Clark v AutoIt Holdings Ltd t/a Zip Motors - Reference No. MVD 038/2019 [2019] NZMVDT 63 (3 April 2019)

Last Updated: 19 May 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 038/2019 [2019] NZMVDT 063 BETWEEN NICOLE WENDY CLARK Purchaser AND AUTOIT HOLDINGS LTD T/A ZIP MOTORS Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S D Gregory, Assessor

HEARING at Auckland on 19 March 2019

APPEARANCES

N W Clark, Purchaser C D Smale, Witness for the Purchaser

A Trifonov, for the Trader Y Yang, Witness for the Trader

DATE OF DECISION 3 April 2019

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DECISION OF THE TRIBUNAL

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1. Nicole Clark’s application is dismissed
   

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REASONS

Introduction

[1] On 19 July 2018, Nicole Clark purchased a 2010 BMW 320i for $13,990 from Autoit Holdings Ltd, trading is Zip Motors (Zip Motors). The vehicle had an odometer reading of 72,509 km time of sale.
[2] The vehicle had a pre-existing fault with its fuel injectors, which caused the vehicle to misfire. Ms Clark has had the vehicle repaired and has applied to the Tribunal, seeking orders that Zip Motors compensate her for the cost of repairs performed by Coombes Johnston BMW and the cost of fuel, which was drained from the vehicle.
[3] Zip Motors says that Ms Clark is not entitled to recover the cost of those repairs as she did not give it an opportunity to rectify the fault before incurring that cost.

The Issues

[4] The issues requiring consideration in this case are:

• (a) Does the vehicle have a fault that breaches the acceptable quality guarantee in s 6 of the Consumer Guarantees Act (the Act)?
• (b) If so, what remedy is Ms Clark 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 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 Clark’s subjective perspective.
[8] I am satisfied that the evidence shows that the vehicle had a pre-existing fuel injector fault, which breached the acceptable quality guarantee in s 6 of the Act. That fault became apparent on the day Ms Clark took possession of the vehicle when the vehicle intermittently lost power at low speeds and then began to shake, with the engine warning light illuminated.
[9] Ms Clark then contacted Alexey Trifonov, the Managing Director of Zip Motors, who travelled from Auckland to Hamilton to assess the vehicle. Mr Trifonov performed a diagnostic scan on the vehicle and considered that the symptoms experienced by Ms Clark may have been caused by her using 91 octane fuel in the vehicle. He recommended that Ms Clark drain the 91 octane fuel from the vehicle and replace it with 98 octane fuel. Once that was done, Mr Trifonov rescanned the vehicle, and found no further fault codes.
[10] Although Zip Motors thought that the symptoms experienced by Ms Clark may have been rectified by changing the vehicle’s fuel, the fault returned shortly afterwards while Ms Clark was in Rotorua.
[11] Ms Clark initially had the vehicle assessed by Birchall & Maunder in Rotorua, who made lengthy but unsuccessful attempts to diagnose and rectify the fault. The vehicle was then sent to Coombes Johnston BMW in Hamilton, which found the vehicle had a fault with its fuel injectors, which was causing it to run rich, which in turn was causing excessive carbon to build up in the engine. Coombes Johnston BMW considered that the internal components required cleaning by a method called “walnut blasting” and that the vehicle’s fuel injectors and spark plugs required replacement.
[12] Ms Clark provided photographs of the internal components of the vehicle’s engine and its spark plugs taken by Coombes Johnston BMW. Mr Gregory, the Tribunal’s Assessor, advises that those photographs show that the spark plugs are in poor condition due to the vehicle running rich, and that the cylinder head intake port and valve stems show a moderate build-up of carbon, which could cause the valves not to seat correctly. Mr Gregory advises that the photographs, together with Ms Clark’s description of the symptoms, are consistent with the diagnosis from Coombes Johnston BMW that the vehicle had faulty fuel injectors, which caused the vehicle to misfire.
[13] Based on the evidence presented by Ms Clark, and Mr Gregory’s advice, I am satisfied that the vehicle has not been of acceptable quality for the purposes of s 6 of the Act. The vehicle had a pre-existing fault with its fuel injectors that caused it to intermittently misfire. A reasonable consumer would not expect such a defect to be present in a vehicle of this price, age and mileage.

What remedy is Ms Clark entitled to under the Act?

[14] 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.

