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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 19 May 2019
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IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
BETWEEN NARESH KUMAR
Purchaser
AND NZ TOPNOTCH AUTO IMPORT LTD T/A TOPNOTCH AUTOS
Trader
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S D Gregory, Assessor
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HEARING at Auckland on 26 March 2019
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APPEARANCES
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N Kumar, Purchaser
H Albert, Witness for the Purchaser
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J Wang, for the Trader
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DATE OF DECISION 10 April 2019
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
A Naresh
Kumar’s application to reject the vehicle is dismissed.
_________________________________________________________________
REASONS
Introduction
[1] On 2 June 2018, Naresh Kumar purchased a 2007 BMW 320i for $9,800 from NZ Topnotch Auto Import Ltd, trading as Topnotch Autos (Topnotch Autos). The vehicle had an odometer reading of approximately 49,000 km at the time of sale.
[2] Mr Kumar has now rejected the vehicle, claiming it has a serious defect that causes it to consume an excessive amount of oil and emit smoke from its exhaust.
[3] Topnotch Autos denies that the vehicle has a significant defect that causes it to consume an excessive amount of oil and submits that the vehicle has been as durable as a reasonable consumer would consider acceptable. In that regard, it says that Mr Kumar drove the vehicle approximately 25,000 km between the date of purchase and 14 February 2019, when he filed this application.
The Issues
[4] The issues requiring consideration in this case are:
- (a) Does the vehicle have a defect that breaches the acceptable quality guarantee in s 6 of the Act?
- (b) Has Topnotch Autos failed to rectify the fault within a reasonable time?
- (c) Has Mr Kumar lost the right to reject the vehicle?
- (d) What remedy is Mr Kumar 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 Mr Kumar’s subjective perspective.
[8] Mr Kumar alleges that the vehicle has a fault that causes it to consume an excessive amount of oil and emit smoke from its exhaust and other faults that have caused various warning lights to illuminate on the vehicle’s dashboard.
The oil consumption fault
[9] The evidence shows that the vehicle has a fault that causes it to consume an excessive amount of oil from shortly after purchase, and that the fault worsened, causing the vehicle to then emit grey smoke from its exhaust.
[10] Topnotch Autos advised that the vehicle was serviced before sale, meaning the vehicle’s oil levels were replenished in about early June 2018. The evidence then shows that the vehicle quickly consumed oil. Mr Kumar advised that the vehicle’s oil warning light illuminated shortly after purchase, and a photograph sent by Mr Kumar to Topnotch Autos on 18 July 2018 shows that the oil warning light had illuminated when the vehicle had travelled 52,418 km, about 3,400 km after purchase. Mr Kumar replenished the vehicle’s oil supply, but the oil warning light returned, and the vehicle continued to consume oil.
[11] In September 2018, Mr Kumar again complained to Topnotch Autos, so Topnotch Autos had the vehicle serviced by Mani Motors in New Lynn. That work did not rectify the oil consumption fault, and Mr Kumar again complained to Topnotch Autos in December 2018. By this stage, in addition to consuming an excessive amount of oil, the vehicle was also emitting smoke from its exhaust.
[12] The vehicle was then assessed by AR Auto Tech in New Lynn. I was provided a letter from “Arnold”, a mechanic at AR Auto Tech, which advises that he inspected the vehicle on 20 December 2018, and found smoke coming out of the exhaust. AR Auto Tech replaced the vehicle’s PCV valve.
[13] Jason Wong, a director of Topnotch Autos, submitted that the vehicle does not have any fault that breaches the acceptable quality guarantee. He submitted that the vehicle showed no signs of emitting smoke or of excessive oil consumption at the time of sale. He says that the vehicle was recently imported into New Zealand, and had been subject to stringent compliance testing, where emissions from the vehicles exhaust would have been examined. He says that there was no sign of smoke being emitted from the exhaust at that time. Mr Wong also submitted that the vehicle has been sufficiently durable.
[14] Notwithstanding Mr Wong’s submissions, I am satisfied that this vehicle has defects that breach the acceptable quality guarantee in s 6 of the Act. The evidence shows that the vehicle was consuming an excessive amount of oil shortly after purchase. Although Mr Kumar suggested that the vehicle was emitting smoke from the outset, I consider that the evidence shows that the vehicle did not begin emitting smoke from its exhaust until about December 2018, when Mr Kumar complained about that defect.
