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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 23 August 2019
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IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
BETWEEN INDRA KUMAR JAKHOTIA
Purchaser
AND DREAMLINE MOTOR COMPANY LTD
Trader
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S D Gregory, Assessor
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HEARING at Auckland on 10 July 2019
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APPEARANCES
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I K Jakhotia, Purchaser
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A Kumar, for the Trader
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DATE OF DECISION 16 July 2019
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] On 11 October 2018, Indra Jakhotia purchased a 2008 Honda Civic Hybrid for $10,295 from Dreamline Motor Company Ltd (Dreamline). The vehicle had an odometer reading of 98,400 kilometres at the time of sale.
[2] Mr Jakhotia alleges that the vehicle has not been of acceptable quality for the purposes of the Consumer Guarantees Act 1993 (the CGA). Mr Jakhotia says that despite being told that the vehicle’s integrated motor assist (IMA) battery was new, it was not and now requires replacement. He also alleges that the vehicle’s tyres have not been of acceptable quality. Mr Jakhotia also claims that Dreamline misled him by representing that the IMA battery was new and that he could expect to drive 100,000 kilometres in the vehicle before the IMA battery required replacement.
[3] Dreamline denies telling Mr Jakhotia that the IMA battery was new. Further, it says that both the IMA battery and the vehicle’s tyres have been sufficiently durable, so Mr Jakhotia should be entitled to no remedy.
The Issues
[4] Against this background, the issues requiring consideration are:
- (a) Has Dreamline engaged in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA)?
- (b) Does the vehicle have faults that breach the acceptable quality guarantee in s 6 of the CGA?
- (c) If so, what remedy is Mr Jakhotia entitled to under the CGA?
Has Dreamline engaged in conduct that breached s 9 of the FTA?
[5] Section 9 of the FTA provides;
- Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[6] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd v Ellis:[1]
The question to be answered in relation to s 9 ... is ... whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established. It is not necessary under s 9 to prove that the defendant’s conduct actually misled or deceived the particular plaintiff or anyone else. If the conduct objectively had the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9. If it is likely to do so, it has the capacity to do so. Of course the fact that someone was actually misled or deceived may well be enough to show that the requisite capacity existed.
[7] Mr Jakhotia says that Dreamline has engaged in misleading conduct in breach of s 9 of the FTA because Akshay Kumar, a director of Dreamline, told him that the vehicle’s IMA battery was new and that he could expect to obtain 100,000 kilometres of use before that battery required replacement. Mr Jakhotia also says that he tried to negotiate the purchase price downwards, but Mr Kumar would not negotiate on price because a new IMA battery had been installed in the vehicle.
[8] Mr Jakhotia says that the representation that the IMA battery was new is misleading because the IMA battery was not new. Instead, Dreamline installed a second-hand IMA battery in the vehicle before it was sold to Mr Jakhotia and the IMA battery now requires replacement after approximately 10,000 kilometres of driving. Mr Jakhotia says that the IMA battery light frequently illuminates, with the vehicle entering limp mode and temporarily losing power.
[9] Mr Jakhotia has had the vehicle assessed by Itech Automotive, which considers that the IMA battery has deteriorated and requires replacement. Mr Gregory, the Tribunal’s Assessor, advises that the symptoms described by Mr Jakhotia and the results of the diagnostic scan performed by Itech Automotive show that the IMA battery has deteriorated and needs to be replaced.
[10] Mr Kumar denies telling Mr Jakhotia that the IMA battery was new or that he could expect to obtain 100,000 kilometres of use before that battery required replacement. Mr Kumar says that he told Mr Jakhotia that the small front battery was new, but that the IMA battery was second hand. Mr Kumar also says that he showed Mr Jakhotia a copy of the invoice for the IMA battery from Strong For Honda (the supplier of the battery) to demonstrate that the battery was not new.
[11] As the applicant, Mr Jakhotia must prove that it is more likely than not that Dreamline misled him by representing that the vehicle’s IMA battery was new. After considering all of the evidence, I am not satisfied that he has done that.
[12] Both Mr Jakhotia and Mr Kumar presented clear and consistent evidence in support of their respective sides of the story. Further, although Mr Kumar sent a text message on 5 October 2018 advising that a “new battery” had been fitted, which would give a reasonable consumer the impression that a new IMA battery had been installed, I am inclined to accept Mr Kumar’s evidence that he subsequently advised Mr Jakhotia that the front battery was new, but that the IMA battery was second hand. I tested Mr Kumar extensively on this evidence, and he remained resolute that he advised Mr Jakhotia that he IMA battery was not new.
