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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 15 January 2019
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IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
BETWEEN KAISA JURIOJA
Purchaser
AND COLLECTIVE CAR COMPANY LTD
Trader
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Haynes, Assessor
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HEARING at Auckland on 18 December 2018
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APPEARANCES
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K Jurioja, Purchaser
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J Hamilton, for the Trader
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DATE OF DECISION 20 December 2018
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______________________________________________________________
DECISION OF THE TRIBUNAL
______________________________________________________________
______________________________________________________________
REASONS
Introduction
[1] On about 20 September 2018, Ms Jurioja purchased a 2007 Volkswagen Golf, registration number DZS670, for $3,910 from Collective Car Company Ltd. The vehicle had an odometer reading of approximately 200,915 km at the time of sale.
[2] The vehicle had pre-existing faults with its exhaust gas recirculation (EGR) valve and transmission valve body. Ms Jurioja has rejected the vehicle, alleging that its faults amount to a failure of a substantial character for the purposes of s 21(a) of the Consumer Guarantees Act 1993 (the Act). Ms Jurioja also seeks to recover the cost of replacing the EGR valve.
[3] Collective Car Company says that the vehicle was free of faults when it was sold to Ms Jurioja, and that it should have no obligations under the Act because the vehicle was sold by one dollar reserve on Trade Me on an “as is, where is” basis.
The Issues
[4] The issues requiring consideration in this case are:
- (a) Does the vehicle have faults that breach the acceptable quality guarantee in s 6 of the Act?
- (b) Are the faults a failure of a substantial character?
- (c) What remedy is Ms Jurioja entitled to under the Act?
Does the vehicle have faults that breach the acceptable quality guarantee?
[5] 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.
[6] 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.
[7] 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 Ms Jurioja’s subjective perspective.
[8] I am satisfied that the vehicle had pre-existing faults with its EGR valve and transmission.
[9] Ms Jurioja advises that, two days after she purchased the vehicle, the vehicle began to jerk and shudder, the engine warning light illuminated and the vehicle’s gearbox began to malfunction. Ms Jurioja nursed the vehicle home, and the next day had it assessed by Michies Automotive in Takapuna. Michies Automotive performed a diagnostic scan and found a fault relating to the vehicle’s EGR valve, which it rectified at a cost of $830.30.
[10] Mr Haynes, the Tribunal’s Assessor, advises that the EGR valve controls exhaust gas emissions and is an essential part of the vehicle’s emission control system. Mr Haynes advises that a faulty EGR valve will cause the engine warning light to illuminate.
[11] The symptoms described by Ms Jurioja and the diagnosis from Michies Automotive satisfies me that the vehicle had a faulty EGR valve that breached the acceptable quality guarantee in s 6 of the Act. Although a reasonable consumer should have realistic expectations as to the quality and durability of an 11-year-old, $3,910 Volkswagen Golf that had travelled more than 200,000 km at the time of sale, I consider that a reasonable consumer would not expect such a vehicle to be supplied with a pre-existing fault that caused its engine warning light to illuminate and cost more than $800 to rectify. That is particularly the case where the Trade Me listing for the vehicle represented that it was “in very good nick” and that “everything works as it should”.
[12] Ms Jurioja continued to use the vehicle, but the jerking symptoms and transmission problems remained. She returned the vehicle to Michies Automotive, which diagnosed a fault with its transmission and suggested that she take the vehicle to a transmission specialist. Ms Jurioja then took the vehicle to A Automotive Services Ltd (A Automotive) in Glenfield, which diagnosed a fault with the vehicle’s transmission valve body assembly. A Automotive provided an estimate of $2,527.44 for the required repairs.
[13] Mr Haynes advises that the diagnosis from A Automotive is consistent with the symptoms described by Ms Jurioja. Mr Haynes says that the transmission valve body is essential to the operation of the vehicle’s transmission, as it is responsible for selecting the appropriate gear. If the transmission valve body malfunctions, the vehicle will have difficulty selecting a gear, leading to the type of symptoms described by Ms Jurioja. Mr Haynes also advises that the estimate provided by A Automotive is an accurate reflection of the cost of performing the required repairs.
[14] On the basis of Ms Jurioja’s description of the symptoms, the diagnosis from A Automotive and Mr Haynes’ advice, I am satisfied that the vehicle had a pre-existing fault with its transmission valve body that breached 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 be supplied with a pre-existing transmission fault that will cost more than $2,500 to rectify.