[15] Despite the evidence showing that these symptoms arose at different times, Mr Gregory, the Tribunal’s Assessor, advises that they are related. Mr Gregory advises that the symptoms — i.e. excessive oil consumption and smoke emitting from the exhaust — are consistent with the engine’s valve stem seals being perished, which can occur over time. Initially the perished valve stem seals will cause the vehicle to consume oil because the perished seals allow oil the enter the combustion chamber through the valve stems. Over time, the oil consumption will worsen as the seals continue to perish, to the extent that the vehicle then begins to emit smoke from its exhaust. That is because, during idle and deacceleration, more oil is drawn past the seals due to the increased vacuum in the intake manifold, so that the next time the accelerator is pushed excessive smoke is emitted out the exhaust system due to the amount of oil entering the combustion process.
[16] Although a reasonable consumer should have realistic expectations as to the quality and durability of a vehicle of this price, age and mileage, I am nonetheless satisfied that this vehicle has not been of acceptable quality as required by s 6 of the Act. The vehicle had a fault that became evident shortly after purchase, which caused it to consume an excessive amount of oil. That fault worsened, and vehicle began to emit smoke from its exhaust. I consider a reasonable consumer would not expect such a vehicle to have this fault so shortly after purchased.
The other alleged undiagnosed faults
[17] Mr Kumar also says that warning lights have illuminated on the vehicle’s dashboard. Mr Kumar says the lights relate to the vehicle’s brakes, radiator and airbags. Mr Kumar has not had the cause of these warning lights diagnosed and has not provided sufficient evidence to enable me to form a view as to the existence or significance of these faults. Accordingly, I am unable to conclude whether the vehicle has any other defect that may breach any of the Act’s guarantees.
Has Topnotch Autos failed to rectify the faults within a reasonable time?
[18] Under s 18(2)(b)(ii) of the Act, Mr Kumar will be entitled to reject the vehicle if Topnotch Autos has failed to rectify the vehicle’s faults within a reasonable time.
[19] Section 18 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.
[20] Mr Kumar first complained of an oil consumption fault in July 2018. He then returned the vehicle to Topnotch Autos in September 2018 for the oil consumption fault to be diagnosed and repaired. Topnotch Autos had the vehicle serviced, which was not a reasonable attempt at repair. That is because Topnotch Autos had serviced the vehicle before the vehicle was sold to Mr Kumar, meaning any oil consumption fault could not have been attributable to a lack of recent servicing.
[21] Mr Kumar again returned the vehicle in December 2018. AR Auto Tech then replaced the PCV valve, which Mr Gregory advises was a reasonable attempt to rectify the fault. It was nonetheless unsuccessful, and I consider that, by failing to rectify the fault after two attempts, Topnotch Autos has failed to rectify the fault within a reasonable time. Accordingly, I am satisfied that Mr Kumar is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act.
Has Mr Kumar lost the right to reject the vehicle?
[22] 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.
[23] Under s 20(1)(a) of the Act, Mr Kumar will lose the right to reject the vehicle if he 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.
[24] 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.
[25] Mr Kumar first became aware of a potential oil consumption fault in July 2018. He continued to drive the vehicle extensively. Mani Motors then serviced
the vehicle in September 2018, but that work did not rectify the fault, and the vehicle continued to consume oil. By this time, it should have been clear to Mr Kumar that the vehicle had an ongoing oil consumption problem. Nonetheless, Mr Kumar continued to use the vehicle, and did not reject it until February 2019, by which time Mr Kumar had driven more than 20,000 km since first becoming aware that the vehicle was consuming oil.
[26] Applying s 20(1)(a) of the Act, I consider that, by waiting until February 2019 to then reject the vehicle, which was more than four months after he ought reasonably to have been aware that the vehicle had a fault that Topnotch Autos had failed to rectify, Mr Kumar has failed to exercise his right to reject the vehicle within a reasonable time.
[27] This conclusion may seem harsh on Mr Kumar, 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, Mr Kumar knew of a recurring oil consumption fault by September 2018. By waiting until February 2019 to reject the vehicle, during which time he has had extensive use of the vehicle, I consider Mr Kumar simply took too long to exercise that right.
What remedy is Mr Kumar entitled to under the Act?
[29] Although he is not entitled to reject the vehicle, Mr Kumar is entitled to have the fault that causes the vehicle to consume an excessive amount of oil and emit smoke from its exhaust rectified within a reasonable time under s 18(2)(a) of the Act. In that regard, Topnotch Autos must rectify that fault within 15 working days of the date of this decision.
DATED at AUCKLAND this 10h day of April 2019
B.R. Carter
Adjudicator
[1] Nesbit v Porter [2000] NZCA 288; [2000] 2 NZLR 465 (CA).
[2] At [39].
[3] At [42].
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2019/69.html