Ehrhorn v Robert Allen Wholesale Limited t/a Raw Motors Reference No. MVD 045/2018 [2018] NZMVDT 73 (4 April 2018)

Last Updated: 21 May 2018

BEFORE THE MOTOR VEHICLE DISPUTES TRIBUNAL
		[2018] NZMVDT 073 Reference No. MVD 045/2018
	IN THE MATTER	of the Motor Vehicle Sales Act 2003
	AND
	IN THE MATTER	of a dispute
	BETWEEN	LOGAN EHRHORN
		Purchaser
	AND	ROBERT ALLEN WHOLESALE LIMITED T/A RAW MOTORS
		Trader
MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor
HEARING at Auckland on 15 March 2018
DATE OF DECISION 4 April 2018
APPEARANCES
L Ehrhorn, Purchaser R Bush and C Ristic, Witnesses for the Purchaser
R Allen, for the Trader S Ban, Witness for the Trader

ORDERS

1. Logan Ehrhorn’s application to reject the vehicle is upheld.
2. Robert Allen Wholesale Limited shall, within 10 working days of the date of this decision, pay $12,206 to Logan Ehrhorn.

DECISION

[1] The vehicle has, or has had, several faults that breach the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (“the Act”). Robert Allen Wholesale Limited, trading as RAW Motors, has rectified most of the faults.
[2] However, despite being required to do so, RAW Motors has failed to rectify the faults with the rear differential and front driveshaft within a reasonable time. Accordingly, under s 18(2)(b)(ii) of the Act, Logan Ehrhorn is entitled to reject the vehicle. Mr Ehrhorn has not lost the right to reject the vehicle by disposing of the vehicle or by the manner in which he has used the vehicle.

REASONS

Introduction

[3] On 22 July 2017, Mr Ehrhorn purchased a 2002 Holden Rodeo LX3.0TD ute from RAW Motors for $11,995. The vehicle had an odometer reading of 184,000 kms at the time of sale. Mr Ehrhorn lives in Pukekohe and RAW Motors is based in Onehunga. Mr Ehrhorn paid $120 to have the vehicle delivered to him.
[4] Within four months of purchase, Mr Ehrhorn had identified several faults with the vehicle, many of which would have caused the vehicle to fail a warrant of fitness inspection.
[5] Mr Ehrhorn asked RAW Motors to rectify the faults. RAW Motors has rectified most of the faults, including the vehicle’s faulty headlights, twisted left front brake hose, worn inner tie rod, rusty and worn front hubs, leaking gearbox and steering box and faulty park brake. However, RAW Motors has failed to rectify the worn rear differential and worn, insecure front driveshaft.
[6] Mr Erhhorn has applied to the Tribunal seeking to reject the vehicle. RAW Motors says that Mr Erhrorn is not entitled to reject the vehicle for three reasons:

• (a) The faults are minor and consistent with the age and mileage of the vehicle, and it has repaired the faults that required repair.
• (b) Mr Ehrhorn has disposed of the vehicle, so has lost the right to reject it.
• (c) Mr Ehrhorn’s use of the vehicle has caused damage to the vehicle.

The Issues

[7] 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) Has RAW Motors failed to repair the fault within a reasonable time?
• (c) Has Mr Ehrhorn lost the right to reject the vehicle?
• (d) What remedy is Mr Ehrhorn entitled to under the Act?

