Reid v JVP Wholesale Ltd t/a Shore Prestige - Reference No. MVD 088/2019 [2019] NZMVDT 143 (9 July 2019)

Last Updated: 23 August 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 088/2019 [2019] NZMVDT 143 BETWEEN CRAIG JOHN REID Purchaser AND JVP WHOLESALE LTD T/A SHORE PRESTIGE Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S D Gregory, Assessor

HEARING at Auckland on 7 May 2019 and 25 June 2019

APPEARANCES

C J Reid, Purchaser A Reid, Witness for the Purchaser

P A Nelson, for the Trader R Davis, L Nelson and K Pemberton, Witnesses for the Trader

DATE OF DECISION 9 July 2019

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

1. Craig Reid’s application to reject the vehicle is dismissed.
2. JVP Wholesale Ltd, trading as Shore Prestige, shall within 20 working days of the date of this decision, rectify the damage to the vehicle’s engine, including by replacing the engine if necessary.

_________________________________________________________________

REASONS

Introduction

[1] On about 8 October 2017, Craig Reid purchased a 2009 Range Rover TDV8, registration number JTM588 for $35,000 from JVP Wholesale Ltd, trading as Shore Prestige (Shore Prestige).
[2] On about 3 January 2018, the vehicle overheated causing extensive engine damage. Mr Reid has now rejected the vehicle, saying that it has not been fit for purpose or of acceptable quality for the purposes of the Consumer Guarantees Act 1993 (the Act).
[3] Shore Prestige says that it should have no liability for the vehicle’s significant engine damage. It says that the engine damage occurred because the vehicle overheated after a coolant hose disconnected from the vehicle’s throttle body, starving the engine of coolant. It says that Mr Reid would have seen obvious signs that the vehicle had lost its coolant, but that he nonetheless continued to drive the vehicle when he should not have.

The Issues

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

• (a) What damage does the vehicle have?
• (b) What caused the engine damage?
• (c) Has the vehicle been of acceptable quality guarantee for the purposes of s 6 of the Act?
• (d) If not, is the engine damage a failure of a substantial character?
• (e) What remedy is Mr Reid entitled to under the Act?

What damage does the vehicle have?

[5] It is common ground between the parties that the vehicle has extensive engine damage. Mr Reid gave evidence that the vehicle broke down on 3 January 2018 and has since been inspected by Rangiora Mazda, which has diagnosed significant and irreparable engine damage. I also heard evidence from Karl Pemberton of Auto Assess Ltd, a firm of loss adjusters and consultant engineers. Mr Pemberton inspected the vehicle at Rangiora Mazda and advises that the vehicle has irreparable engine damage caused by overheating.
[6] The Tribunal has also seen photographs of the internal components of the vehicle’s engine. Mr Gregory, the Tribunal’s Assessor, advises that those photographs support Mr Pemberton’s assessment of the extent of the engine damage.
[7] Shore Prestige advises that the engine requires replacement and, given the difficulty in obtaining a replacement engine for this vehicle, any repair may cost up to $30,000.

What caused the engine damage?

[8] The parties agree that the extensive engine damage was caused by the engine overheating. However, there are differing opinions as to what caused the engine to overheat. Mr Reid says that he was told by Rangiora Mazda that the vehicle had a leak from a split coolant hose, which allowed coolant fluid to slowly leak from the vehicle causing the engine to overheat.
[9] Mr Pemberton disagrees and says that the vehicle’s engine overheated after a coolant hose connected to the throttle body became detached, causing the vehicle’s coolant to “evacuate into the engine compartment” in “one event”. Mr Pemberton says the coolant hose had become softened by oil leaking onto it and became detached. Mr Pemberton also considers that a clip holding the coolant hose onto the throttle body was poorly attached, which may have contributed to the hose working loose.
[10] I accept Mr Pemberton’s explanation as to the cause of the vehicle overheating. Mr Pemberton has inspected the vehicle and was clear in his diagnosis. His diagnosis was also consistent with the photographs shown to the Tribunal, which clearly show a detached coolant hose.

