Pudlas v Campervan World 33 Limited Reference No. MVD 390/2018 [2018] NZMVDT 286 (5 December 2018)

Last Updated: 15 January 2019

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 286 Reference No. MVD 390/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	ANDREW CHARLES PUDLAS
		Purchaser
	AND	CAMPERVAN WORLD 33 LTD
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S D Gregory, Assessor
HEARING at Auckland on 27 November 2018
DATE OF DECISION 5 December 2018
APPEARANCES
A C Pudlas, Purchaser (by video link)
N Pelko, for the Trader

ORDERS

1. Andrew Pudlas’ application to reject the vehicle is upheld.
2. Campervan World 33 Ltd shall, within 10 working days of the date of this decision, pay $8,940.89 to Mr Pudlas.

DECISION

[1] The vehicle has suffered significant engine damage and has not been of acceptable quality as required by s 6 of the Consumer Guarantees Act 1993 (the Act).
[2] The engine damage is a failure of a substantial character for the purposes of s 21(a) of the Act. Mr Pudlas is entitled to reject the vehicle and obtain a refund of the purchase price. He is also entitled to recover some, but not all, of the other costs he seeks.

REASONS

Introduction

[3] On 20 May 2018, Mr Pudlas and his wife, Kit Wing (Janet) Chau, purchased a 1999 Nissan Homy campervan, registration number EZD135, for $8,031.50 from Campervan World 33 Ltd (Campervan World). The vehicle had an odometer reading of 330,955 km at the time of sale. Mr Pudlas also purchased a 12-month mechanical breakdown warranty policy from Janssen Insurance.
[4] Mr Pudlas and Ms Chau are Canadian nationals and purchased the vehicle with the intention of travelling around New Zealand while on holiday. The vehicle was self-contained, meaning Mr Pudlas and Ms Chau could stay at free or low-cost camping spots where such facilities were available.
[5] About two and a half months after purchase, the vehicle suffered significant engine damage and the engine now requires replacement or rebuilding. Campervan World has declined to rectify the fault at its expense, so Mr Pudlas has rejected the vehicle, saying that it has not been as durable as a reasonable consumer would consider acceptable. Mr Pudlas also says that Campervan World sold the vehicle with a six-month mechanical warranty that it has failed to honour. Mr Pudlas seeks to recover the purchase price, together with other costs he and Ms Chou incurred as a result of being unable to use the vehicle.
[6] Campervan World says that Mr Pudlas is not entitled to a remedy under the Act because the vehicle has been sufficiently durable. Further, it says that the six-month mechanical warranty referred to on the vehicle offer and sale agreement is a warranty from Janssen Insurance, which it supplied in addition to the 12-month warranty purchased by Mr Pudlas.

The Issues

[7] 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 Act?
• (b) Is the fault a failure of a substantial character?
• (c) If so, what remedy is Mr Pudlas entitled to under the Act?

