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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 19 April 2019
IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA
MVD
013/2019
[2019] NZMVDT 44
BETWEEN JOEL HART DESIGN LIMITED
Purchaser
AND MOTOREKA LIMITED
Trader
HEARING at Nelson on 1 March 2019
MEMBERS OF TRIBUNAL
J S McHerron, Barrister – Adjudicator
R C Dixon – Assessor
APPEARANCES
J R Hart, Director of Purchaser (by AVL)
S J Ward, Witness for Purchaser
(by AVL)
S Malcolm, Service Advisor at Miles Toyota (by telephone)
G P
Taitua, Sales Manager of Trader
DATE OF DECISION 8 March 2019
___________________________________________________________________
DECISION OF THE TRIBUNAL
___________________________________________________________________
___________________________________________________________________
REASONS
Introduction
[1] Joel Hart Design Ltd purchased a 2015 Toyota Hiace from Motoreka Ltd on 22 October 2018 for $24,950 plus $345 delivery. Ever since the vehicle was delivered to Joel Hart Design, a warning light has been lit up on its dashboard. The warning light is on because there is a fault with the diesel particulate filtration (DPF) system, a device designed to reduce emissions by removing soot from the exhaust gas. Despite Joel Hart Design's extensive efforts to get Motoreka to fix the problem, it is still not repaired. The vehicle is currently in limp home mode and only operates at low speed. Mr Hart, the director of Joel Hart Design, has rejected the vehicle. He seeks a full refund of the purchase price and the cost of delivery.
[2] From this background, the following issues arise:
- (a) Does the Consumer Guarantees Act 1993 (the Act) apply?
- (b) If so, did the vehicle fail to comply with the guarantee of acceptable quality?
- (c) If so, what remedy, if any, is Joel Hart Design entitled to?
Issue one: Does the Consumer Guarantees Act 1993 apply?
[3] Motoreka points out that this vehicle, a Toyota Hiace van, was purchased by a business, Joel Hart Design. Motoreka submits the fact that the vehicle was purchased by a business means the guarantees in the Act do not apply.
[4] There are two possible ways that goods supplied to businesses, such as the Toyota Hiace supplied to Joel Hart Design, can be excluded from the Act's coverage. I will describe each of these ways in terms of its possible application to the facts of the present case.
Is Joel Hart Design a consumer?
[5] The first way in which this transaction might be excluded from the Act's coverage is if Joel Hart Design was not a “consumer” under the Act.
[6] The definition of “consumer” is in s 2 of the Act:
consumer means a person who—
(a) acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption; and
(b) does not acquire the goods or services, or hold himself or herself out as acquiring the goods or services, for the purpose of—
(i) resupplying them in trade; or
(ii) consuming them in the course of a process of production or manufacture; or
(iii) in the case of goods, repairing or treating in trade other goods or fixtures on land
[7] None of the exclusions in para (b) of the above definition applies. The issue for consideration is, in terms of para (a), whether a Toyota Hiace such as that purchased by Joel Hart Design, is a vehicle “of a kind ordinarily acquired for personal, domestic, or household use or consumption”.
[8] In Nesbit v Porter, the Court of Appeal considered the use of the word “ordinarily” in para (a) of the definition of "consumer" in the Act.[1]
[9] The Court held that "ordinarily" means whether the good is acquired for personal, domestic or household use as a matter of regular practice or occurrence, or in the ordinary or usual course of events or state of things, and not merely as an idiosyncratic choice.[2] The Court of Appeal held that:[3]
It is clear from the definition of “consumer” that Parliament contemplated that goods can have several uses; that some buyers might acquire them exclusively for a business use, some exclusively for a private use and some might intend to use them for both. The definition covers under para (a) a person who acquires goods of a kind ordinarily acquired for private use, but in para (b) goes on to exclude such a person if the goods are actually acquired, or the purchaser holds himself or herself out as acquiring them, for any of the commercial purposes listed in subparas (i), (ii) or (iii). Paragraph (b) would be unnecessary if goods could fall within para (a) only if they were of a kind not ordinarily acquired for a commercial purpose.