Has the vehicle been of acceptable quality?

[11] Although he did not express his claim in these precise terms, I understand Mr Reid to allege that the engine damage means the vehicle has not been of acceptable quality for the purposes of s 6 of the Act because it has not been as durable as a reasonable consumer would consider acceptable.
[12] 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.
[13] 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.

[14] 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 Reid’s subjective perspective.
[15] On its face, the vehicle’s significant engine damage would ordinarily breach the acceptable quality guarantee because the vehicle has not been sufficiently durable. That damage occurred less than three months after purchase, and taking account of the vehicle’s price, age and mileage, a reasonable consumer would ordinarily expect the vehicle’s engine to have been much more durable than this.
[16] However, relying on Mr Pemberton’s opinion and statements made by Mr and Mrs Reid, Shore Prestige says that it should not be liable for the irreparable engine damage because the damage was caused by Mr Reid continuing to drive the vehicle when obvious warning signs of the impending engine damage were evident.
[17] Shore Prestige’s position is significant because, under s 7(4) of the Act, the engine damage will not breach the acceptable quality guarantee if it was caused by the vehicle being 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 that use caused or contributed to the engine damage.
[18] Shore Prestige says that Mr Reid caused the extensive engine damage by continuing to drive when warning signs were present, initially on 27 December 2017 and then on 3 January 2018. Shore Prestige says that Mr Reid should have stopped driving the vehicle once those warning signs occurred, and if he had done so, the significant engine damage would have been avoided. It therefore says that it should not be liable for the engine damage.

The restricted performance warning message on 27 December 2017

[19] Mr Reid lives in Milton, in Otago. On 27 December 2017, Mr Reid and his wife Alma Reid drove north to Blenheim in the vehicle, towing an unloaded trailer. The journey was uneventful until, about five minutes outside of Blenheim, a “restricted performance” warning message illuminated on the vehicle’s dashboard display and the vehicle lost power.
[20] Mr Gregory advises that the restricted performance warning message is a warning message generated by the vehicle’s control modules. Mr Gregory also considers that the vehicle would have lost power because it went into “limp mode”, which occurs when one of the vehicle’s control modules receives a signal from one of the vehicle’s sensors that is not within the computer's programmed specifications. Secondary programmes are then activated by the computer to protect the vehicle from damage. Those secondary programmes can restrict the power to the vehicle and the range of gears available to the driver. Limp mode is designed to allow the driver to get the vehicle to safety, such as off a busy street to a nearby parking lot, or to drive the vehicle home or to a repair facility, although the vehicle may drive slower than normal or behave erratically.
[21] The restricted performance message went away, so Mr and Mrs Reid continued to drive to Blenheim. They then took the vehicle to Vision Autos, a Blenheim based car dealership, for assessment. Although Mr Reid could not provide any precise details as to the diagnosis performed by Vision Autos, he did say that Vision Autos found four fault codes in the vehicle’s control modules. Mr Reid advises that Vision Autos cleared those fault codes and Mr and Mrs Reid continued to use the vehicle without incident for the remainder of their holiday in the Nelson/Marlborough area.
[22] Paul Nelson, a director of Shore Prestige, says that Mr Reid should not have continued to use the vehicle, and should have performed a more thorough diagnosis than was performed by Vision Autos on 27 December 2017 before continuing to use the vehicle. Mr Nelson considered that the cause of the restricted performance warning light is likely to be connected to the subsequent significant engine damage and that Mr Reid’s continued use of the vehicle has caused the damage. Mr Pemberton also advised that, in his opinion, the restricted performance warning message on 27 December 2017 could be connected to the subsequent significant engine failure.
[23] I am not satisfied that the restricted performance warning message that appeared on 27 December 2017 had any connection with the subsequent engine damage.
[24] The evidence from Mr Pemberton shows that the engine damage was caused by an oil contaminated coolant hose becoming detached from the throttle body, causing cooling fluid to evacuate from the vehicle, and the engine to overheat. Mr Pemberton says that the evacuation of the coolant fluid would have happened in one event.
[25] Mr Gregory agrees and advises that if the coolant loss happened as described by Mr Pemberton, then any restricted performance light relating to this fault would not have illuminated until the vehicle started to lose coolant fluid and overheat, which would only have occurred shortly before the vehicle broke down on 3 January 2018. Mr Gregory advises that there is certainly no way that a restricted performance message on 27 December 2017 could have been due to the oil contaminated coolant hose becoming detached from the throttle body.
[26] Mr Pemberton suggested that the warning message on 27 December 2017 may have been related to a coolant leak, which may have contributed to the vehicle overheating. In dismissing this suggestion, I note that there is no evidence to show that the vehicle was losing coolant fluid or overheating on 27 December 2017 or at any other time before 3 January 2018. Indeed, Mr Reid advises that he frequently checked the vehicle’s coolant levels, and there were no signs of any coolant loss. Mr Reid also advises that there was no sign of the vehicle overheating.
[27] I also note that the mere presence of the restricted performance warning message is not conclusive evidence that the vehicle had a related fault on 27 December 2017. As Mr Pemberton said in his evidence, there is an “endless list” of reasons why the vehicle’s restricted performance warning message may have illuminated.
[28] Accordingly, I am not satisfied that Mr Reid’s continued use of the vehicle after the restricted performance light illuminated on 27 December 2017 was unreasonable or that this use has contributed in any way to the vehicle’s engine damage. The evidence does not prove any connection between the restricted performance light on 27 December 2017 and the subsequent irreparable engine damage on 3 January 2018.