Does the vehicle have faults that breach 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 s7(1)(a)-(e) of the Act, as modified by the factors set out in s7(1)(f)-(j), from the perspective of a “reasonable consumer”. The test is an objective one; it is not a view those factors from Mr Ehrhorn’s subjective perspective.
[11] When Mr Ehrhorn first purchased the vehicle, he noticed that the vehicle’s suspension felt “bouncy” and that the vehicle felt like it was floating at the front. Mr Ehrhorn is not an experienced driver, so does not appear to have considered anything to untoward with the way the vehicle felt. That changed when Mr Ehrhorn’s father drove the vehicle. Mr Ehrhorn senior was concerned about the vehicle’s handling, and arranged to have the vehicle assessed by Buckland Motors in Pukekohe.
[12] On about 13 November 2017, Buckland Motors inspected the vehicle and found that the vehicle had a worn right front inner tie rod, rusty and worn front hubs, worn front axles, a leaking gearbox and steering box, worn rear leaf springs and differential and a “very worn” front driveshaft. Buckland Motors was concerned that these faults would cause the vehicle to fail a warrant of fitness inspection, and that the faults would have been visible when the vehicle had its warrant of fitness inspection before Mr Ehrhorn purchased it.
[13] Rebecca Bush, Mr Ehrhorn’s stepmother, contacted RAW Motors seeking to reject the vehicle and obtain a refund of the purchase price. RAW Motors refused to accept the rejection claiming, in an email dated 16 November 2017, that it had fulfilled its obligations by supplying a vehicle with a current warrant of fitness, and stating that it had “nothing else to offer regarding your concerns”.
[14] Mr Ehrhorn then had the vehicle assessed by VTNZ in Pukekohe on 17 November 2017. VTNZ found a very similar list of faults, including faults with the lights, steering, tyres and brakes that it considered were sufficient for the vehicle to fail a warrant of fitness inspection.
[15] Ms Bush again contacted RAW Motors advising it about the results of the VTNZ assessment and giving RAW Motors an opportunity to accept rejection of the vehicle before Mr Ehrhorn filed an application with the Tribunal. RAW Motors replied, again refusing to offer any remedy, and notifying Mr Ehrhorn that, because he was considering legal action, it would discontinue correspondence.
[16] Despite this initial refusal to offer any remedy, it seems that RAW Motors then agreed to repair the vehicle, in conjunction with Loleen Auto Services, the company who issued the warrant of fitness before the vehicle was sold to Mr Ehrhorn. Loleen Auto Services performed repairs, including by replacing both inner tie rods and repaired the leaking steering box. RAW Motors was left to repair the remaining faults, including the worn driveshaft.
[17] This evidence satisfied me that the vehicle had several faults that breached the acceptable quality guarantee in s6 of the Act. Both Buckland Motors and VTNZ agree that the vehicle had play in the front hubs, a worn right front inner tie rod, a leaking steering box, an insecure driveshaft and a worn rear differential, amongst several other faults that breach the acceptable quality guarantee, and that many of these faults would have caused the vehicle to fail a warrant of fitness inspection.
[18] Mr Haynes, the Tribunal’s Assessor, agrees that many of these faults would cause the vehicle to fail a warrant of fitness inspection. For example, Mr Haynes says that the play in the driveshaft would fail a warrant of fitness inspection due to the lateral movement between the inner and outer slip joint spline, which causes extra wear on the splines, eventually making the vehicle undriveable. Mr Haynes says the front hub play will eventually cause the wheel bearing hardness to wear off from the inner and outer cage. This would eventually cause the bearing cage to collapse and possibly seize the front wheel.
[19] RAW Motors says that these faults are in keeping with the age and mileage of the vehicle, particularly taking account of the use Mr Ehrhorn has had of the vehicle since purchase.
[20] Certainly, in concluding that the vehicle’s faults breach the acceptable quality guarantee, I acknowledge that Mr Ehrhorn paid $11,995 for a 15-year-old vehicle that had travelled 184,000 kms at the time of sale. I accept that a reasonable consumer would have realistic expectations about the condition and durability of such a vehicle and would expect such a vehicle to have wear and tear consistent with its age and mileage. Nonetheless, I am satisfied that this vehicle was not of acceptable quality when it was sold to Mr Ehrhorn, and it has not been nearly as durable as a reasonable consumer would expect. I consider that no reasonable consumer would expect a vehicle of this price, age and mileage, that had travelled no more than 7,000 kms since purchase, to develop such an extensive list of faults and defects within four months of purchase.

Did Mr Ehrhorn’s use of the vehicle cause or contribute to the faults?

[21] Shortly after he purchased the vehicle, Mr Ehrhorn found cracks in the chassis near front bullbars. Mr Ehrhorn had that damage repaired by a family friend and it does not form part of his claim.
[22] Robert Allen, a Director of RAW Motors, alleged that Mr Ehrhorn’s use of the vehicle led to accelerated damage to the vehicle. Mr Allen was not specific as to the alleged manner of use that may have caused damage to the vehicle, although it seems that Mr Allen considers that the cracks found in the vehicle’s chassis were caused by Mr Ehrhorn’s use of the vehicle, indicating that his use of the vehicle had caused or contributed to the vehicle’s other faults.
[23] There is simply no evidence to support Mr Allen’s assertion that Mr Ehrhorn has used the vehicle in a way that has caused or contributed to the damage. Mr Ehrhorn denied using the vehicle in a manner that could cause the damage. He says he drove the vehicle to and from work and on occasional road trips. He did not drive the vehicle off-road or in any environment that could cause or contribute to the vehicle’s faults.
[24] I accept Mr Ehrhorn’s evidence. Further, I do not consider that the cracks in the chassis prove unreasonable use. Instead, if anything, the chassis cracks are consistent with the overall poor condition of the vehicle, which appears to have been subject to vigorous use before it was sold to Mr Ehrhorn.