[10] In Dallimore Motors Ltd v Everett, the District Court considered the same question in the context of a similar phrase used in the definition of "motor vehicle" in the Motor Vehicle Sales Act 2003 (the MVSA). That case was an appeal from a decision of the Motor Vehicle Disputes Tribunal regarding an Isuzu Bighorn diesel turbo.[4] The Court noted that, in considering the purpose for which a vehicle is ordinarily acquired, the definition in the MVSA does not use the words “principally” or “exclusively”, and nor does it use the word “normally”.[5] The Court considered that Parliament had not enacted a test based on "preponderance of purpose". Instead, the Court considered the correct test to be:[6]
If it is established that it is not out of the ordinary that vehicles of the particular kind are acquired for private purposes then one surely can confidently say that it is of a kind ordinarily acquired for those purposes....the test is perhaps – given that the vehicle is one which may be used for personal domestic etc use, - is it of a kind that is ordinarily (or commonly) acquired for that type of use?
[11] These decisions indicate that a vehicle can be of a kind ordinarily acquired for personal, domestic or household use as well as having a commercial purpose, as long as the personal, domestic or household use is not out of the ordinary or idiosyncratic for a vehicle of this kind.
[12] In my view, a Toyota Hiace is exactly the kind of vehicle that the Court in Dallimore Motors had in mind when it considered a vehicle that can have several uses. Even a vehicle which has a commercial purpose can also have a personal, domestic or household use as a matter of regular practice or occurrence. Indeed, Toyota Hiace vehicles are commonly used for a combination of commercial and domestic purposes. It cannot be said that use of a Toyota Hiace for personal purposes is an "idiosyncratic choice".
[13] Accordingly, I conclude that Joel Hart Design was a “consumer” in relation to its purchase of the Toyota Hiace.
Did the parties contract out of the Act?
[14] The second possible way in which this transaction could have been excluded from the Act's reach is if the parties contracted out of the application of the Act in relation to this transaction.
[15] Section 43 of the Act provides the circumstances in which the parties are to be regarded as having contracted out of the guarantees of the Act. It provides, as far as is relevant:
- No contracting out except for business transactions
(1) Subject to this section and to sections 40, 41, and 43A, the provisions of this Act shall have effect notwithstanding any provision to the contrary in any agreement.
(2) However, despite subsection (1), parties to an agreement may include a provision in their agreement to the effect that the provisions of this Act will not apply to that agreement, provided that—
(a) the agreement is in writing; and
(b) the goods or services are, or (in connection only with the guarantee of acceptable quality in section 7A) the gas or electricity is, supplied and acquired in trade; and
(c) all parties to the agreement—
(i) are in trade; and
(ii) agree to contract out of the provisions of this Act; and
(d) it is fair and reasonable that the parties are bound by the provision in the agreement.
(2A) If, in any case, a court is required to decide what is fair and reasonable for the purposes of subsection (2)(d), the court must take account of all the circumstances of the agreement, including—
(a) the subject matter of the agreement; and
(b) the value of the goods, services, gas, or electricity (as relevant); and
(c) the respective bargaining power of the parties, including—
(i) the extent to which a party was able to negotiate the terms of the agreement; and
(ii) whether a party was required to either accept or reject the agreement on the terms and conditions presented by another party; and
(d) whether all or any of the parties received advice from, or were represented by, a lawyer, either at the time of the negotiations leading to the agreement or at any other relevant time.
...
[16] As is clear from s 43(2)(a) of the Act (above), any agreement to contract out of the Act must be in writing. Neither party in the present case produced any evidence that the parties had agreed in writing to contract out of the Act. Indeed, the vehicle offer and sale agreement dated 22 October 2018, signed by Motoreka (but not by Joel Hart Design) has the pre-printed clause excluding the provisions of the Act struck out by hand. Therefore, it is a simple matter to conclude that the parties have not contracted out of the Act.
[17] Accordingly the provisions of the Act apply in respect of this dispute.
Conclusion
[18] Joel Hart Design is a consumer and the Act applies to Joel Hart Design's purchase of the Toyota Hiace.
Issue two: Did the vehicle fail to comply with the guarantee of acceptable quality?
[19] Section 6(1) of the Act 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 Act, “goods” includes vehicles.
[20] "Acceptable quality" is defined in s 7 of the Act (as far as is relevant) as follows:
- 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.
[21] 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.