The events of 3 January 2018

[29] On 3 January 2018, while returning to Milton towing a load of firewood, which Mr Reid estimated to weigh approximately 1.5 tonnes, Mr Reid says that the restricted performance warning light returned while driving between Cheviot and Greta Valley, which is approximately 80 km north of Christchurch.
[30] Mr Reid says he pulled over, but considered the stopping place to be unsafe, so he waited approximately two minutes and restarted the vehicle. When the warning light did not return, Mr Reid says he drove for approximately one to one and a half kilometres to find a safer stopping point.
[31] Mr Reid says that once he reached that safer stopping point, he noticed the restricted performance warning message illuminate again and a large amount of steam from beneath the vehicle’s bonnet. The vehicle would not restart and was then towed to Rangiora Mazda, where the extensive engine damage was diagnosed.
[32] Shore Prestige says that I should not accept the evidence of Mr Reid and Mrs Reid as to what happened on 3 January 2018. Despite Mr Reid’s evidence that there were no obvious warning signs that the coolant hose had become detached or of the impending engine damage, Shore Prestige says that once the coolant hose became detached there would have been obvious warning signs, which should have caused Mr Reid to stop driving the vehicle well before the irreparable engine damage was caused. Shore Prestige also says that there are discrepancies in Mr and Mrs Reid’s evidence that should cause me to disbelieve their evidence as to what happened on 3 January 2018.

The warning signs

[33] Shore Prestige says that, once the coolant hose had become detached, Mr Reid would have noticed the following warning signs before the vehicle’s engine was irreparably damaged:

• (a) a restricted performance warning message;
• (b) noise from the engine bay caused by the radiator fan blades contacting the disconnected coolant hose;
• (c) a temporary spike in the temperature gauge;
• (d) a misfire from the engine; and
• (e) steam from the engine bay for a significant period of time before the vehicle broke down

