 279 (26 November 2018)

Last Updated: 17 December 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 279 Reference No. MVD 396/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	AARTHI VIJAYA POLICE
		Purchaser
	AND	MINAMI MOTORS LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S D Gregory, Assessor
HEARING at Auckland on 20 November 2018
DATE OF DECISION 26 November 2018
APPEARANCES
A V Police, Purchaser N K Racherle, Witness for the Purchaser
A Ali and P Madden, for the Trader

ORDERS

1. Aarthi Police’s application to reject the vehicle is upheld.
2. Minami Motors Ltd shall, within 10 working days of the date of this decision, pay $3,765 to Ms Police.

DECISION

[1] The vehicle had a fault with its crank angle sensor that breached the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (the CGA).
[2] The fault was relatively minor. However, Minami Motors refused to rectify the fault at its expense, meaning that under s 18(2)(b)(ii) of the CGA, Ms Police is entitled to reject the vehicle and obtain a refund of the purchase price.

REASONS

Introduction

[3] On 21 July 2018, Ms Police purchased a 2007 Honda Fit, registration number HNK316, for $3,765 from Minami Motors Ltd (Minami Motors). The vehicle had an odometer reading of 129,991 km at the time of sale.
[4] Less than one month after purchase, Ms Police noticed an intermittent shudder when the vehicle was driven between 80 and 100 km an hour. She continued to use the vehicle and on 1 September 2018, the vehicle stalled while being driven on the motorway. Ms Police was able to restart the vehicle, but the engine warning light remained illuminated.
[5] Ms Police returned the vehicle to Minami Motors, which found a fault with the vehicle’s crank angle sensor. Minami Motors has replaced the crank angle sensor, but has declined to pay for the repairs, claiming that because Ms Police had owned the vehicle for more than one month, it was not obliged to provide any remedy. Minami Motors seeks to recover the cost of repairs from Ms Police.
[6] Ms Police then rejected the vehicle. Minami Motors has not accepted the rejection, so Ms Police has applied to the Tribunal to have her rejection upheld and to recover the purchase price.
[7] Minami Motors says that Ms Police is not entitled to a remedy because the fault arose too long after purchase.

The Issues

[8] 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 CGA?
• (b) Has Minami Motors refused to repair the fault?
• (c) What remedy is Ms Police entitled to under the CGA?

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

[9] Section 6 of the CGA imposes on suppliers and manufacturers of consumer goods "a guarantee that the goods are of acceptable quality". Section 2 of the CGA defines "goods" as including vehicles.
[10] 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.

[11] 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 CGA 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 Police’s subjective perspective.
[12] On about 15 August 2018, the vehicle started to intermittently jerk while driving. Despite these symptoms, Ms Police continued to use the vehicle until 1 September 2018, when it broke down on Auckland’s north-western motorway. Ms Police returned the vehicle to Minami Motors, who had the vehicle assessed by Woodhead Auto Electrical Services Ltd. Woodhead Auto Electrical Services Ltd found a fault with the vehicle’s crank angle sensor, which it replaced at a cost of $288.77.
[13] Mr Gregory, the Tribunal’s Assessor, says that the crank angle sensor is an electronic device that monitors the position or rotational speed of the crankshaft. The information provided by the sensor determines the rate of fuel injection and ignition timing. Mr Gregory advises that the jerking symptoms experienced by Ms Police since 15 August 2018 are consistent with a crank angle sensor fault. As the crank angle sensor begins to fail, it will intermittently fail to send a signal to the vehicle’s engine computer. Because the computer does not receive information about the crankshaft’s angle, it can no longer fire the vehicle’s ignition system or fuel injectors, causing a misfire or stalling the vehicle completely.
[14] On the basis of the evidence presented by the parties, and Mr Gregory’s advice, I am satisfied that the vehicle developed a fault with its crank angle sensor on approximately 15 August 2018, a little more than three weeks after purchase.
[15] Minami Motors submitted that this fault arose too long after purchase for the protections in the CGA to apply. I do not agree. Although purchasers of an 11-year-old, $3,765 vehicle that has travelled nearly 130,000 km at the time of sale should have realistic expectations as to its durability, I consider that a reasonable consumer would not expect the crank angle sensor on a vehicle of that price, age and mileage to require replacement so shortly after purchase.
[16] I am therefore satisfied that this fault breaches the acceptable quality guarantee in s 6 of the CGA because it was not as durable as a reasonable consumer would consider acceptable.
[17] Ms Police also alleged that the vehicle breached the acceptable quality guarantee because it was unsafe. She submitted that the vehicle was dangerous because it had broken down on the motorway, exposing her to the risk of harm.
[18] I am not satisfied that the vehicle was unsafe simply because it broke down. The underlying fault — the faulty crank angle sensor — did not make the vehicle unsafe, and neither am I satisfied that Ms Police was exposed to any unreasonable danger because the vehicle broke down on the motorway. Ms Police suggested that she was exposed to danger because of the risk posed by other motorists. As I pointed out to Ms Police during the hearing, road rules require motorists to follow at a safe braking distance, meaning that Ms Police would only have been exposed to danger if other road users were failing to comply with those road rules. I do not feel able to conclude that a vehicle is unsafe because of the risk posed by other road users failing to comply with road rules.