[22] The Trade Me listing for the vehicle stated it “is sold with a New WOF, Registered, Serviced and with a Warranty”.
[23] Despite the reassurance offered by the listing, when the vehicle was delivered to Mr Hart, at least one warning light was lit up on the dashboard. Mr Hart saw from the check sheet for the warrant of fitness obtained just prior to delivery that the following advisory had been given by the warrant of fitness inspector:
DPF filter light on
Engine check light on
Spare wheel not fitted correctly
[24] Mr Hart texted Motoreka about the warning light. He followed his text up with a phone call. Motoreka’s representative told Mr Hart that the wrong oil had been added to the engine, which was causing the light to illuminate. Motoreka advised that the incorrect oil would “burn itself off” within 100 km and he should keep driving the vehicle to allow that to occur.
[25] However, after 100 km, the warning light was still illuminated. Even after 300 km of driving the light still did not turn off.
[26] Motoreka arranged for the vehicle to be booked into Miles Toyota in Christchurch for assessment. Miles Toyota attempted to burn out the incorrect oil and returned the vehicle to Mr Hart. However, the light lit up again after about two days.
[27] Mr Hart returned the vehicle to Miles Toyota, which diagnosed that the DPF filter needed to be replaced. Miles Toyota told Mr Hart that a replacement filter could be sourced by it overnight.
[28] However, Motoreka did not want to pay for a replacement DPF filter. It first instructed Miles Toyota to remove the filter from the vehicle. Mr Hart intervened and said that he wanted the faulty filter to be replaced. After all, the vehicle had been supplied to him with a DPF filter, so Mr Hart felt entitled to insist on a replacement. Mr Hart was concerned that removing the filter may cause other faults or may infringe legal requirements concerning vehicle emissions, either now or in the future.
[29] Motoreka then said that it would prefer to order its own replacement DPF filter from overseas. Presumably this was cheaper. Motoreka told Mr Hart that the part could be obtained within two to three working days. Miles Toyota so apparently sceptical about whether Motoreka could obtain a replacement filter this quickly. Indeed, Miles Toyota's scepticism proved justified as the replacement DPF filter ordered by Motoreka took some five weeks to arrive. The delay was to cause Mr Hart and his partner Ms Ward, much inconvenience to their business and family life. As mentioned above, the vehicle has now gone into limp home mode. It is safe to drive it, but it only operates very slowly.
[30] Eventually, the replacement DPF filter arrived and was fitted to the vehicle. However, within 20 minutes of being installed, the warning light returned.
[31] By the time they brought Joel Hart Design's application to the Tribunal, Mr Hart and Ms Ward were not aware of whether Motoreka had made any plan for their vehicle's repair or if any further parts had been ordered, as they were having great difficulty getting Motoreka to even return their calls or texts.
[32] On 27 December 2018, Miles Toyota diagnosed that the particulate filter pressure was too low in bank one of the engine as a result of a pressure sensor malfunction. It recommended replacement of the DPF pressure sensor at a cost of $1,270.82, including labour and GST.
[33] Mark Mills, the CEO of Miles Toyota, also suggested that another new DPF filter may also need to be fitted at a further cost of $3,500 plus GST.
[34] However, Simon Malcolm, the service advisor who had assisted Mr Hart and Ms Ward with the repairs to their vehicle, indicated at the hearing that replacement of the DPF pressure sensor alone should be enough to fix the problem.
Stereo does not work
[35] In addition, the volume button and SD card is missing from the vehicle’s stereo, meaning that it does not work. The Trade Me listing for the vehicle advertised it as including a CD changer. Mr Hart said that the photographs accompanying the listing show the volume button on the stereo. Mr Hart made several attempts to try and get Motoreka to address these defects, but to no avail. The stereo remains broken.
Tribunal's assessment
[36] The vehicle has been diagnosed as requiring a new DPF pressure sensor. Until this part is installed in the vehicle, it will continue to operate in limp home mode. In addition, the stereo is not functioning because it lacks a volume button and an SD card.
