Tyson v New Zealand Car Canterbury Ltd - Reference No. MVD 049/2019 [2019] NZMVDT 94 (6 May 2019)

Last Updated: 20 June 2019

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 049/2019
[2019] NZMVDT 94

BETWEEN MARGARET JEAN TYSON

Purchaser

AND NEW ZEALAND CAR CANTERBURY LIMITED

Trader

HEARING at Christchurch on 12 April 2019
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

R C Dixon – Assessor
APPEARANCES

M J Tyson, Purchaser (by AVL)
J Tyson, Husband of Purchaser (by AVL)
R J Lawton, Operations Manager of Trader

DATE OF DECISION 6 May 2019

___________________________________________________________________

DECISION OF THE TRIBUNAL

___________________________________________________________________

1. Margaret Tyson’s rejection of her Volvo XC90 is upheld as from 10 December 2018.
2. Mrs Tyson’s rights and obligation under the collateral credit agreement dated 13 September 2018 between her and New Zealand Car Canterbury Ltd (NZC)/UDC Finance Ltd (the Collateral Credit Agreement), are vested in NZC with effect from 10 December 2018.

100. NZC must refund Mrs Tyson all of her payments of principal under the Collateral Credit Agreement prior to 10 December 2018, as well as her payments of interest and principal from 10 December 2018 to the date of this decision. The parties must cooperate to obtain any necessary information from UDC Finance Ltd to calculate these sums.

4. The payments ordered in C above must be made no later than 20 May 2019, to a bank account nominated by Mrs Tyson.
5. Once the payments in C have been made in full, Mrs Tyson must make the vehicle available for NZC to collect promptly at its cost.
6. If there is any disagreement as to the calculation of the amounts payable as set out above, leave is granted to either party to refer that dispute to the Tribunal, with the unsuccessful party paying the Tribunal’s costs.
7. Mrs Tyson has leave to request a telephone conference no later than 22 May 2019 if NZC does not comply with the above orders and the Tribunal will consider taking further steps.

___________________________________________________________________

REASONS

Introduction

[1] Margaret Tyson wishes to reject the Volvo XC90 that she purchased from NZC on 13 September 2018. Within three months of the date of purchase of the car, its transmission needed to be replaced. The cost of the repair was met under Mrs Tyson’s mechanical breakdown insurance policy, with the excess paid by NZC. However, Mrs Tyson says she was pressured into getting the repairs done, even though she had previously told NZC that she wanted to reject the car.
[2] From this background, the following issues arise for determination:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality?
• (b) If so, was the failure of a substantial character?
• (c) What remedy, if any, is Mrs Tyson is entitled to?

Issue one: Did the vehicle fail to comply with the guarantee of acceptable quality?

[3] Section 6(1) of the Consumer Guarantees Act 1993 (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.
[4] "Acceptable quality" is defined in s 7 of the Act (as far as is relevant) 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.

[5] 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.
[6] The purchase price for the vehicle was $24,500. This price included on-road costs, a 36 month Provident Pinnacle Cover mechanical breakdown insurance policy, the installation of a tow bar and roof rack/side step, and a transmission service.
[7] Mrs Tyson took out a loan to pay for the vehicle from NZC and UDC Finance Ltd. The terms of the loan were set out in the Collateral Credit Agreement.
[8] After the transmission was serviced by Aceomatic Transmission Services, Mrs Tyson's husband collected the vehicle from NZC in Christchurch and drove it to Auckland. He noticed some clunking noises coming from the car on the way to the Picton ferry. Mrs Tyson reported that these noises worsened over the next few months.
[9] On 6 December 2018 (just under three months after the date of purchase), Mrs Tyson phoned NZC because she was concerned that the transmission might be faulty. NZC asked Mrs Tyson to contact the insurer, Provident Insurance, and follow its advice. NZC itself followed up with Provident to make sure that Mrs Tyson had contacted it.
[10] The vehicle was assessed by the Gearbox Factory which recommended that the transmission needed to be rebuilt. This work was completed in December 2018 and January 2019. An invoice dated 24 January 2019 from the Gearbox Factory to Provident Insurance records an insurance claim made on Mrs Tyson's behalf to Provident Insurance for these repairs in the sum of $5,191.30. The Tribunal was informed that this claim was approved and paid out by Provident Insurance. NZC met the cost of the insurance claim excess of $450. In total, the cost of the Gearbox Factory's work to rebuild the transmission was $5,641.29.
[11] While there was a lack of detail produced by either party as to the specific nature of the fault, the Tribunal’s Assessor Mr Dixon considers that based on the fact that the transmission has been rebuilt by the Gearbox Factory, and that Provident Insurance accepted the claim and has paid it in full minus the excess, it is likely that the transmission was defective and needed to be replaced or rebuilt. The Gearbox Factory’s invoice records that the vehicle’s odometer reading at the time of the repairs was 118,134 km. Thus, it can be seen that the transmission failed to the point of needing to be rebuilt approximately three months and 5,000 km after Mrs Tyson purchased the vehicle.

