Heeran v Euroland Motor Company Limited - Reference No. MVD 308/2019 [2019] NZMVDT 231 (1 November 2019)

Last Updated: 20 December 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 308/2019
[2019] NZMVDT 231

BETWEEN NIALL JOSEPH HEERAN

Purchaser

AND EUROLAND MOTOR COMPANY LIMITED

Trader

HEARING at Wellington on 4 October 2019
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

S D Gregory – Assessor
APPEARANCES

N J Heeran, Purchaser
A P Smith, Director of Trader

DATE OF DECISION 1 November 2019

___________________________________________________________________

DECISION OF THE TRIBUNAL

___________________________________________________________________

Euroland Motor Company Ltd must pay Niall Heeran $1,000 no later than 15 November 2019.

___________________________________________________________________

REASONS

Introduction

[1] Niall Heeran has replaced the transmission control module (TCM) on his Audi A4. He seeks to recover the cost of this repair, $3,507.50, from Euroland Motor Company Ltd, which sold him the vehicle in July 2018.
[2] I will consider Mr Heeran’s application first as a claim under the Consumer Guarantees Act 1993 (the CGA), in particular whether the vehicle failed to comply with the guarantee of acceptable quality.
[3] Mr Heeran’s primary grievance is that an earlier repair carried out to the TCM on his vehicle in July 2018 was less extensive than Mr Heeran was told by Euroland that it would be. In particular, Mr Heeran says he was told in 2018 that the TCM would be replaced. However, contrary to the indication Mr Heeran says he was given, only one of the sensors in the TCM was repaired. Mr Heeran feels let down by this because, if the vehicle had been repaired as stated by replacing the TCM in 2018, then Mr Heeran’s more recent problems with his vehicle are less likely to have occurred.
[4] For this reason, I will also consider Mr Heeran’s claim under the provisions of the Fair Trading Act 1986 (the FTA), in particular whether Euroland’s conduct was misleading and deceptive in breach of s 9 of that Act.

Issue one: Did the vehicle fail to comply with the guarantee of acceptable quality?

[5] Section 6(1) of the CGA provides that “where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”. According to s 2 of the CGA, “goods” includes vehicles.
[6] “Acceptable quality” is defined in s 7 of the CGA (as far as is relevant) 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.

[7] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.

The first TCM fault

[8] Four days after purchasing the vehicle in July 2018, Mr Heeran observed that the letters “PRNDS”, representing different transmission gears, were flashing on the dashboard. In addition, Mr Heeran noticed that reverse would not engage, despite the gear selector being in reverse. Furthermore, the dashboard icon indicating which gear the vehicle was in, switched from D to S even though the gear selector stayed in D.
[9] Mr Heeran also noticed the engine revolutions jumping from 2,000 to 2,600 rpm while the vehicle’s transmission seemed to be moving up and down the gears, and he said the gearstick was moving as well.
[10] Mr Heeran brought the vehicle back to Euroland, which took it to Motortech Transmissions for assessment.
[11] When Mr Heeran asked for an update on repairs to his car, a Euroland employee told him, first, that Motortech Transmissions was “waiting for a part to arrive”. Then the Euroland employee told him:

The problem is with the megatronic unit (the electrical box that talks to the gearbox). They have ordered a new one, should be here today or tomorrow ...