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

[25] Mr Ehrhorn claims that he is entitled to reject the vehicle because RAW Motors has failed to repair the vehicle’s faults within a reasonable time. He says that he has given RAW Motors a reasonable opportunity to diagnose and repair the faults, and RAW Motors has not taken that opportunity.
[26] Under s 18(2)(b)(ii) of the Act, Mr Ehrhorn is entitled to reject the vehicle if, having been required to remedy the fuel gauge fault, RAW Motors has not succeeded in doing so within a reasonable time.
[27] Section 18 of the Act 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), he 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.”

Did Mr Ehrhorn require RAW Motors to rectify the faults?

[28] I am satisfied that Mr Ehrhorn required RAW Motors to rectify the vehicle’s faults and that RAW Motors made attempts to rectify those faults. The vehicle was delivered to Loleen Auto Services on 6 December 2017. Loleen Auto Services performed some repairs, and then sent the vehicle to RAW Motors to perform further repairs on 14 December 2017. The vehicle was then available to be picked up by Mr Ehrhorn on 10 January 2018.

Did RAW Motors fail to rectify the faults within a reasonable time?

[29] Despite many of the faults being repaired, I am satisfied that RAW Motors failed to rectify the faults with the front driveshaft and rear differential within a reasonable time.
[30] RAW Motors was advised that the vehicle had faults with its driveshaft and rear differential. After initially refusing to rectify any faults, it ultimately agreed to perform repairs. The vehicle was delivered to Loleen Auto Services on 6 December 2017 for repairs to be performed, and then delivered to RAW Motors on 14 December 2017 for further repairs. Those repairs were completed on 10 January 2018, when the vehicle was returned to Mr Ehrhorn.
[31] Mr Ehrhorn then took the vehicle back to Buckland Motors, who found that although most of the faults had been rectified, the vehicle still had play in the front driveshaft and in the rear differential. Carl Ristic, the automotive engineer from Buckland Motors who inspected the vehicle, gave evidence at the hearing. He said that the front driveshaft remained worn and had between 3mm and 4mm of movement. Mr Ristic also said that differential was also worn, with approximately 25mm of play in the driveshaft before the differential would engage.
[32] Stjepan Ban, an employee of RAW Motors, gave evidence that he had repaired the driveshaft by replacing the universal joint. Mr Ban considered that this repair had rectified the fault and that there was otherwise no play in the driveshaft. Mr Ban also considered that the vehicle had no fault with its differential. Mr Ban said the differential was not noisy, did not make a whining sound (which is an indication of a worn differential) and there was no sign of any oil leaks. Mr Ban considered the differential to be in keeping with the age and mileage of the vehicle. Mr Ristic disagreed, saying that the driveshaft and differential still had play, and required further repair.
[33] Mr Ristic is an experienced automotive engineer, and has been a registered warrant of fitness inspector since 1997. I accept his evidence as to the condition of the vehicle’s driveshaft and differential, and that those faults had not been rectified when he assessed the vehicle in January 2018.
[34] Mr Ehrhorn also had the vehicle assessed by Wyatt Automotive Limited in Tuakau on 9 March 2018. Wyatt Automotive considered that the front driveshaft and rear differential were worn, with excessive play.
[35] Despite the repairs performed by RAW Motors, the evidence from Mr Ristic and Wyatt Automotive satisfies me that RAW Motors has not rectified the faults with the front driveshaft and rear differential, despite being given a reasonable opportunity to do so. Of particular concern is that RAW Motors did not rectify the fault with the front driveshaft. Mr Haynes advises that this fault alone would cause the vehicle to fail a warrant of fitness inspection. I would have expected RAW Motors to be careful to ensure that it rectified such a fault before returning the vehicle to Mr Ehrhorn. It did not do so.
[36] I am therefore satisfied that RAW Motors failed to repair the front driveshaft and rear differential faults within a reasonable time. RAW Motors was clearly advised of the vehicle’s faults before it commenced repairs in December 2017. It then had the vehicle for more than three weeks, which Mr Haynes considers ample time to perform the repairs required. Mr Haynes also advises that these were relatively straightforward repairs, which should have been quickly conducted.
[37] Under s18(2)(b)(ii) of the Act, Mr Ehrhorn is entitled to reject the vehicle.

Has Mr Ehrhorn lost the right to reject the vehicle?