[34] Shore Prestige, again relying on Mr Pemberton’s opinion, says that the warning signs would have been obvious to Mr Reid for a significant period of time while driving the vehicle.
[35] Mr Pemberton says that the vehicle was driven for a significant distance (potentially up to 100 km) after the coolant hose became detached. In support of this opinion, Mr Pemberton advises that the damage he observed to the vehicle’s radiator fan blades and coolant hose, caused by the disconnected coolant hose contacting the fan blades, could only have been caused if the vehicle was driven a significant distance.
[36] Mr Pemberton also considered that warning signs would have been observable to the occupants of the vehicle during this time. He considered that a “very significant amount of steam” would then have been visible for a significant distance before the vehicle broke down. Mr Pemberton says that the detached hose would have caused coolant to be sprayed onto the hot engine and exhaust manifolds, generating steam that would have been expelled from the front and side of the vehicle. Mr Pemberton considers that the steam would have been evident immediately once the coolant hose had become detached. Mr Pemberton also says that the occupants of the cabin of the vehicle would have heard the sound of the radiator fan blades contacting the disconnected coolant hose. Mr Pemberton also considers that the temperature gauge would have spiked temporarily, and that the vehicle would have developed an observable misfire.
[37] In support of his opinion that the occupants of the vehicle would have been aware of these warning signs before the catastrophic engine failure, Mr Pemberton also says that Mr Reid has admitted continuing to drive the vehicle despite seeing steam from beneath the bonnet. Mr Pemberton says that he was told by employees of Rangiora Motors that Mr Reid had said that he had seen steam from the engine but continued to drive because the temperature gauge had not risen.
[38] Aside from the restricted performance warning light that initially caused him to pull over on 3 January 2018, Mr Reid denies seeing any such warning signs until after the engine had failed, when he noticed a large amount of steam from beneath the vehicle’s bonnet. Mr Reid advises that the temperature gauge remained within normal parameters, and that there were no other signs of problems with the vehicle.
[39] I found Mr Reid to be a reliable and credible witness, who across two hearings remained consistent in the evidence he gave.
[40] I accept Mr Reid’s evidence that he drove no more than one to one and a half kilometres after the initial restricted performance warning message illuminated on 3 January 2018. Aside from my finding him to be a reliable and credible witness, his evidence is also consistent with the advice I have received from Mr Gregory as to the distance this vehicle could have been driven before its engine failed.
[41] Although Mr Pemberton advised that the vehicle could be driven for a significant distance after the coolant hose became detached (as much as 100 km at the first hearing and then 15 to 20 minutes at the second), Mr Gregory advises that the vehicle could not possibly be driven for any significant distance, and certainly nowhere near the distances suggested by Mr Pemberton, after the coolant hose became detached from the throttle body. Mr Gregory says, given the size of the vehicle, the load it was towing, the undulating roads that the vehicle was being driven on and the speed at which the coolant would have evacuated from the cooling system, the engine would have been quickly destroyed. Mr Gregory advises that it is highly unlikely that the vehicle could have been driven for any more than five minutes after the coolant hose became detached before the engine failed.