Does the vehicle have a fault 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 Pudlas’ subjective perspective.
[11] On 10 August 2018, Mr Pudlas was driving the vehicle between Milford Sound and Te Anau. Mr Pudlas says he noticed the engine making a ticking sound while driving uphill. There were no warning lights on the vehicle’s dashboard and the temperature gauge was showing a normal operating temperature. Mr Pudlas pulled the vehicle over and the engine then stopped with smoke and steam coming from the vehicle. The vehicle would not restart and was towed to Caltex Te Anau.
[12] Mr Pudlas has since had the vehicle assessed by Caltex Te Anau, which consider that the cylinder head is bent and cracked, the pistons are damaged and the engine will require a full rebuild or replacement. Caltex Te Anau also found that the vehicle had a cracked exhaust manifold. Caltex Te Anau considered that the damage was likely caused by the vehicle overheating after its water bypass hose burst.
[13] Mr Gregory, the Tribunal’s Assessor, advises that the diagnosis from Caltex Te Anau is consistent with the symptoms described by Mr Pudlas. Mr Gregory advises that a burst water bypass hose will cause the vehicle to lose its coolant fluid and overheat rapidly, causing the engine to overheat and suffer damage.
[14] The evidence from Mr Pudlas, combined with the diagnosis from Caltex Te Anau and the advice from Mr Gregory, satisfies me that the vehicle has suffered significant engine damage, and the engine will need to be replaced or fully rebuilt. The engine damage was most likely caused by the water bypass hose bursting, causing the vehicle to rapidly lose all its coolant fluid and the engine to overheat and fail.
[15] Campervan World does not dispute the existence of the engine damage. Instead, it says that this engine damage does not breach any of the Act’s guarantees because the vehicle has been as durable as a reasonable consumer would consider acceptable. Further, it says that Mr Pudlas has caused or contributed to the engine damage by continuing to drive the vehicle while it was overheated. Campervan World also says it supplied the vehicle with a six-month Janssen Insurance warranty, under which Mr Pudlas can make a claim of up to $2,000 towards the cost of rectifying the fault. It says that Mr Pudlas is able to make a claim against that warranty and that it has attempted to help him to do so.
[16] Although I accept that the vehicle was supplied with a six-month Janssen Insurance warranty, the existence of that warranty does not affect my analysis of whether Mr Pudlas is entitled to a remedy under the Act. That is because the protections in the Act apply regardless of any warranty provided by Campervan World, and Mr Pudlas is entitled to pursue the remedies under the Act rather than under any warranty provided by Campervan World if he chooses to do so.
[17] In then determining whether the engine damage means the vehicle breaches the acceptable quality guarantee in s 6 of the Act, I must take account of the range of factors set out in s 7(1)(f)–(j) of the Act, and assess whether Mr Pudlas has caused or contributed to the engine damage by using the vehicle in a manner inconsistent with the manner in which a reasonable consumer would use the vehicle under s 7(4) of the Act.

The factors in s 7(1)(f)–(j) of the Act

[18] Most relevant to this case, I must take account of the price, age and mileage of the vehicle at the time of sale, the length of Mr Pudlas’ ownership before the fault became apparent, the distance travelled during Mr Pudlas’ ownership and any representations made by Campervan World as to the quality and/or durability of the vehicle.

The price, age and mileage of the vehicle

[19] Mr Pudlas paid $8,031.50 for a 19-year-old Nissan campervan that had travelled more than 330,000 km at the time of sale. Although Mr Pudlas advised that he was told that the vehicle’s engine had been replaced approximately 150,000 km ago, I accept Campervan World’s submission that a reasonable consumer should have limited expectations as to the quality and durability of a vehicle of this price, age and mileage, and should understand that faults with such vehicles are likely to arise.

The length of ownership and distance travelled

[20] Mr Pudlas owned the vehicle for approximately two and a half months and travelled more than 5,600 km in that time.

Pre-purchase representations

[21] Mr Pudlas says that he spoke with Maj Pelko, a director of Campervan World, before purchasing the vehicle. He says that Mr Pelko made several representations that led him to believe that the vehicle would be sufficiently durable for his purposes.
[22] Firstly, he says Mr Pelko mentioned that the engine was only 150,000 km old. Further, Mr Pudlas says he advised Mr Pelko that he intended to use the vehicle to travel around New Zealand, and that Mr Pelko advised him that he was likely to travel between 10,000 and 12,000 km in that time. Mr Pelko made no mention of the vehicle being unsuitable for a journey of that length.
[23] Although I do not consider that Mr Pelko’s pre-purchase representations can be taken as any kind of warranty as to the durability of the vehicle, I am satisfied that the pre-purchase representations would lead a reasonable consumer to believe that Campervan World considered this vehicle to be suitable for Mr Pudlas and Ms Chau’s purpose of travelling around New Zealand.