[37] I do not consider that a reasonable consumer would regard the vehicle as being as free from minor defects, or as fit for purpose, as is acceptable considering its age, mileage and price. In particular, this was a relatively new and expensive vehicle. It is unacceptable for Motoreka to attempt to excuse the vehicle's defects on account of it being a secondhand vehicle. A reasonable purchaser of a secondhand vehicle that costs nearly $25,000 would undoubtedly regard the fact that, within three months of purchase, it cannot be driven other than in limp home mode, as unacceptable. Such a vehicle is not "fit for all the purposes for which goods of the type in question are commonly supplied" in terms of s 7(1)(a) of the Act.
[38] I have no hesitation in concluding that the vehicle did not comply with the guarantee of acceptable quality in s 6 of the Act due to both its faulty DPF system and non-functioning stereo.
Issue three: What remedy, if any, is Joel Hart Design entitled to?
[39] The available remedies in this case are set in s 18 of the Act, 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.
[40] The primary remedy under s 18 is set out in subs (2)(a) (above). It allows the consumer to require the supplier to remedy the failure within a reasonable time. This is what Joel Hart Design initially attempted to do. It gave Motoreka ample opportunity over several weeks to remedy the vehicle’s failure. Motoreka initially authorised Miles Toyota to diagnose the problem, then there was an unacceptable delay while Motoreka attempted to source its own part. This took five weeks, during which Joel Hart Design, and Mr Hart and Ms Ward and their family, were subjected to considerable inconvenience. On this ground alone, Joel Hart Design would have been entitled to reject the vehicle because Motoreka failed to remedy the failure within a reasonable time. I note that Joel Hart Design sent a text indicating it wished to obtain a refund for the vehicle as early as 9 November 2018. This was followed up with a more formal letter of rejection on 16 January 2019.
[41] Joel Hart Design is also entitled to reject the vehicle under s 18(2)(b)(ii) of the Act because Motoreka has not succeeded in remedying the failure within a reasonable time. This is clear from the fact that, even though the DPF filter has been replaced, the vehicle now needs a new DPF pressure sensor as diagnosed by Miles Toyota. This diagnosis was formalised in Miles Toyota’s quote dated 27 December 2018. Motoreka was fully aware of this diagnosis as both the quote and invoice for diagnostic work was provided to Motoreka. However, as late as 27 February 2019, in a submission to the Tribunal by Motoreka’s director, Racheal Cancian, Motoreka indicated that it believed it has done everything in its power to remedy the issues that Mr Hart has experienced with his Toyota Hiace.
[42] At the hearing, Motoreka’s Sales Manager, Gerald Taitua, claimed to possess a new DPF pressure sensor in his office which he was prepared to courier down to Mr Hart as soon as possible. This was the first time Mr Hart or the Tribunal had been given any information that Motoreka was prepared to assist. Why this offer had not been made earlier was not explained. Mr Taitua's reference to the replacement part was at odds with the written submission to the Tribunal by his employer's director, made only two days earlier. Moreover, there was no offer to fix the stereo.
Tribunal's assessment
[43] In my view, it is too late for Motoreka now to attempt to try and fix the problems with Mr Hart’s vehicle. At the time of his rejection of the vehicle, initially communicated on 9 November 2018 and confirmed in a further letter on 16 January 2019, Joel Hart Design was entitled to reject the vehicle. At that stage, Motoreka had failed to remedy the failure in respect of the DPF pressure sensor and the stereo within a reasonable time.
[44] Accordingly, I uphold Joel Hart Design's rejection of the vehicle. Joel Hart Design is entitled to a refund of the money it paid for the rejected vehicle.[7]
Conclusion
[45] Joel Hart Design's rejection of the vehicle is upheld. Motoreka must pay Joel Hart Design a total of $25,295 (including the $345 delivery charges for the vehicle) no later than 22 March 2019.
[46] As soon as Motoreka has paid this amount in full, Mr Hart must make the vehicle available for Motoreka to collect at its expense.
[47] If Motoreka fails to pay the full amount owing to Joel Hart Design by the deadline, Joel Hart Design has leave to request the Tribunal to consider making further orders regarding non-compliance.
J S McHerron
Adjudicator
[1] Nesbit v Porter [2000] NZCA 288; [2000] 2 NZLR 465 (CA).
[2] At [29].
[3] At [26].
[4] Dallimore Motors Ltd v Everett DC Auckland NP4945/98, 7 July 1999.
[5] At 15.
[6] At 15.
[7] Consumer Guarantees Act 1993, s 23(1)(a).
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2019/44.html