[38] On 5 December 2017, the vehicle was transferred into the name of Rebecca Bush, Mr Ehrhorn’s stepmother. Ms Bush says this occurred because Mr Ehrhorn urgently needed to arrange insurance before returning the vehicle to RAW Motors for repairs, and that Mr Ehrhorn could not make those arrangements on the day. Ms Bush could, but to insure the vehicle she needed to be the registered owner. Accordingly, she transferred ownership of the vehicle into her name, and insured the vehicle. Ms Bush says that she never intended to deprive Mr Ehrhorn of ownership of the vehicle and that the vehicle still belongs to Mr Ehrhorn. The transfer was simply to enable Ms Bush to insure the vehicle.
[39] This transfer of the vehicle to Ms Bush raises a question as to whether Mr Ehrhorn has lost the right to reject the vehicle, because under s 20(1)(b) of the Act, Mr Ehrhorn has lost the right to reject the vehicle if he disposed of it.
[40] Section 20(1)(b) of the Act states:

20 Loss of right to reject goods

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

...

(b) the goods have been disposed of by the consumer, or have been lost or destroyed while in the possession of a person other than the supplier or an agent of the supplier.

[41] RAW Motors argues that the transfer of ownership means that Mr Ehrhorn has disposed of the vehicle, meaning he has lost the right to reject it.
[42] While Mr Ehrhorn has clearly transferred the vehicle to Ms Bush, I am satisfied that he did not dispose of the vehicle for the purposes of s 20(1)(b) of the Act. I consider that, for the purposes of s 20(1)(b) of the Act, the fact of transfer of ownership is not decisive in determining whether the vehicle has been disposed of. Instead, I consider that a vehicle is disposed of if there has been a permanent transfer of possession from one person to another.
[43] In this case, I am not satisfied that Mr Ehrhorn has transferred possession to another person. The vehicle remained in Mr Ehrhorn’s possession, he continued to use the vehicle in the same manner he had used it before it was registered in Ms Bush’s name, and he continued to repay money he had borrowed from his father and stepmother to purchase the vehicle. I am therefore satisfied that the vehicle belongs to Mr Ehrhorn, and that he has not disposed of the vehicle. Accordingly, he has not lost the right to reject it.

What remedy is Mr Ehrhorn entitled to under the Act?

[44] Under s 18(2)(b)(ii) of the Act, Mr Ehrhorn is entitled to reject the vehicle, because RAW Motors failed to repair the faults with the front driveshaft and rear differential within a reasonable time. Under s 23(1)(a) of the Act, Mr Ehrhorn is entitled to recover all amounts paid in respect of the vehicle – in this case, the purchase price of $11,995 and the delivery charge of $120.
[45] Under s 18(4) of the Act, Mr Ehrhorn is also entitled to recover other loss or damage suffered as a result of the vehicle’s faults. In that regard, Mr Ehrhorn is entitled to recover the following:

• (a) $45 – being the cost of having the vehicle assessed by VTNZ on 17 November 2017.
• (b) $46 – being the cost of having the vehicle assessed by Wyatt Automotive on 9 March 2018.

[46] Mr Ehrhorn also seeks to recover $691.55 for other repairs performed on the vehicle, and $500, for the cost of another vehicle purchased for Mr Ehrhorn to use while this vehicle was being repaired.
[47] I do not consider that Mr Ehrhorn is entitled to recover either amount. In relation to the earlier repairs, Mr Ehrhorn has provided no evidence to prove that those costs were incurred. Regarding the replacement vehicle, I have seen no evidence to show that Mr Ehrhorn has suffered loss as a result of purchasing this vehicle. Indeed, I have seen no evidence to show that Mr Ehrhorn purchased the vehicle. Accordingly, I cannot be satisfied that he has suffered loss or damage.

Conclusion

[48] The vehicle has, or has had, several faults that breach the acceptable quality guarantee in s 6 of the Act. RAW Motors has rectified most of the faults.
[49] However, despite being required to do so, RAW Motors has failed to rectify the faults with the rear differential and front driveshaft within a reasonable time. Accordingly, under s 18(2)(b)(ii) of the Act, Mr Ehrhorn is entitled to reject the vehicle. Mr Ehrhorn has not lost the right to reject the vehicle by disposing of the vehicle or by manner in which he has used the vehicle.
[50] Accordingly, the Tribunal upholds Mr Ehrhorn’s rejection of the vehicle and orders that RAW Motors shall, within 10 working days of the date of this decision, pay $12,206 to Mr Ehrhorn.

DATED at AUCKLAND this 4th day of April 2018

B.R. Carter
Adjudicator