[15] Ms Clark seeks to recover $3,759.70, being the cost of repairs performed by Coombes Johnston BMW and $39.06, being the cost of the 91 octane fuel that was drained at the recommendation of Zip Motors.
[16] Ms Clark may only recover the cost of repairs performed by Coombes Johnston BMW if Zip Motors has failed, or refused, to perform the repair. In Acquired Holdings Ltd v Turvey, the High Court found that, under s 18(2) of the Act, where goods have failed to comply with the acceptable quality guarantee in s 6 of the Act (as the vehicle did in this case), the consumer must first give the supplier an opportunity to remedy the failure before they can have the fault repaired elsewhere and recover the cost.[1]
[17] Ms Clark says that she did give Zip Motors an opportunity to take responsibility for the diagnosis and repair of the vehicle’s faults, but it refused to do so by claiming that the fault was caused by the use of 91 octane fuel and by refusing to pay transportation costs to have the vehicle diagnosed.
[18] In support of this submission, Ms Clark says that she spoke with Mr Trifonov in late July 2018 after the fault had returned while the vehicle was in Rotorua. Ms Clark says she asked Mr Trifonov to pay for the vehicle to be transported to Zip Motors for the fault to be diagnosed and rectified. She says that Mr Trifonov refused to pay the cost of transporting the vehicle and suggested that the symptoms experienced by Ms Clark may have been caused by using 91 octane fuel in the vehicle.
[19] In an email dated 24 July 2018, Ms Clark then gave Zip Motors three options:

• (a) to tow the vehicle back to Auckland and rectify the vehicle’s faults at its cost;
• (b) to agree to have Ms Clark tow the vehicle to a mechanic in Rotorua to independently assess the vehicle, with Zip Motors covering the cost of any repairs; or
• (c) to refund the full purchase price and arrange for Zip Motors to collect the vehicle from Rotorua at its cost.

[20] Zip Motors agreed to the second option, and Ms Clark transported the vehicle to Birchall & Maunder for the vehicle to be assessed and repaired. Birchall & Maunder then conducted diagnosis and performed repairs at Zip Motors expense.
[21] This evidence satisfies me that, as at 24 July 2018, Zip Motors had not refused to rectify the vehicle’s faults. Although Zip Motors had suggested that the symptoms may have been caused using 91 octane fuel and disputed whether it should pay for the cost of transporting the vehicle to Auckland, it nonetheless agreed to have the vehicle assessed and repaired in Rotorua at its cost.
[22] Ms Clark says Zip Motors’ conduct amounted to a refusal to rectify the vehicle’s faults. She says she has taken advice from Consumer Protection, a branch of the Ministry of Business, Innovation and Employment. She says that she was advised that Zip Motors was obliged to pay transportation costs under the Act, and its refusal to do so means it has failed to comply with its obligations under the Act. Ms Clark also provided a link to the consumerprotection.govt.nz website, which states, among other things:[2]

It is your responsibility to return a faulty product. But if postage will be expensive or complicated, then the business must pay for it to be collected or posted.