[15] Collective Car Company submitted that the vehicle was free of faults when it was sold to Ms Jurioja. I do not accept that submission and consider that the evidence shows otherwise. The evidence presented by Ms Jurioja shows that the vehicle had pre-existing faults with its EGR valve and transmission valve body.
Are the faults a failure of a substantial character?
[16] Ms Jurioja submits that she is entitled to reject the vehicle because its faults amount to a failure of a substantial character, as defined in s 21 of the Act:
- 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.
[17] Section 21(a) of the Act applies to this case. The question I must answer is whether the faults that this vehicle has are such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle.
[18] On their own, I am satisfied that neither the EGR valve fault or the transmission fault amounts to a failure of a substantial character. Although both repairs are expensive in relation to the purchase price of the vehicle, both are faults that a reasonable consumer should understand may arise in a Volkswagen Golf of this price, age and mileage from time to time, with Mr Haynes advising that such faults are relatively common in Volkswagen Golfs of this age and mileage. Accordingly, I am not satisfied that either of the faults is so significant that a reasonable consumer would not have purchased the vehicle.
[19] However, I am satisfied that the vehicle’s faults amount to a failure of a substantial character when considered together. In Cooper v Ashley & Johnson Motors Ltd, the District Court stated that a purchaser may nonetheless reject a vehicle where there has been an accumulation of minor defects, which in themselves could not be described as substantial.[1] The Court noted that a point will eventually be reached where the purchaser could “say convincingly that he or she had no ‘confidence in the reliability of the vehicle’”.[2]
[20] This is such a case. Although neither fault is a failure of a substantial character in its own right, the combined effect of the faults is such that the faults amount to a failure of a substantial character. The fact that the vehicle had two pre-existing faults that will be costly to repair, and which significantly affected the performance of the vehicle, satisfies me that a reasonable consumer would not have purchased the vehicle if they were aware of those faults at the time of sale. I am also satisfied that the faults are such that a reasonable consumer would now have reached the point of losing all confidence in the reliability of the vehicle. Consequently, the vehicle’s accumulated faults amount to a failure of a substantial character for the purposes of s 21(a) of the Act.
What remedy is Ms Jurioja entitled to under the Act?
[21] The remedies relevant to this claim are set out in section 18 of the Act, which provides:
- 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.
[22] Under s 23(1)(a) of the Act, having rejected the vehicle, Ms Jurioja is entitled to recover the purchase price. In that regard, Collective Car Company shall, within 10 working days of the date of this decision, pay $3,910 to Ms Jurioja. Ms Jurioja must then make the vehicle available to be uplifted by Collective Car Company.
[23] Under s 18(2)(b)(i) of the Act, Ms Jurioja is also entitled to recover the cost of rectifying the EGR valve fault. Ms Jurioja asked Collective Car Company to rectify the fault, as evidenced by a string of text messages between the parties between 23 September and 28 September 2018. Collective Car Company refused to rectify the fault, claiming that the vehicle was sold by one dollar reserve on Trade Me on an “as is, where is” basis. During the hearing, Collective Car Company said that, because the vehicle was “high risk” due to its age and mileage, it did not want to supply a guarantee with the vehicle.
[24] I consider that the correspondence shows that Collective Car Company refused to comply with its obligations under the Act, and accordingly Ms Jurioja is entitled to recover the cost of having the EGR fault rectified. Collective Car Company must therefore, within 10 working days of the date of this decision, pay $830.30 to Ms Jurioja.
Referral to the Commerce Commission
[25] Collective Car Company did not provide a Consumer Information Notice to Ms Jurioja when she purchased the vehicle, as required by s 28(1) of the Fair Trading Act 1986. It says it did not do so because the vehicle was “high-risk”, sold by one dollar reserve on Trade Me on an “as is, where is” basis. I will therefore refer this decision to the Commerce Commission, which has jurisdiction to investigate conduct that breaches the consumer information standards provisions of the Fair Trading Act.
[26] In referring this decision to the Commerce Commission, I also note that Collective Car Company represented that the vehicle was supplied on an “as is, where is” basis and that the protections in the Consumer Guarantees Act did not apply, which may also breach the provisions of the Fair Trading Act that prohibit representations that purport to contract out of the Consumer Guarantees Act.
DATED at AUCKLAND this 20th day of December 2018
B.R. Carter
Adjudicator
[1] Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407 (DC) at 417.
[2] At 417.
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2018/307.html