Whether Mr Pudlas caused or contributed to the engine damage

[24] Nina Pelko, another director of Campervan World, gave evidence at the hearing. Ms Pelko submitted that the engine damage could have been caused by Mr Pudlas continuing to drive the vehicle while it was low on coolant fluid. She submitted that the engine damage would have been avoided if Mr Pudlas had immediately stopped driving the vehicle once he was aware of a fault.
[25] Mr Pudlas says that he did immediately pull over once he was aware of unusual symptoms with the vehicle. He says that the first he knew of the fault was when the engine began ticking and he immediately took steps to pull over, by which time the engine had stopped and would not restart.
[26] I accept Mr Pudlas’ evidence. Mr Gregory says that a burst water bypass hose because the vehicle to quickly lost all of its coolant fluid, causing significant engine damage before any symptoms would have been obvious to the driver.
[27] Accordingly, I do not consider that Mr Pudlas has caused or contributed to the engine damage by continuing to drive the vehicle while it was low on coolant fluid. Instead, after considering the factors in s 7(1)(f)–(j) of the Act, I am satisfied that the vehicle has not complied with the acceptable quality guarantee in s 6 of the Act. Although a reasonable consumer must have realistic expectations as to the quality and durability of an inexpensive 19-year-old Nissan campervan, that had travelled more than 330,000 km before purchase, I consider that a reasonable consumer would not expect such a vehicle to suffer engine damage that will cost many thousands of dollars to rectify within two and a half months of purchase, during which time the vehicle had travelled a little more than 5,600 km.
[28] Campervan World submitted that, when considering whether the vehicle has been suitably durable, I should take account of the fact that much of the value of the vehicle is in the modifications made by Campervan World to make it self-contained and suitable for Mr Pudlas and Ms Chau’s use. Ms Pelko submitted that, without the modifications, the vehicle would have been worth much less, and a reasonable consumer would then have had lower expectations as to its durability.
[29] I accept Campervan World’s submission that a significant proportion of the value of this vehicle relate to the modifications necessary to make it a self-contained campervan suitable for Mr Pudlas and Ms Chau’s purposes. Nonetheless, I am satisfied that, even when I take account of the value of the modifications, the vehicle was not as durable as a reasonable consumer would consider acceptable.

Is the fault a failure of a substantial character?

[30] Under s 18(3) of the Act, Mr Pudlas 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. 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.

[31] Section 21(a) of the Act applies to this case. The question I must answer is whether the fault that this vehicle has are such that a reasonable consumer, fully acquainted with the true nature and extent of the fault, would not have purchased the vehicle.
[32] I am satisfied that the engine fault amounts to a failure of a substantial character. The vehicle’s engine requires replacement or rebuilding. Any repairs will be expensive. Caltex Te Anau has provided an estimate of between $5,000 and $7,000 to rebuild the engine. Mr Gregory agrees with this estimate and advises that it would be cheaper to replace the engine, but considers it unlikely that any repairer will be able to find a suitable replacement engine for a 1999 Nissan Homy.
[33] I consider that no reasonable consumer would have purchased this vehicle if they had known that it would suffer significant engine damage two and a half months and 5,600 km after purchase. I am therefore satisfied that Mr Pudlas is entitled to reject the vehicle.

What remedy is Mr Pudlas entitled to under the Act?

[34] The remedies relevant to this claim are set out in s 18 of the Act, which 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.

[35] Under s 18(3)(a) of the Act, Mr Pudlas is entitled to reject the vehicle because the engine damage amounts to a failure of a substantial character. Under s 23(1)(a) of the Act, Mr Pudlas is entitled to recover a refund of the purchase price.
[36] Under s 18(4) of the Act, Mr Pudlas is also entitled to recover damages for any loss or damage resulting from the vehicle’s failure which was reasonably foreseeable as liable to result from the failure. In that regard, Mr Pudlas seeks to recover $3,890.37, being accommodation and transportation costs, the cost of having the vehicle towed and assessed, and for filing this application.