[13] Accordingly, in light of the absence of clear evidence to show that Dreamline represented that the vehicle’s IMA battery was new, I am not satisfied that Mr Jakhotia has proven that Dreamline engaged in misleading conduct in breach of s 9 of the FTA.
Does the vehicle have faults that breach the acceptable quality guarantee?
[14] Section 6 of the CGA imposes on suppliers and manufacturers of consumer goods “a guarantee that the goods are of acceptable quality”. Section 2(b)(ii) of the CGA defines “goods” as including vehicles.
[15] The expression “acceptable quality” is defined in s 7(1) 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.
[16] In considering whether or not goods meet the guarantee of acceptable quality, the Tribunal must consider the quality elements as set out in s 7(1)(a)–(e) of the CGA as modified by the factors set out in s 7(1)(f)–(j), from the perspective of a “reasonable consumer”. The test is an objective one; it is not a view of those factors from Mr Jakhotia’s subjective perspective.
The vehicle’s battery
[17] As set out above, the vehicle’s IMA battery has now deteriorated to the point that it now requires replacement. Mr Jakhotia says that the battery has not been nearly as durable as a reasonable consumer would consider acceptable.
[18] Dreamline says that Mr Jakhotia has driven more than 10,000 kilometres in the vehicle since purchase, meaning the IMA battery has been sufficiently durable.
[19] Although I acknowledge that the IMA battery in a hybrid vehicle will deteriorate over time, in light of Dreamline’s pre-purchase representation that the vehicle’s IMA battery had been recently replaced with a genuine Honda part that had been tested by Strong For Honda, I am satisfied that the vehicle has not been as durable as a reasonable consumer would consider acceptable.
[20] Such a representation would give a reasonable consumer high expectations as to the durability of the vehicle’s IMA battery and a reasonable consumer would not expect that battery to then require replacement so shortly after purchase. Accordingly, I am satisfied that the vehicle has not been of acceptable quality for the purposes of s 6 of the CGA because its IMA battery has not been sufficiently durable.
The vehicle’s tyres
[21] Mr Jakhotia also alleges that the vehicle’s tyres are substandard. On 21 May 2019, Mr Jakhotia took the vehicle to Midas Onehunga to be serviced. Midas Onehunga noticed that all four of the vehicle’s tyres were badly cracked on all edges and require replacement.
[22] Mr Jakhotia says that the vehicle’s tyres are different from those shown in pre-purchase photographs of the vehicle. Mr Jakhotia alleges that Dreamline swapped the tyres after the vehicle had obtained its warrant of fitness, removing the good quality tyres and replacing them with substandard ones.
[23] Dreamline denies knowingly installing substandard tyres on the vehicle and I note that there is no evidence to prove that Dreamline knowingly behaved in this way. The evidence does show that the vehicle had different tyres fitted when the pre-purchase photographs were taken and that the replacement tyres have now deteriorated to the point that they require replacement. However, that evidence does not prove that Dreamline knowingly installed substandard tyres on the vehicle.
[24] Further, I am satisfied that the vehicle’s tyres have been sufficiently durable. A reasonable consumer should understand that consumable items, such as tyres, will require replacement from time to time and that the protections in the Act are not indefinite, and last only as long as is reasonable in the circumstances of each case, taking account of factors such as the price, age and mileage of the vehicle, the length of ownership before the defect became apparent and the distance travelled in that time.
[25] Mr Jakhotia owned the vehicle for more than seven months before the defective tyres were identified and had travelled more than 10,000 kilometres in that time. In those circumstances, I am satisfied that the tyres have been sufficiently durable for the purposes of s 6 of the CGA.
What remedy is Mr Jakhotia entitled to under the CGA?
[26] The remedies relevant to this claim are set out in s 18 of the CGA, 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.
[27] Under s 18(2)(a) of the CGA, Mr Jakhotia is entitled to have the vehicle’s IMA battery replaced within a reasonable time. Further, under s 18(4) of the CGA, Mr Jakhotia is entitled to recover the cost of having the faulty IMA battery diagnosed by Itech Automotive. Accordingly, the Tribunal orders that Dreamline shall, within 10 working days of the date of this decision:
- (a) replace the vehicle’s IMA battery; and
- (b) pay $57.50 to Mr Jakhotia.
[28] For the avoidance of doubt, Dreamline is responsible for all costs relating to the required repairs, including any cost of transporting the vehicle to its chosen repairer.
DATED at AUCKLAND this 16th day of July 2019
B.R. Carter
Adjudicator
[1] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2019/149.html