[42] In accepting Mr Reid’s evidence as to the distance that the vehicle travelled, I also acknowledge Mr Pemberton’s evidence that the damage to the radiator fan and detached coolant hose was consistent with the vehicle being driven significant distance. However, I am not satisfied that Mr Pemberton’s opinion as to the distance the vehicle would have been driven because of the damage to the radiator fan and coolant hose withstands scrutiny.
[43] Mr Pemberton says that the damage to the radiator fan and coolant hose shows that the vehicle was driven a significant distance. However, Mr Pemberton was unable to tell me how fast the vehicle’s cooling fan rotates. I also issued directions asking the parties to provide information as to how fast the vehicle’s cooling fan rotates. They were unable to do so.
[44] Given the absence of evidence as to the precise speed at which the radiator fan rotates, I do not feel able to accept Mr Pemberton’s evidence that the damage to the radiator fan and coolant hose proves the vehicle was driven for a significant distance after the coolant hose detached. On the contrary, I consider it entirely possible that the damage to the radiator fan and coolant hose could have been caused in as little as one minute of driving.
[45] That is because, although the precise speed of the fan in this vehicle is unknown, to perform its task of drawing air through the radiator to control the engine temperature at low speeds, the radiator fan must rotate at high speeds. Mr Pemberton advises that the radiator fan has eight blades. Even if the radiator fan was spinning at a speed of 200 rpm (which Mr Gregory advises would be a very low estimate of the actual speed of the radiator fan), the radiator fan blades could then have contacted the coolant hose as many as 1600 times within one minute, which in my view would be more than enough time to cause the damage evident to the radiator fan and coolant hose.
[46] I also accept Mr Reid’s evidence that he saw or heard no observable warning signs of the pending engine failure. I consider that Mr Reid would have seen, and been concerned about, such symptoms had they been observable. Mr Reid is an experienced truck driver, and I consider it highly unlikely that an experienced truck driver would continue to drive a vehicle if any such warning signs were present.
[47] Again, in reaching this conclusion, I acknowledge Mr Pemberton’s opinion that the occupants of the vehicle should have seen a significant amount of steam from the engine bay.
[48] Mr Gregory advises that it is not inevitable that steam would have been visible to the occupants of the vehicle while it was being driven. Given the forward momentum of the vehicle, Mr Gregory considers that steam could be directed backwards beneath the vehicle, and not escape through the engine bay in the manner described by Mr Pemberton. Certainly, once the vehicle came to a rest, the steam would be visible in the manner described by Mr Pemberton, but not necessarily while the vehicle was still in motion.
[49] Finally, I am not prepared to rely upon the evidence from Mr Pemberton that an employee of Rangiora Mazda told him that Mr Reid admitted driving the vehicle after seeing steam from the engine bay. This evidence is hearsay — in that it is statement made by a person (the Rangiora Mazda employee) who was not a witness at the hearing and is offered in evidence at the hearing to prove the truth of its contents (that Mr Reid drove the vehicle despite seeing observable warning signs).
[50] Although this Tribunal has broad discretion to accept evidence that would not be admissible in other tribunals or courts, the circumstances relating to this statement do not provide me with a reasonable assurance that the statement is reliable. Mr Reid strongly denies seeing steam and given the potential significance of this evidence to the outcome of the case, Shore Prestige could have called the Rangiora Mazda employee to give evidence of this discussion. It did not do so, and I do not feel able to rely on a second hand re-telling of that evidence in concluding that Mr Reid saw obvious warning signs of impending engine failure.