[12] The Euroland employee who told Mr Heeran that the “megatronic unit” was faulty and that Motortech Transmissions had ordered a new one was, according to Euroland’s director Andrew Smith, not mechanically trained. The same employee sent a further email later that day describing the “megatronic unit” as “the standalone further “brain” for the transmission”.
[13] What the Euroland employee described as the “megatronic” unit is correctly referred to as a “mechatronic” unit. A mechatronic is a type of TCM. It houses the electronic gearbox computer module and the valves that control the flow of hydraulic fluid to different parts of the transmission.
[14] From what the Euroland employee told him, Mr Heeran assumed that the entire mechatronic unit was being replaced. He asked a friend with mechanical knowledge if this was an appropriate repair and his friend told him that it was. However, Mr Heeran did not receive any invoice from Motortech Transmissions at the time of the repair confirming what work was done.
[15] Subsequently, it has become clear that in fact in July 2018, the whole of the mechatronic unit was not replaced. Rather, Motortech Transmissions’ invoice dated 26 July 2018 states that the TCM assembly was removed from the vehicle’s transmission and sent for repair. The repair that occurred appears to have been related to the output speed sensor, just one of the sensors on the mechatronic unit. Motortech Transmissions’ invoice for this repair totalled $1,738.23, which was paid in full by Euroland.
[16] The Tribunal’s Assessor, Mr Gregory, advised that a number of different faults can occur with a TCM/mechatronic unit. Not all of these faults require the entire unit to be replaced. Rather, it is possible to replace individual sensors, or alternatively to repair the TCM by soldering joints that have lost contact due to heat within the unit.
[17] I consider that, in respect of the first TCM defect in 2018, the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the CGA because it was insufficiently durable. As the vehicle at the time of its sale to Mr Heeran was already 13 years old and had travelled 123,823 km, and given that it was sold for the relatively modest price of $8,990, Mr Gregory and I consider that the repair that Motortech Transmissions carried out in July 2018 was perfectly reasonable. Indeed, that seems to be confirmed by the fact that the repair was successful and allowed Mr Heeran to continue to drive the vehicle for a further approximately 16,000–17,000 km before the most recent fault occurred.
[18] Mr Gregory also commented that, while the symptoms experienced by Mr Heeran in respect of the most recent transmission fault were similar to those experienced by him in July 2018, the current fault itself is probably coming from a different part of the TCM. Indeed, Mr Heeran confirmed that this was also the advice he had received from Motortech Transmissions. In other words, the fault experienced in 2019 was in fact a different fault from the fault that occurred in July 2018. It follows that it is not possible to say that the repair that was carried out in 2018 was unsuccessful. On the contrary, it appears to have been successful. Moreover, the current fault is a new fault that has arisen some 17,000 km after the purchase of this vehicle, nine months earlier.
[19] For that reason, although Mr Heeran has established a breach of the acceptable quality guarantee in respect of the 2018 TCM failure, I agree with Mr Smith that no such breach is established in respect of the 2019 TCM failure. That is because of the age, mileage and price of the vehicle, and the fact that the second TCM fault occurred so long after purchase. As the 2018 TCM fault was successfully remedied, Mr Heeran has not established any actionable breach of the CGA.

Issue two: Did Euroland engage in misleading conduct in breach of s 9 of the FTA?

[20] I turn to what Mr Heeran said was his primary grievance, whether the comments made by Euroland’s employee to Mr Heeran at the time of the initial repair were misleading.
[21] Because the employee’s comments were made in connection with the 2018 TCM failure, which I have found was a breach of the guarantee of acceptable quality under the CGA, they were sufficiently connected with the sale of the vehicle for the Tribunal to have jurisdiction to consider whether there was a breach of the FTA.[1]
[22] Mr Heeran submitted that the Euroland employee’s words left him with the impression that the whole TCM was being replaced, whereas in fact only the faulty sensor was repaired.
[23] Section 9 of the FTA provides:

9. 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

[24] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd v Ellis:[2]

... 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 a 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.

[25] Having regard to the email correspondence from the Euroland employee in 2018 (above at [11]), I consider that a reasonable consumer would interpret the statements by the employee that the “megatronic unit” was faulty and that a new one had been ordered, as meaning that the entire TCM was going to be replaced. I consider that Mr Heeran was objectively misled by the Euroland employee’s description of the proposed repair to the vehicle in 2018, given the much more limited repair that actually occurred.
[26] Accordingly, I conclude that Mr Heeran has established that Euroland breached s 9 of the FTA when it described to him what repairs were going to be carried out on the vehicle.

