Harden v Ingham Motor Holdings Limited t/a Mercedes-Benz Auckland - Reference No. MVD [2019] NZMVDT 45 (11 March 2019)

Last Updated: 19 April 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 495/2018 [2019] NZMVDT 045 BETWEEN SUSAN GWENDOLYN HARDEN Purchaser AND INGHAM MOTOR HOLDINGS LTD T/A MERCEDES-BENZ AUCKLAND Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S D Gregory, Assessor

HEARING at Auckland on 19 February 2019

APPEARANCES

S G Harden, Purchaser D Gray, Witness for the Purchaser

T Walmsley, for the Trader B Ferguson and J Visser, Witnesses for the Trader

DATE OF DECISION 11 March 2019

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DECISION OF THE TRIBUNAL

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1. Susan Harden’s application to reject the vehicle is dismissed.

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REASONS

Introduction

[1] On 11 October 2013, Susan Harden purchased a 2011 Mercedes-Benz E500 Avantgarde for $80,000 from Ingham Motor Holdings Ltd, trading as Mercedes-Benz Auckland (Mercedes-Benz Auckland). The vehicle had an odometer reading of 25,244 km at the time of sale.
[2] Ms Harden now seeks to reject the vehicle and obtain a refund of the purchase price. She says that the vehicle has had an undiagnosed fault since purchase, which causes the vehicle to intermittently fail to start (the starting fault). Ms Harden says that, despite many attempts by Mercedes-Benz Auckland, the starting fault remains unrectified.
[3] Mercedes-Benz Auckland says that, despite its attempts, it has not been able to diagnose a starting fault. Accordingly, it has declined to accept Ms Harden’s rejection of the vehicle.

The Issues

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

• (a) Does the vehicle have a fault that breaches the acceptable quality guarantee in s 6 of the Consumer Guarantees Act 1993 (the Act)?
• (b) Has Mercedes-Benz Auckland failed to repair the fault within a reasonable time?
• (c) Has Ms Harden lost the right to reject the vehicle?
• (d) What remedy, if any, is Ms Harden entitled to under the Act?

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

[5] 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.
[6] 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.

[7] 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 Ms Harden’s subjective perspective.
[8] Ms Harden says that the starting fault first occurred on 25 March 2014 and has intermittently recurred since. She says that on average, the vehicle has failed to start three or four times a year.
[9] Mercedes-Benz Auckland’s service records show that, between 25 March 2014 and November 2018, Ms Harden returned the vehicle to it on at least seven occasions complaining of the starting fault. Ms Harden submits that the evidence shows that the vehicle has an undiagnosed starting fault which breaches the acceptable quality guarantee in s 6 of the Act.
[10] Although Mercedes-Benz Auckland has replaced the vehicle’s battery four times, it submits that the vehicle has no such fault. Trevor Walmsley, the Dealer Principal of Mercedes-Benz Auckland, gave evidence that, despite performing several diagnostic scans, Mercedes-Benz Auckland has found no fault that affects the vehicle’s starting. Mr Walmsley also advised that Mercedes-Benz Auckland has not been able to replicate the fault while the vehicle has been in its possession. Mercedes-Benz Auckland provided service, diagnostic and repair records to confirm this.
[11] I also heard evidence from Johannes Visser, a diagnostic technician at Mercedes-Benz Auckland, and Briar Ferguson, a service manager at Mercedes-Benz Auckland, both of whom said that the company has not been able to identify any defect with the vehicle that might explain the symptoms complained of by Ms Harden. Mr Visser advised that Mercedes-Benz Auckland had found fault codes relating to low voltage readings when it assessed the vehicle. Mr Visser considered that those fault codes were most likely caused by either the battery age and/or by the vehicle’s pushbutton ignition being unintentionally left in stage one of the ignition cycle, which can cause the vehicle’s battery to drain.
[12] In respect of the evidence that the low voltage readings may have been caused by the age of the battery, Mercedes-Benz Auckland considers that the battery in this vehicle may last as little as two years before requiring replacement. Mr Gregory, the Tribunal’s Assessor, advises that a reasonable consumer should expect the battery in a vehicle of this age, make and model to last much longer than two years, and Mr Gregory considers it highly unlikely that each of the three new batteries installed in this vehicle by Mercedes-Benz Auckland would have naturally degraded to the extent that they required replacement. Instead, Mr Gregory considers it likely that an external factor was causing drain on those batteries, shortening their usual lives.
[13] In that regard, Mercedes-Benz Auckland suggested that Ms Harden may have been unintentionally leaving the ignition in stage one of the ignition cycle, which will cause the vehicle’s battery to drain. Ms Harden gave evidence that, at the suggestion of Mercedes-Benz Auckland, she removed the pushbutton ignition and instead only used the key to attempt to start the vehicle. Ms Harden says that after approximately six months, the vehicle again failed to start. Mercedes-Benz Auckland submitted that Ms Harden experienced no fault with the starting of the vehicle while the pushbutton start was disabled. On this point there was a conflict in the evidence between Ms Harden and Ms Ferguson. I prefer Ms Harden’s evidence. I found her to be a thorough and credible witness, and although I do not doubt the credibility of Ms Ferguson, I would have expected Mercedes-Benz Auckland to be able to provide records to corroborate the advice it says it gave to Ms Harden. This is particularly the case where Mr Walmsley advised me that his company is very thorough in its record-keeping. Given the absence of any documentation supporting Ms Ferguson’s contention, I prefer Ms Harden’s evidence.
[14] Although Mercedes-Benz Auckland says that it has not been able to find any fault consistent with the symptoms described by Ms Harden, I am satisfied that the symptoms described by Ms Harden and her partner, David Gray, shows that a starting fault existed. I accept their evidence that this vehicle has intermittently failed to start over a period of five years, and that despite attempts by Mercedes-Benz Auckland to diagnose and rectify the fault, the starting fault remains.
[15] Mr Gregory advises that it is not uncommon for an electronically sophisticated vehicle such as this to develop electrical faults that are not detected by diagnostic scanning. Mr Gregory advises that the absence of a fault code following a diagnostic scan is not evidence of the absence of a fault. Mr Gregory advises that, based on the evidence of Ms Harden and Mr Gray, the vehicle is likely to have an undiagnosed fault or series of faults in one of the vehicle’s electrical systems, which caused drain on the vehicle’s battery. Once the battery is sufficiently drained, the vehicle will fail to start.
[16] Accordingly, taking account of the evidence from Ms Harden, Mr Gray and Mercedes-Benz Auckland, and the advice from Mr Gregory, I am satisfied that the vehicle had an undiagnosed electrical fault, which caused it to intermittently fail to start.
[17] I am also satisfied that this fault breaches the acceptable quality guarantee in s 6 of the Act. Although this application was brought more than five years after purchase, I am satisfied that the evidence shows that the fault arose shortly after purchase, and certainly no later than 9 March 2014, about five months after purchase. I consider that a reasonable consumer would not expect a two-year-old Mercedes-Benz, which cost $80,000, to develop an intermittent starting fault so shortly after purchase.