Discrepancies in the evidence

[51] In accepting the version of events presented by Mr Reid at the hearing, I acknowledge that there are discrepancies between the evidence of Mr Reid and documents provided to the Tribunal before the hearing as to precisely what happened on 3 January 2018.
[52] Shore Prestige says that I should not accept the evidence of Mr and Mrs Reid as to what happened on 3 January 2018. Shore Prestige says that there are significant discrepancies in the evidence of Mr and Mrs Reid that undermine the credibility of their claim.
[53] Shore Prestige, relying upon emails written by Mrs Reid, says that the restricted performance warning message illuminated much earlier than Mr Reid now claims. In that regard, I agree with Shore Prestige’s interpretation of Mrs Reid’s emails, and conclude that Mrs Reid’s emails do read as if the restricted performance message illuminated approximately one hour into their journey home, and approximately one and a half to two hours before the vehicle broke down on 3 January 2018.
[54] Notwithstanding the emails from Mrs Reid, I accept Mr Reid’s evidence that the engine warning light did not illuminate so early in their journey home. As set out above, I found Mr Reid to be a credible and straightforward witness, and although I consider that Mrs Reid was less than careful with the facts in her email correspondence with Shore Prestige, I must be careful not to let my views as to the reliability of her evidence contaminate my view as to the reliability of Mr Reid’s evidence. In that regard, I note Mr Reid’s difficulties in reading and writing, so I am prepared to accept that he was not aware of the precise details of the emails being sent by Mrs Reid.
[55] Further, I prefer Mr Reid’s oral evidence to the contents of the relevant emails because the version of events contained in the emails could not have happened. If the restricted performance light had illuminated one hour into the journey (as suggested in Mrs Reid’s email correspondence), and that message related to the fault that caused the engine damage (as alleged by Shore Prestige), the vehicle simply could have been driven such a distance before the engine failed.
[56] Although Mr Pemberton initially considered that the vehicle could be driven up to 100 km after the coolant hose became detached, he then revised his estimate downwards to say that the vehicle could be driven between 15 and 20 minutes after the coolant hose became detached. Even if I accept Mr Pemberton’s final resting point as to the distance that the vehicle could have travelled after the coolant hose became detached, any restricted performance message that illuminated as early as Mrs Reid claimed in her email correspondence could not then have been related to the fault that caused the engine damage. The vehicle simply could not have been driven that far after the coolant hose became detached.
[57] There are also discrepancies between a statement signed by Mr and Mrs Reid and the evidence I heard at the hearing. At paragraph 16 of the signed statement, Mr and Mrs Reid say that, after initially pulling over, they drove the vehicle for another 10 minutes before the restricted performance light illuminated again, which caused them to pull over, at which time they noticed steam from the engine bay. During the hearing Mr Reid advised that he drove between one and one and a half kilometres, which is less than 10 minutes.
[58] With regards to the discrepancies between the signed statement and Mr Reid’s evidence, again, I accept Mr Reid’s evidence during the hearings as to the distance travelled after the restricted performance light first illuminated on 3 January 2018. Mr Gregory advises that the vehicle could not be driven for 10 minutes over the hilly terrain present in this area while towing a 1.5 tonne load after losing the contents of its cooling system. Mr Gregory advises that the engine failure would have been almost immediate, and certainly would have taken no longer than five minutes.
[59] On that basis, I am prepared to accept Mr Reid’s evidence that he drove the vehicle for approximately one to one and half kilometres to find a safe stopping point and consider that paragraph 16 of the signed statement provided to the Tribunal, prepared by Mr Reid’s lawyer, is not an accurate record of events.

The engine damage breaches the acceptable quality guarantee

[60] I therefore accept Mr Reid’s explanation as to what happened on 3 January 2018. I accept his evidence that the first sign of overheating occurred when he pulled over and saw steam escaping from the engine bay. I am also satisfied that Mr Reid acted reasonably in seeking to move the vehicle to a safer stopping point to assess the cause of the initial restricted performance light. I consider that any reasonable consumer would have done the same thing.
[61] It follows that I am not satisfied that Shore Prestige has proven that Mr Reid should have stopped the vehicle any earlier or that Mr Reid 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. Consequently, the significant engine damage breaches the acceptable quality guarantee in s 6 of the Act because the vehicle has not been as durable as a reasonable consumer would consider acceptable.

Is the fault a failure of a substantial character?

[62] Under s 18(3) of the Act, Mr Reid 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.

[63] The vehicle’s engine has failed and requires replacement, at a cost exceeding $30,000. Applying s 21(a) of the Act, I am satisfied that the engine fault is a failure of a substantial character. A reasonable consumer would not have purchased this vehicle if they had known that such a significant and expensive fault would develop so shortly after purchase.

Has Mr Reid lost the right to reject the vehicle?

[64] The law relating to the loss of the right to reject goods is set out in s 20 of the Act, which states:

20 Loss of right to reject goods

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

(a) the right is not exercised within a reasonable time within the meaning of subsection (2); or

(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; or

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

(d) the goods have been attached to or incorporated in any real or personal property and they cannot be detached or isolated without damaging them.

(2) In subsection (1)(a), the term reasonable time means a period from the time of supply of the goods in which it would be reasonable to expect the defect to become apparent having regard to—

(a) the type of goods:

(b) the use to which a consumer is likely to put them:

(c) the length of time for which it is reasonable for them to be used:

(d) the amount of use to which it is reasonable for them to be put before the defect becomes apparent.