Has Mr Heeran suffered any loss?

[27] In order to obtain a remedy in respect of Euroland’s breach of the FTA, Mr Heeran also has to establish that he has, or is likely to have, suffered loss as a result of the conduct that breached s 9 of the FTA.
[28] At the hearing, I asked whether Mr Heeran suffered any loss in respect of Euroland’s misleading him about the nature of the repair, particularly in light of Mr Gregory’s advice that the repair that was carried out was indeed entirely appropriate. Mr Heeran’s own experience has shown that the 2018 repair was successful. The more recent fault does not signify the failure of the original repair. Indeed, as I mentioned at the hearing, if Mr Heeran had been told accurately what repair was going to be carried out, and if he had insisted on a full replacement of the TCM at Euroland’s expense, Euroland would have been within its rights to refuse. That is because the repair that was carried out was perfectly adequate, especially in light of the age, mileage and price of the vehicle. Accordingly, if Mr Heeran had wanted to replace the entire TCM in 2018 he is likely to have been required to contribute to the cost of such repair.
[29] Therein lies the basis of Mr Heeran’s loss. If Euroland had accurately informed him about the repair it was proposing, he could have insisted on the TCM being replaced in its entirety, by making a contribution to the cost of the repair.
[30] It was Mr Gregory’s advice that if the TCM had been replaced in its entirety back in 2018, then the more recent fault is unlikely to have occurred. So, one way of looking at Mr Heeran’s loss is that he is unlikely to have needed to incur the repair costs of $3,507.50 in 2019, if the 2018 repair that he was informed was done, was actually done.
[31] That is why, on reflection, I accept that there is an objective basis for Mr Heeran to establish that he has suffered loss as a result of being misled about the 2018 repair.
[32] If he had been given accurate information, Mr Heeran could have elected to replace the entire TCM unit. If he had decided to do so, then I consider Euroland would have been entitled to insist that Mr Heeran pay the difference between the repair Mr Heeran wanted and the repair Euroland was required to carry out. We do not know for sure that Mr Heeran would have insisted on the entire mechatronic unit being replaced in 2018, if he had been given accurate advice about the nature of the repair that was then being contemplated. But I think he is quite likely to have done so. That is borne out by the fact that, in respect of the 2019 repair, Mr Heeran was given the choice of simply repairing the defective sensor that was causing the fault, or replacing the entire TCM, and he took the latter option.
[33] Accordingly, I consider that what Mr Heeran has lost, as a result of Euroland’s employee’s misleading conduct, is the opportunity to obtain a complete replacement TCM in 2018, partly at his own cost, which is likely to have obviated the need for the 2019 repair.
[34] The difference in value between the repair that was done by Motortech in 2018 and the cost of a full TCM replacement amounts to $1,769.27. This amount might be thought to reflect Mr Heeran’s loss.
[35] But I do not propose to order Euroland to pay Mr Heeran the full difference. The power to order a payment under s 43 of the FTA is discretionary and it is open to the Tribunal to award only part of the amount of loss or damage in fulfilling the duty to do “justice to the parties in the circumstances of the particular case and in terms of the policy of the [FTA]”.[3] The full difference does not reflect the amount that I consider is fairly recoverable in the present case by Mr Heeran, because if he had been presented with accurate information in 2018 he may nevertheless have been persuaded by Euroland that it was not necessary for the full TCM to be replaced. I also consider a further discount is warranted to reflect the time that has passed since Mr Heeran purchased the vehicle and the considerable distance he has driven in it. Accordingly, in the exercise of the discretion under s 43 of the FTA, I order Euroland to pay Mr Heeran $1,000.

Conclusion

[36] Euroland Motor Company Ltd must pay Mr Heeran $1,000 within 14 days of the date of this decision.

J S McHerron
Adjudicator

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[1] Motor Vehicle Sales Act 2003, s 89(1)(a).

[2] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

[3] Red Eagle Corp Ltd v Ellis, above n 1 at [30] – [31].