Tribunal’s assessment

[12] Despite its age (eight years old) and moderately high mileage (113,000 km at date of purchase), the vehicle was relatively expensive at $24,500 including accessories and insurance. The transmission in the vehicle has failed within a relatively short time after the date of purchase, namely within three months and after Mrs and Mr Tyson had only driven approximately 5,000 km in the vehicle. Having regard to these matters, in particular the purchase price, Mr Dixon and I do not think that this vehicle has been sufficiently durable. We do not think that a reasonable consumer fully acquainted with the state and condition of the vehicle, including that its transmission would require replacement or rebuilding within three months of purchase, would regard its durability to be acceptable. We also find relevant the fact that Mrs Tyson was sufficiently concerned about the vehicle's transmission, when deciding to purchase the vehicle, that she requested the transmission to be serviced prior to collection.
[13] The fact that no concerns were initially identified suggests that the transmission did not have a pre-existing fault. But this does not provide a defence to NZC. That is because the guarantee of acceptable quality includes a guarantee that a vehicle will be reasonably durable. That means that if a problem arises shortly after purchase, a vehicle can fail to comply with the guarantee of acceptable quality even though there was no fault at the time of purchase.

Conclusion – the vehicle failed to comply with the guarantee of acceptable quality

[14] I find that Mrs Tyson’s Volvo XC90 was not as durable as a reasonable consumer would regard as acceptable. I therefore uphold her claim that the vehicle failed to comply with the guarantee of acceptable quality in s 6 of the Act.
[15] I record that Mrs Tyson also claimed that the vehicle's tyres were defective and that its wheels were no correctly aligned. Given my ultimate finding in relation to the vehicle’s transmission, it is not necessary for me to make any findings regarding these other matters. I nevertheless record that Mrs Tyson produced insufficient evidence to substantiate her claim in respect of these other matters.

Issue two: Was the failure of a substantial character?

[16] Section 21 of the Act provides that a failure to comply with the guarantee of acceptable quality will be of a substantial character in the following situations:

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.

[17] In the present case, two of the criteria in s 21 (above) are established.
[18] First, in terms of s 21(a), I do not consider that a reasonable consumer fully acquainted with the nature and extent of the failure of Mrs Tyson’s vehicle's transmission, occurring so soon after purchase, would have acquired the vehicle. A reasonable consumer who knew that the vehicle's transmission would require substantial repairs totalling $5,641.29, so soon after purchase, is likely to have refrained from buying the vehicle.
[19] Second, in terms of s 21(c), a vehicle without a satisfactorily functioning transmission is “substantially unfit for a purpose for which goods of the type in question are commonly supplied”, namely, in the case of a vehicle, to be driven. A vehicle's transmission is a vital component, without which it cannot be driven as intended.
[20] Standing back, the total cost of the repairs to the transmission was more than 25 per cent of the underlying value of the vehicle as sold to Mrs Tyson, which was $19,765 before the cost of accessories, the transmission service and insurance was added on to make a total purchase price of $24,500.
[21] For a consumer to have to pay 25 per cent of the vehicle’s purchase price for repairs to the vehicle within three months of purchase is a strong indication that the vehicle has suffered a failure of a substantial character. The fact that the repair costs were covered under insurance is not relevant to the Tribunal’s assessment of this issue. In other words, just because the cost of the repairs has been reimbursed to Mrs Tyson, does not affect the Tribunal’s finding that there was a failure of a substantial character, or what remedy Mrs Tyson may be entitled to under the Act, a question to which I now turn.

Conclusion

[22] Accordingly, I conclude that the vehicle's failure to comply with the guarantee of acceptable quality was of a substantial character.

Issue three: What remedy is Mrs Tyson entitled to?

[23] The remedies available under the Act for a breach of the guarantee of acceptable quality are set out in s 18, 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.

[24] The High Court has described s 18 as establishing a hierarchy of remedies, under which a supplier is first given an opportunity to remedy the failure where it is capable of remedy. If the failure cannot be remedied or is of a substantial character, the consumer may reject the goods or obtain damages and compensation for any reduction in value below the price paid.[1]
[25] There is a tension between the right of a trader to remedy a failure and the right of a consumer to reject the vehicle, if the failure is of a substantial character. A trader cannot insist on its right to repair without paying regard to the consumer's possible right to reject. Indeed, s 21(a) of the Act (above) assumes that the trader will give the consumer adequate information about the nature of the failure, the repairs needed, and the likely cost of those repairs. The consumer needs to have that information in order to decide whether or not a right to reject exists and, if so, whether to exercise that right of rejection.
[26] The existence of this tension between the trader's right to repair and the consumer's possible right to reject means that traders need to be very careful to preserve the opportunity of a consumer to make a fully informed decision as to whether to reject a vehicle. That means that in any case where there is a reasonable possibility that a failure might be regarded as being of a substantial character, the trader needs to pause before progressing with repairs to ensure that the consumer has the information they need to decide whether to reject the vehicle, or alternatively to authorise repairs. It is not acceptable for traders, where there is a prospect of a failure being seen as one of a substantial character, to proceed with repairing the vehicle in the face of a reasonable prospect that the purchaser may wish to reject it. Traders who push ahead with repairs in this scenario risk having a purchaser’s application to reject the vehicle upheld, even after the repairs have been completed.
[27] Looking at what happened in the present case, NZC acknowledges that Mrs Tyson reported a problem with the transmission on 6 December 2018. It asked her to contact the insurer and follow its advice. On 10 December 2018, Mrs Tyson emailed Mr Lawton, NZC’s Operations Manager, and told him:

Based on information supplied and the amount of work required on the car I will be rejecting the vehicle.