Did Mercedes-Benz Auckland fail to repair the fault within a reasonable time?

[18] Under s 18(2)(b)(ii) of the Act, Ms Harden will be entitled to reject the vehicle if Mercedes-Benz Auckland has failed to rectify the vehicle’s faults within a reasonable time.
[19] Section 18 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.

[20] Ms Harden has returned the vehicle to Mercedes-Benz Auckland on at least seven occasions over a five-year period complaining of a starting fault. By November 2018, when Ms Harden rejected the vehicle, Mercedes-Benz Auckland had not rectified the fault. Although Mr Gregory advises that intermittent electrical faults can be extremely difficult to diagnose, I am satisfied that Mercedes-Benz Auckland had more than enough time to diagnose and rectify the fault. Accordingly, I am satisfied that Ms Harden is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act.

Has Ms Harden lost the right to reject the vehicle?

[21] 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.

[22] Under s 20(1)(a) of the Act, Ms Harden will lose the right to reject the vehicle if she 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.
[23] 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.

[24] In this case, Ms Harden first became aware of a potential starting fault in March 2014. I accept that, at that stage, Ms Harden did not have sufficient information in her possession to form a view as to whether the symptoms amounted to a fault. I also accept that, on the next two or three occasions that the fault recurred, Ms Harden also acted quite reasonably in returning the vehicle to Mercedes-Benz Auckland to give it an opportunity to diagnose and rectify the starting fault. As Ms Harden said in her evidence, she loved the vehicle and did not want to return it, but instead wanted to give Mercedes-Benz Auckland an opportunity to perform the necessary repairs.
[25] Although I fully understand why Ms Harden kept returning the vehicle to Mercedes-Benz Auckland, I consider that by February 2017, by which time Ms Harden had returned the vehicle to Mercedes-Benz Auckland on at least five separate occasions for the starting fault to be diagnosed and repaired, Ms Harden was aware that the vehicle had a fault, that she had given Mercedes-Benz Auckland a reasonable opportunity to rectify the fault and that Mercedes-Benz Auckland’s efforts to rectify that fault had not been successful.
[26] Applying s 20(1)(a) of the Act, I consider that, by waiting until November 2018 to then reject the vehicle, which was approximately 20 months after she ought reasonably to have been aware that the vehicle had a fault that Mercedes-Benz Auckland had failed to rectify, Ms Harden has failed to exercise her right to reject the vehicle within a reasonable time.
[27] This conclusion may seem harsh on Ms Harden, however, in Nesbit v Porter, the Court of Appeal considered that there are good policy grounds for requiring the right to reject goods to be exercised within a reasonable time. The Court of Appeal noted:[3]

... the Court should not lose sight of the burden which may be imposed upon a supplier by a lengthy delay in rejecting the goods during a time when their value is likely to depreciate, particularly where depreciation is increased by further usage, as it is for motor vehicles.

[28] Such a situation arose here. As set out above, I consider that Ms Harden ought reasonably to have rejected the vehicle in early February 2017, when it was again returned to Mercedes-Benz Auckland because of the starting fault. Ms Harden continued to use the vehicle for more than 21 months after that date, driving more than 40,000 km in that time. Given this extent of use, the vehicle will have depreciated in the time it took Ms Harden to reject the vehicle. In those circumstances, by waiting until November 2018 to reject the vehicle, I consider Ms Harden simply took too long to exercise that right.

What remedy, if any, is Ms Harden entitled to under the Act?

[29] Ms Harden says that the undiagnosed starting fault remains, although she has not provided any recent evidence of the existence of a fault because the vehicle has been in Mercedes-Benz Auckland’s possession. To the contrary, Mercedes-Benz Auckland has provided evidence to show that there is no ongoing fault. It has had possession of the vehicle since November 2018 and has regularly started and scanned the vehicle. It has identified no ongoing issues.
[30] Accordingly, because Ms Harden has not proven that the starting fault remains, she is entitled to no remedy under the Act and her application is dismissed. Having dismissed this application, I note that if the starting fault was to return, Ms Harden would be entitled to bring this matter back before the Tribunal for further consideration as to whether that defect should be rectified by Mercedes-Benz Auckland.

DATED at AUCKLAND this 11th day of March 2019

B.R. Carter
Adjudicator

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

[2] At [39].

[3] Above n 1, at [42].