[23] Ms Clark also pointed to s 22 of the Act, which relates to rejection of goods. Section 22 provides that, where the size of the goods means the goods cannot be returned without significant cost to the consumer, the supplier must collect the goods at its expense.
[24] I am not sure that s 22 of the Act assists greatly. Those rules apply only where the purchaser exercises its right to reject the vehicle and presuppose that the vehicle has a proven fault that breaches one of the Act’s guarantees. Ms Clark does not seek to reject the vehicle and, as at 24 July 2018, she had not established that the vehicle had any defect that breached any of the Act’s guarantees.
[25] I also disagree with the advice on the Consumer Protection website, and the other advice Ms Clark says she was given by that organisation. I think that advice is too simplistic and does not reflect the true nature of a supplier’s obligations under the Act.
[26] I acknowledge that the scheme of the Act requires the parties to engage constructively with each other to have any undiagnosed faults assessed and repaired if required. However, the Act does not impose an obligation on a supplier to pay transport costs where the alleged fault remains undiagnosed, as was the case here. Such an obligation has the potential of requiring suppliers to incur significant costs in circumstances where the vehicle may have no fault at all, or where the supplier has no liability for any fault that does exist (for example, if the fault was caused by the manner in which the vehicle was used).
[27] Certainly, I accept that where a vehicle has a proven fault that breaches any of the Act’s guarantee, or where the consumer has evidence to show that there is a real likelihood of such a fault existing, any refusal by a supplier to pay transportation costs to have the vehicle assessed and repaired could amount to a refusal to remedy the defect. However, a refusal by a supplier to pay transportation costs to have an undiagnosed fault assessed does not amount to such a refusal. That is because the obligation that a supplier has under s 18(2)(a) of the Act to remedy any failure within a reasonable time only arises once the consumer has shown that the vehicle has, or is likely to have, a defect that breaches any of the Act’s guarantees.
[28] In this case, it was Ms Clark’s responsibility to have the defect diagnosed, and if that diagnosis involved transporting the vehicle to Auckland for Zip Motors to perform the required assessment, then Ms Clark was liable for that cost. Ms Clark would have been entitled to recover the transportation cost from Zip Motors if a fault that breached the Act’s guarantees was found, but Zip Motors had no obligation to pay for the vehicle to be transported to Auckland for assessment to determine whether or not Zip Motors ought to have liability for any defects that may exist.
[29] Ultimately though, this discussion about Zip Motor’s obligation to pay for the transportation of the vehicle is somewhat moot, as the evidence shows that, on about 24 July 2018, Zip Motors agreed to have the vehicle assessed and rectified by Birchall & Maunder, meaning regardless of whether it was required to pay the transportation costs, it complied with any obligation it may have had under the Act by subsequently agreeing to pay for that assessment and repair.
[30] Zip Motors’ subsequent conduct also demonstrates a continuing intention to comply with its obligations under the Act.
[31] The repairs performed by Birchall & Maunder did not rectify the vehicle’s faults and on 29 August 2018, Ms Clark emailed Mr Trifonov, advising him that the vehicle’s problems remained, and that the vehicle was being sent to Coombes Johnston BMW for diagnosis. Ms Clark then advised Mr Trifonov of Coombes Johnston BMW’s findings.
[32] In an email dated 3 September 2018, Mr Trifonov advised that “to get your issue fixed, I need the car back to me to see what’s going on”. Mr Trifonov also said that he wanted a refund of the cost of the work performed by Birchall & Maunder. He also suggested that Ms Clark consider having Birchall & Maunder rectify the fault found by Coombes Johnston BMW, as it had already been paid for unsuccessful repairs.
[33] Ms Clark responded advising that she wanted Coombes Johnston BMW to perform the repairs and requested that Mr Trifonov contact Coombes Johnston BMW immediately to organise payment for the investigation and repairs. In an email dated 5 September 2018, Mr Trifonov responded saying, relevantly, “once again I am asking that I need to collect your car and get back to my place to find out the problem and work out the solution accordingly”.
[34] Correspondence then continued between the parties, which can be best summarised as Ms Clark advising Mr Trifonov that she wanted the vehicle repaired by Coombes Johnston BMW, and Mr Trifonov advising Ms Clark that he wanted to collect the vehicle himself to diagnose and rectify any faults. Despite Mr Trifonov’s continued insistence that he be allowed to collect the vehicle and perform the necessary diagnosis and repairs, Ms Clark then had the vehicle repaired by Coombes Johnston BMW.
[35] Against this background, I am satisfied that Zip Motors has not refused to rectify the vehicle’s faults. I consider that the email correspondence from 29 August 2018 onwards shows that Zip Motors was prepared to perform the necessary diagnosis and to repair any defects that it had liability for, at its cost.
[36] Ms Clark says that, by this time, she had lost confidence in Zips Motors and did not trust to perform the required diagnosis and repairs because of its earlier refusal to pay transportation costs and because it considered that Ms Clark may have caused the problems with the vehicle by using 91 octane fuel. Ms Clark was concerned that Zip Motors would simply conclude that the fault was caused by the use of 91 octane fuel and would deny liability for the required repairs.
[37] Notwithstanding that Ms Clark may not have trusted Zip Motors, she was obliged to give it a reasonable opportunity to rectify the vehicle’s faults before having those faults repaired elsewhere. Zip Motor’s earlier conduct did not amount to a refusal to repair, and I am satisfied that the evidence shows that Zip Motors continued to be prepared to comply with its obligations under the Act, but that Ms Clark simply would not allow it to.
[38] Consequently, although the vehicle had a fault that breached the acceptable quality guarantee in s 6 of the Act, Ms Clark is not entitled to recover the cost of the repairs performed by Coombes Johnston BMW because she did not give Zip Motors a reasonable opportunity to perform those repairs before instructing Coombes Johnston BMW to do so.
[39] Ms Clark is also not entitled to recover the cost of 91 octane fuel, which was drained from the vehicle. Ms Clark should not have used 91 octane fuel in the vehicle. Mr Gregory advises that the vehicle should only be used with 95 octane fuel or higher, and that 91 octane fuel can cause damage to the internal components of the vehicle’s engine. Mr Gregory advises that 91 octane fuel can cause detonation, which can damage the vehicle’s pistons and rings. Mr Gregory also advises that Mr Trifonov’s suggestion that Ms Clark drain the 91 octane fuel was sensible considering the damage that can be caused by using the wrong fuel.
[40] Ms Clark advised that she was not told by Zip Motors or anyone else that she needed to use higher octane fuel. I understood her to suggest that Zip Motors should have told her to use higher octane fuel.
[41] I do not consider that Zip Motors had an obligation to tell Ms Clark that the vehicle required 95 octane fuel. I consider that it is the consumer’s responsibility to make the necessary enquiries to determine what type of fuel should be used in the vehicle, in much the same way as they should make enquiries as to the type of oil, brake fluid or transmission fluid that should be used if they are putting those substances into the vehicle. Certainly, if Ms Clark had asked Zip Motors what fuel should be used, Zip Motors would have had an obligation to advise her to use 95 octane fuel or higher, but Ms Clark asked no such question.

Conclusion

[42] Although the vehicle had faults that breached the acceptable quality guarantee in s 6 of the Act, Ms Clark is entitled to no further remedy under the Act. Ms Clark’s application is therefore dismissed.

DATED at AUCKLAND this 3rd day of April 2019

B.R. Carter
Adjudicator

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[1] Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 (HC) at [11].

[2] Ministry of Business, Education and Employment “Faulty products” Consumer Protection <consumerprotection.govt.nz>.