Parker v Moto Ltd - Reference No. MVD 369/2019 [2019] NZMVDT 254 (26 November 2019)

Last Updated: 20 December 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 369/2019 [2019] NZMVDT 254 BETWEEN IAN JAMES PARKER Purchaser AND MOTO LTD Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S D Gregory, Assessor

HEARING at Auckland on 19 November 2019

APPEARANCES

I J Parker, Purchaser (by audio-visual link) J Rankin, Witness for the Purchaser

A Symes, for the Trader S Ban, Witness for the Trader

DATE OF DECISION 26 November 2019

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DECISION OF THE TRIBUNAL

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1. Ian Parker’s application to reject the vehicle is upheld.
2. Moto Ltd shall, within 10 working days of the date of this decision, pay $20,000 to Ian Parker.

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REASONS

Introduction

[1] On 1 December 2018, Ian Parker purchased a 2008 Subaru Impreza WRX STi, registration number LUS93, for $20,000 from Moto Ltd. The vehicle has now suffered significant engine damage, and Mr Parker seeks to reject it, alleging that the vehicle has not been of acceptable quality for the purposes of the Consumer Guarantees Act 1993 (the Act).
[2] Moto Ltd says that Mr Parker is not entitled to reject the vehicle. It says that the engine damage was most likely caused by Mr Parker misusing the vehicle by driving it off-road. It also alleges that Mr Parker has failed to adequately maintain the vehicle and that the fault arose too long after purchase for the protections in the Act to continue to apply.

The issues

[3] Against this background, the issues requiring consideration are:

• (a) Issue 1: Does the vehicle have a fault that breaches the acceptable quality guarantee in s 6 of the Act?
• (b) Issue 2: Is the fault a failure of a substantial character?
• (c) Issue 3: What remedy is Mr Parker entitled to under the Act?

Issue 1: Does the vehicle have a fault that breaches the acceptable quality guarantee?

[4] 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.
[5] 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.

[6] 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 Parker’s subjective perspective.
[7] Mr Parker says that while driving home from work on 4 July 2019, he noticed a rattle from the vehicle’s engine, which became louder under load. Mr Parker then had the vehicle inspected by P F Automotive in Tauranga, which performed oil pressure and compression tests and considered that the vehicle had “run a big end bearing”. It estimates that the required repairs will cost $8,636.42. Mr Gregory, the Tribunal’s Assessor, advises that this is a reasonable estimate of the cost of a complete engine overhaul, which may be required in this case.
[8] Moto Ltd agrees that the vehicle has suffered significant engine damage. Stepjan Ban, a mechanic who frequently does work for Moto Ltd, gave evidence that he inspected the vehicle and can confirm that it has significant engine damage, most likely caused by damage to the big end bearing on the number four cylinder. Nonetheless, Moto Ltd says that the engine damage does not breach the acceptable quality guarantee because:

• (a) Mr Parker has driven the vehicle in a manner inconsistent with the manner in which a reasonable consumer would use the vehicle;
• (b) Mr Parker has failed to adequately maintain the vehicle; and
• (c) Mr Parker has owned the vehicle for too long.

Mr Parker’s alleged misuse of the vehicle

[9] Moto Ltd says that Mr Parker has misused the vehicle by driving it off road. It considers that Mr Parker has used the vehicle for “paddock bashing”, which involves driving a vehicle in a reckless manner (performing donuts etc) on a grass surface (hence the name paddock bashing). It says that driving in this manner can put strain on a vehicle’s engine, causing the type of damage now evident in this vehicle.
[10] Mr Ban says that he saw signs of grass on the muffler and debris in the chassis rails consistent with the vehicle being driven off-road when he inspected the vehicle. Moto Ltd provided videos filmed by Mr Ban. Mr Ban says that those videos show the grass and debris caused by Mr Parker’s alleged paddock bashing.
[11] In support of its view that Mr Parker has driven the vehicle off-road, Moto Ltd also produced photographs showing Mr Parker driving other vehicles off road. It says that, taking account of the grass stains and debris beneath the vehicle and the fact that Mr Parker has a history of driving vehicles off-road in a manner that would put strain on the engine, this vehicle’s engine could well have been damaged by the vehicle being misused.
[12] This submission is significant, because under s 7(4) of the Act, the vehicle will not fail to comply with the acceptable quality guarantee if the engine damage was caused by it being used in a manner inconsistent with the manner in which a reasonable consumer would use it.
[13] Mr Parker denies using this vehicle off-road. He advised that he has previously raced rally cars, which he can no longer afford since he purchased a house. Mr Parker also agrees that he has driven other vehicle’s off-road in a manner similar to that now being alleged by Moto Ltd. However, he says that the Audi depicted in the photographs provided by Moto Ltd was purchased for $1,000 to be used for that purpose. He says that he has not used this vehicle, which is much more valuable, in that manner.
[14] I am not satisfied that Moto Ltd has proven that Mr Parker has misused the vehicle. In that regard, I do not agree with Mr Ban’s opinion that the marks on the vehicle’s stainless steel muffler were caused by grass. Instead, this is a lowered vehicle, with little clearance between its underside and the ground, and I consider that the marks on the muffler are more consistent with scratches caused by a contact with a solid abrasive object (such as a judder bar or a kerb) than by contact with soft grass. Further, I am not satisfied that the presence of debris in the chassis rails is evidence that the vehicle has been misused. Debris in a vehicle’s chassis rails can come from many sources, such as the vehicle being driven on gravel roads, through roadworks, over roads that have been used by stock or on roads that are dirty. Mr Gregory also advises that the amount of debris present beneath this vehicle is not unusual for vehicle’s driven on New Zealand roads and that the presence of such debris is not evidence of paddock bashing.
[15] Finally, and perhaps most importantly in determining that the vehicle was not misused, I accept Mr Parker’s submission that if this vehicle had been used in the manner alleged by Moto Ltd, there would be other observable damage to the underside of the vehicle, particularly to its plastic shields and side skirts and that debris would be evident in the wheel arches. There is no such damage or debris present. Accordingly, I am not satisfied that Moto Ltd has proven that Mr Parker has misused the vehicle in any way.
[16] There was also a suggestion that Mr Parker could have caused or contributed to the engine damage by continuing to drive the vehicle after the oil pressure warning light illuminated. In that regard, Mr Ban opined that the vehicle’s oil pressure warning light must have illuminated some time before Mr Parker heard the loud knocking noise from the engine, and if Mr Parker had immediately stopped driving when the warning light illuminated, the engine damage may have been much less severe.
[17] Mr Parker says that the oil pressure warning light never illuminated. I found Mr Parker to be a consistent and reliable witness, and I accept his evidence that the oil pressure warning light did not illuminate. Further, Mr Gregory advises that it is likely that the vehicle’s oil pressure warning light would not illuminate because of damage to a big end bearing. Mr Gregory says, although an engine may have big end bearing damage, the oil pump can still supply enough oil to maintain sufficient oil pressure, meaning the oil warning light will not illuminate.
[18] Accordingly, on the basis of Mr Parker’s evidence and the advice I have received from Mr Gregory, I am not satisfied that Mr Parker misused the vehicle by continuing to drive after the oil pressure warning light illuminated.