[28] On the same day, Mr Lawton responded to Mrs Tyson to tell her that he had spoken with Provident Insurance’s representative who informed him that the vehicle was repairable and that the total cost would be lower than the insurance policy limit of $10,000. Mr Lawton stated that:

NZC do not accept your rejection of the vehicle. You have an exceptional mechanical breakdown insurance in place with your vehicle for unforeseen circumstances like this. The next step in the process of having your vehicle repaired is to have a claim lodged formally with Provident Insurance for repairs to get under way. The Gearbox Factory can do this on your behalf however I recommend you contact your Provident representative Nathan and communicate directly with him.

[29] Mrs Tyson was not happy with Mr Lawton’s response. She told the Tribunal that she was informed by the Gearbox Factory in the week before Christmas 2018 that the vehicle was going to take several more weeks to repair and that the total repair cost would be over $5,000. Based on that information, Mrs Tyson texted Mr Lawton on 24 December 2018 to confirm that she wanted to reject the vehicle as it was unable to be fixed in a reasonable time and she would need to purchase another vehicle because she could not wait another several weeks for it to be repaired.
[30] Mr Lawton did not reply to Mrs Tyson’s 24 December 2018 text. By that stage, he had left the country on a holiday. Before going away, he had switched his phone off. The repairs to the vehicle were eventually completed and it was returned to Mrs Tyson with the transmission reconditioned sometime in late January 2019.
[31] What happened in the present case is similar to the facts of a very early Consumer Guarantees Act case, Stephens v Chevron Motor Court Ltd.[2] In that case, the District Court was not satisfied that the consumer was given the opportunity to make an informed decision about whether or not the failure in her vehicle should be remedied. She had rejected the vehicle, but her rejection was refused. After that, the trader, by its agents, simply went ahead and attempted to remedy the failure. Judge MacDonald held:

The appellant can hardly be regarded as having chosen the option of repair when she did not know the extent of the repairs to be carried out. Furthermore she was not specifically requested to authorise their being carried out. Of course the fact that she was not consulted beforehand is perfectly understandable. The vehicle was still under warranty so the repairs would be carried out at no expense to the appellant and the actual repairs were not carried out by the respondent in any event. However, had she been consulted then I have no doubt that she would have chosen cancellation. It is consistent with her request for cancellation on 19 December and can readily be inferred by her subsequent refusal to uplift the vehicle and the events that followed.

[32] As I have mentioned, the present facts are very similar to those in Stephens. Mrs Tyson sought to reject the vehicle on 10 December 2018, which NZC refused. Following that, NZC tried to pressure Mrs Tyson into accepting a repair completed by the Gearbox Factory and paid for largely by Provident Insurance, with the excess being paid by NZC. The evidence shows, however, that Mrs Tyson had wanted to reject the vehicle, but was not given adequate information by either NZC or its agent the Gearbox Factory, in order to make a fully informed decision whether to reject the vehicle.
[33] As I have found that the failure to comply with the guarantee of acceptable quality was of a substantial character, I accept that Mrs Tyson was entitled to reject the vehicle. Despite the repairs having been completed, her right to reject the vehicle remained. Mrs Tyson should have been given the chance to reject the vehicle before the repairs were carried out.

Conclusion

[34] Accordingly, I uphold Mrs Tyson’s rejection of the vehicle as from 10 December 2018.
[35] I will vest Mrs Tyson’s rights and obligation under the Collateral Credit Agreement in NZC with effect from 10 December 2018.
[36] NZC must refund Mrs Tyson all of her payments of principal under the Collateral Credit Agreement prior to 10 December 2018, as well as her payments of interest and principal from 10 December 2018 to the date of this decision. The parties must cooperate to obtain any necessary information from UDC Finance Ltd to calculate these sums. The payments ordered above must be made no later than 20 May 2019, to a bank account nominated by Mrs Tyson. Once the payments have been made in full, Mrs Tyson must make the vehicle available for NZC to collect promptly at its cost.
[37] If there is any disagreement as to the calculation of the amounts payable as set out above, leave is granted to either party to refer that dispute to the Tribunal, with the unsuccessful party paying the Tribunal’s costs. In addition, Mrs Tyson has leave to request a telephone conference no later than 22 May 2019 if NZC does not comply with the above orders.

J S McHerron
Adjudicator

---

[1] Contact Energy Ltd v Jones [2009] NZHC 2631; [2009] 2 NZLR 830 (HC) at [125].

[2] Stephens v Chevron Motor Court Ltd [1996] DCR 1.