Did Minami Motors refuse to rectify the fault?

[19] Ms Police claims that she is entitled to reject the vehicle because Minami Motors refused to repair the vehicle at its cost. Under s 18(2)(b)(ii) of the CGA, a consumer may reject a vehicle where the trader refuses to remedy a failure that breaches the CGA’s guarantees.
[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] Ms Police returned the vehicle to Minami Motors shortly after it stalled on the motorway. Ms Police say she was then advised by Paul Madden, the Yard Manager of Minami Motors, that it would not pay for the required repairs because the vehicle only came with a “one month, 1,500 km warranty” and that the fault had arisen outside that time. Mr Madden gave evidence and agreed that he told Ms Police that Minami Motors would not pay for the repairs because of this limited warranty.
[22] Azhar Ali, a Director of Minami Motors, gave contradictory evidence to that of Mr Madden, and said that Minami Motors only declined to cover the cost of the repairs after a confrontation with Ms Police and family members. I prefer Mr Madden’s evidence as to the circumstances in which Minami Motors refused to pay for the repair. I found Mr Madden to be a straightforward and reliable witness. He was also the person involved in the relevant conversation with Ms Police.
[23] Based on the evidence of Ms Police and Mr Madden, I am satisfied that Minami Motors refused to rectify the fault (ie pay for the repair) with the crank angle sensor because it considered that Minami Motors’ one month, 1,500 km warranty no longer applied.

[24] Nowhere in the CGA does it say that the protections in the CGA apply for only one month, or 1,500 km, or that protections in the CGA are subordinate to a limited warranty provided by the trader. As a motor vehicle trader, Minami Motors is required to comply with its obligations under the CGA. In this case, it was required to consider the fault under the CGA and provide a remedy if appropriate. It refused to do so, claiming that the vehicle was supplied with a limited warranty that had expired.
[25] I consider that, by refusing to rectify the fault because it fell outside of the scope of its limited warranty, Minami Motors has refused to comply with its obligations under the CGA. Under s 18(2)(b)(ii) of the CGA, Ms Police is therefore entitled to reject the vehicle.

What remedy is Ms Police now entitled to under the CGA?

[26] Ms Police rejected the vehicle on 11 September 2018 in an email sent to Minami Motors. Under s 23(1)(a) of the CGA, having validly rejected the vehicle, Ms Police is entitled to recover all money paid in respect of the vehicle. In that regard, Minami Motors must pay $3,765 to Ms Police.

Conclusion

[27] The vehicle had a fault with its crank angle sensor that breached the acceptable quality guarantee in s 6 of the CGA.
[28] The fault was relatively minor. However, Minami Motors refused to rectify the fault at its expense, meaning that under s 18(2)(b)(ii) of the CGA, Ms Police is entitled to reject the vehicle and obtain a refund of the purchase price.
[29] The Tribunal therefore orders that Minami Motors shall, within 10 working days of the date of this decision, pay $3,765 to Ms Police.

Referral to the Commerce Commission

[30] Although many motor vehicle traders responsibly comply with their obligations under the CGA, the Tribunal frequently sees claims involving traders who are either oblivious to, or deliberately evasive of, their obligations under the CGA. The CGA provides important protections for consumers, many of whom are vulnerable and unsure of their rights. Given the frequency of this recurring problem, and because attempts by traders to avoid the protections in the CGA can amount to a breach of s 13(i) of the Fair Trading Act 1986, this decision will be referred to the Commerce Commission, who has jurisdiction to investigate conduct that may breach that Act.

DATED at AUCKLAND this 26th day of November 2018

B.R. Carter
Adjudicator