Mr Parker’s alleged failure to maintain the vehicle

[19] Moto Ltd also suggested that Mr Parker failed to adequately maintain the vehicle because he did not service it and because he continued to drive the vehicle with reduced oil levels.
[20] Moto Ltd alleges that Mr Parker did not service the vehicle as required because he did not service the vehicle in the eight months before the engine damage, during which time he drove nearly 8,000 km. In support, Mr Ban gave evidence that, because this is a performance vehicle, Mr Parker should have serviced the vehicle at least every six months.
[21] Mr Gregory advises that the vehicle was not overdue for a service as the service interval for the vehicle is every 12 months or 10,000 km, whichever occurs earlier. On that basis, I am not satisfied that Mr Parker has failed to adequately service the vehicle. Further, even if Mr Parker should have serviced the vehicle earlier, there is no evidence to show that any such failure has caused or contributed to the engine damage. In that regard, I note that the two oil sample analyses performed by ALS both show that, aside from debris caused by the big end bearing damage, the vehicle’s oil was in good condition and does not appear to have contributed to the engine damage.
[22] Moto Ltd also alleged that Mr Parker should not have driven the vehicle because its oil levels were low.
[23] Mr Parker gave evidence that the vehicle used oil during his ownership, and that just before the engine damage occurred, the oil level was about half way up the vehicle’s dipstick. Mr Ban submitted that driving the vehicle with oil at this level could well have damaged the engine.
[24] Mr Gregory advises that it was perfectly safe to drive the vehicle with this oil level. Mr Gregory says that the dipstick does not measure the total volume of oil in the sump. Instead, it simply indicates whether the oil level remains within safe operating parameters, because an overfilled sump can cause engine damage and an underfilled (as indicated when the oil falls below the low mark on the dipstick) may lead to oil starvation. Where the level is at the half way mark on the dipstick, as occurred in this case, there remains more than enough oil in the sump to keep the engine sufficiently lubricated under all driving conditions.
[25] Accordingly, I am not satisfied that Mr Parker caused or contributed to the engine damage by continuing to drive the vehicle when its oil levels were low.

The length of Mr Parker’s ownership

[26] Moto Ltd also alleged that the vehicle does not breach the acceptable quality guarantee because the engine damage arose too long after purchase for the Act to apply.
[27] In this case, Mr Parker paid $20,000 for a 10-year-old vehicle that had travelled 125,850 km at the time of sale. The engine damage occurred seven months after purchase, by which time Mr Parker had driven a little more than 8,000 km. The vehicle has now suffered significant and expensive engine damage.
[28] Although, the protections in the Act are not indefinite, and last only as long as is reasonable in the circumstances of each case, I consider that a reasonable consumer would expect a vehicle of this price, age and mileage to be free of significant and expensive engine damage for longer than this vehicle has been. Accordingly, I am satisfied that Mr Parker has not owned the vehicle for too long for the provisions in the Act to continue to apply.

The vehicle has not been of acceptable quality

[29] On the basis that the protections in s 6 still apply, that the vehicle has significant engine damage and that Mr Parker has not caused or contributed to that damage by the manner in which he has used or maintained the vehicle, I am satisfied that the 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.

Issue 2: Is the fault a failure of a substantial character?

[30] Under s 18(3) of the Act, Mr Parker 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.

[31] I am satisfied that the engine damage amounts to a failure of a substantial character for the purposes of s 21(a) of the Act. The vehicle is now unusable, and requires extensive engine repairs, at a cost of approximately $8,600. I consider that a reasonable consumer, fully acquainted with the true nature and extent of this fault, would not have purchased the vehicle.

Issue 3: What remedy is Mr Parker entitled to under the Act?

[32] 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.

[33] Under s 18(3)(a) of the Act, Mr Parker is entitled to reject the vehicle because the engine damage amounts to a failure of a substantial character. Under s 23(1)(a) of the Act, Mr Parker is therefore entitled to recover all amounts paid in respect of the vehicle. Accordingly, the Tribunal orders that Moto Ltd shall, within 10 working days of the date of this decision, pay $20,000 to Mr Parker.

DATED at AUCKLAND this 26th day of November 2019

B.R. Carter
Adjudicator