Transportation and accommodation costs

[37] Mr Pudlas purchased the vehicle to live in while he and his wife were travelling around New Zealand. The vehicle was fully self-contained, meaning Mr Pudlas could park the vehicle at freedom camping sites or other low-cost camping locations. Mr Pudlas says that once the vehicle broke down, he and his wife were no longer able to travel and live in the vehicle, and they seek to recover the accommodation expenses they incurred between 10 August and 24 September 2018, as well as the travel costs they incurred between 22 August and 9 October 2018.
[38] I am satisfied that Mr Pudlas is entitled to recover $578.14 for the accommodation costs incurred between 10 August and 22 August 2018, the date on which Mr Pudlas decided to have the vehicle repaired by Caltex Te Anau and travelled to Queenstown, where Mr Pudlas then hired a vehicle from Go Rentals. Mr Pudlas had, quite reasonably, remained in Te Anau while waiting for Campervan World to rectify the fault, and should be entitled to recover the accommodation costs incurred during that time. I consider that the cost of accommodation in Te Anau while the fault was being assessed and Campervan World was given a reasonable opportunity to rectify it, is the type of reasonably foreseeable cost recoverable under s 18(4) of the Act.
[39] However, I am not satisfied that Mr Pudlas is entitled to recover the accommodation and transportation costs he incurred once he left Te Anau. After 22 August 2018, Mr Pudlas and Ms Chau then travelled throughout the South Island, staying in locations such as Queenstown, Franz Josef Glacier, Fox Glacier, Greymouth, Murchison, Lake Hawea, Nelson, Picton and Golden Bay. Mr Pudlas seeks to recover the cost of the rental cars used to drive to those locations and the accommodation while there. Mr Pudlas also seeks to recover other transportation costs for the remainder of his time in New Zealand.
[40] I do not believe that s 18(4) of the Act provides such an open-ended indemnity that allows the owner of a campervan that does not comply with the Act’s guarantees to recover all transportation and travel costs incurred in continuing his or her holiday. Accordingly, I do not consider the continuing cost of Mr Pudlas’ holiday incurred after he left Te Anau to be the type of reasonably foreseeable cost recoverable under s 18(4) of the Act.

[41] Mr Pudlas’ claim also does not recognise the fact that he would have incurred costs in continuing to use the vehicle (including increased fuel costs and depreciation) and that he may well have incurred accommodation costs while travelling around New Zealand if freedom camping sites were unavailable. Because his claim does not take account of these avoided costs, I am not satisfied that the losses claimed by Mr Pudlas after he left Te Anau are an accurate reflection of any loss he actually suffered. Consequently, even if the costs incurred by Mr Pudlas after 22 August 2018 were reasonably foreseeable for the purposes of s 18(4) of the Act, Mr Pudlas has not proven that he actually suffered the loss he claims.

The cost of towing and assessing the vehicle

[42] Mr Pudlas is entitled to recover $125 for the cost of towing the vehicle to Caltex Te Anau on 10 August 2018, and $206.25 for the cost of having the vehicle’s faults assessed by Caltex Te Anau on 6 September 2018. Both these costs are directly related to the fault and are therefore recoverable under s 18(4) of the Act.

The cost of filing this application

[43] Under cl 14(1)(a)(ii) and (b) of sch 1 to the Motor Vehicle Sales Act 2003 (the MVSA), the Tribunal may award costs against a party where that party either fails to participate in pre-hearing settlement discussions or, after receiving notice of the hearing, fails to attend without reasonable cause.
[44] In this case, I am not satisfied that Mr Pudlas is entitled to recover the cost of filing this application. Campervan World participated in pre-hearing settlement discussions with Mr Pudlas and attended the hearing. I therefore have no basis to make an award of costs against Campervan World.

Conclusion

[45] The vehicle has suffered significant engine damage and has not been of acceptable quality as required by s 6 of the Act.
[46] The engine damage is a failure of a substantial character for the purposes of s 21(a) of the Act. Mr Pudlas is therefore entitled to reject the vehicle and obtain a refund of the purchase price. He is also entitled to recover some, but not all, of the other costs he seeks.
[47] The Tribunal therefore orders that Campervan World shall, within 10 working days of the date of this decision, pay $8,940.89 to Mr Pudlas.

DATED at AUCKLAND this 5th day of December 2018

B.R. Carter
Adjudicator