(3) This section applies notwithstanding section 170 of the Contract and Commercial Law Act 2017.

[65] Under s 20(1)(a) of the Act, Mr Reid will lose the right to reject the vehicle if he has not exercised that right within a reasonable time. For the purposes of s 20(1)(a) of the Act, a "reasonable time" is a period from the time of supply of the goods in which it would be reasonable for the defect to become apparent, having regard to the factors set out in s 20(2)(a)–(d) of the Act.
[66] In Nesbit v Porter, the Court of Appeal shed some light on the statutory words in s 20(2) of the Act.[1] The Court observed that: [2]

... A reasonable time under s 20 must accordingly be one which suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of a breakage or malfunction is not apparent, the consumer can be expected to do by taking the goods to someone, usually and preferably the supplier, for inspection.

[67] In this case, Mr Reid first became aware that the vehicle’s engine had suffered significant damage on 3 January 2018. but did not unequivocally reject the vehicle until February 2019, when Mr Reid’s lawyer sent a formal rejection letter to Shore Prestige. That is too long.
[68] I appreciate Mr Reid’s explanation for this delay, in that many months were spent having the engine damage assessed by Autosure Ltd to determine whether it would cover some of the costs of the required repair under the policy bought by Mr Reid at the time of purchase. There was then a period in which Mr Reid attempted to negotiate with Shore Prestige to give it an opportunity to rectify the engine damage.
[69] Nonetheless, the law imposes an obligation of Mr Reid to exercise his right to reject the vehicle with reasonable haste once he becomes acquainted with the nature of the vehicle’s defects. Mr Reid knew of the nature of the vehicle’s defects on 3 January 2018. He did not unequivocally reject the vehicle until over one year later. Applying Nesbit v Porter, by waiting so long to reject the vehicle, Mr Reid took too long, and has now lost that right.

What remedy is Mr Reid entitled to under the Act?

[70] 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.

[71] Mr Reid is not entitled to reject the vehicle because he has lost the right to do so. However, under s 18(2)(a) of the Act, he is entitled to have the engine damage rectified within a reasonable time. Accordingly, I order that Shore Prestige must, within 20 working days of the date of this decision, rectify the damage to the vehicle’s engine, including by replacing the engine if necessary.
[72] Mr Reid also seeks to recover storage costs charged by Rangiora Mazda under s 18(4) of the Act. It seems that the vehicle has been stored on a hoist at Rangiora Mazda’s premises and Rangiora Mazda has charged Mr Reid $8,551.50 for the usage of that hoist between 23 July 2018 and 28 October 2018. Mr Reid seeks to recover that amount from Shore Prestige.
[73] I decline to award those amounts to Mr Reid.
[74] Rangiora Mazda has charged Mr Reid $50 per day for the use of a hoist, but there is no obvious reason why this vehicle was stored on a hoist after 23 July 2018. Mr Gregory advises that it was unnecessary to store the vehicle on a hoist once the engine had been assessed and the cause of the damage determined (which occurred well before 23 July 2018). I consider that the vehicle should have been taken down from the hoist and returned to Mr Reid or stored elsewhere. I do not consider that such an unreasonable charge could amount to loss or damage that was reasonably foreseeable as liable to result from the engine damage.
[75] Further, once it became apparent that Autosure and Shore Prestige were not going to rectify the engine damage, Mr Reid had an obligation to mitigate any losses that may arise from storing the vehicle. In the circumstances of this case, that could have included transporting the vehicle to his premises for storage or finding an alternative, much less expensive, storage option. Mr Reid did not do that, so I am not satisfied that he is entitled to recover the expensive storage costs charged by Rangiora Mazda.

DATED at AUCKLAND this 9th day of July 2019

B.R. Carter
Adjudicator

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[1] Nesbit v Porter [2000] NZCA 288; [2000] 2 NZLR 465 (CA).

[2] At [39].