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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 20 June 2019
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IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
BETWEEN TISCOSKI RENOVATION LTD
Purchaser
AND INFINITY AUTO IMPORT LTD
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 7 May 2019
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APPEARANCES
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C Tiscoski and K Medvedeva, for the Purchaser
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G Li, for the Trader
T You, Witness for the Trader
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DATE OF DECISION 13 May 2019
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] On 14 January 2019, Tiscoski Renovation Ltd purchased a 2013 Smart Fortwo, registration number LYM 529, for $9,850 from Infinity Auto Import Ltd. The vehicle had an odometer reading of approximately 28,500 km at the time of sale. Tiscoski Renovation Ltd entered into a loan with Marac, a division of Heartland Bank Ltd (loan approval no 0000125370) to purchase the vehicle (the collateral credit agreement).
[2] Within two weeks of purchase, the vehicle developed faults with its clutch plate and clutch actuator. Tiscoski Renovation Ltd has now rejected the vehicle under the Consumer Guarantees Act 1993 (the Act), alleging that Infinity Auto Import took too long to rectify the vehicle’s faults. It seeks to recover all amounts paid in respect of the vehicle and to be relieved of its obligations under the collateral credit agreement.
[3] Infinity Auto Import accepts that the vehicle had a clutch fault, which it has now rectified. It says that Tiscoski Renovation is not entitled to reject the vehicle because the Act does not apply, as this is a business to business transaction. It also says that Tiscoski Renovation has exacerbated the damage to the clutch plate and clutch actuator by continuing to drive the vehicle when it should not have.
The Issues
[4] Against this background, the issues requiring consideration in this case are:
- (a) Does the Act apply to this transaction?
- (b) Did the vehicle have faults that breach the acceptable quality guarantee in s 6 of the Act?
- (c) Has Infinity Auto Import failed to repair the faults within a reasonable time?
- (d) What remedy is Tiscoski Renovation entitled to under the Act?
Does the Act apply to this transaction?
[5] Although it was not the main thrust of its defence, Infinity Auto Import noted that the Act may not apply to this transaction, because both parties were in trade and this was a business to business transaction.
[6] The fact that this was a business to business transaction does not mean that the Act is automatically excluded. Instead, parties who are in trade may only contract out of the Act if the provisions in s 43(2) of the Act, which sets out the rules for contracting out of the Act, are complied with:
43 No contracting out except for business transactions
(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.
[7] This transaction complies with many of the requirements in s 43(2) of the Act. For example:
- (a) The agreement was in writing — as evidenced by the Vehicle Offer and Sale Agreement dated 8 January 2019 (the VOSA).
- (b) The vehicle was supplied and acquired in trade. Both parties are in trade. Infinity Auto Import is a motor vehicle dealer and Tiscoski Renovation is a building company, and the vehicle was sold and acquired as part of the business activities of both companies.
- (c) The VOSA also contains an acknowledgement that the parties have agreed to contract out of the Act. In the fine print at the bottom of the VOSA is a provision that states:
“I agree that if I am acquiring this vehicle for business purposes in terms of sections 1 and 43 of the Consumer Guarantees Act 1993, the provisions of the Act will not apply accordingly”.
[8] Despite these factors, I am not satisfied that it is fair and reasonable that the parties should be bound by the exclusion clause.
Is it fair and reasonable that the parties are bound by the exclusion clause?
[9] When determining what is fair and reasonable for the purposes of s 43(2)(d) of the Act, I must consider the criteria set out in s 43(2A) of the Act.
The subject matter of the agreement
[10] The subject matter of the agreement is a Smart Fortwo. This vehicle is of a kind ordinarily acquired for personal, domestic or household use, which Tiscoski Renovation acquired principally to use in its business operation.
The value of the goods
[11] Tiscoski Renovation paid $9,850 for the vehicle. I consider this to be a neutral factor in my consideration of whether it is fair and reasonable that the parties should be held to have contracted out of the Act.
The respective bargaining power of the parties
[12] There was an imbalance in the bargaining power between Infinity Auto Import and Tiscoski Renovation. The agreement was in Infinity Auto Import’s standard form, and its terms do not appear to have been subject to negotiation. Further, Infinity Auto Import is a registered motor vehicle dealer, whereas Tiscoski Renovation does not have the same experience in dealing with, or negotiating, motor vehicle sale and purchase contracts.
Whether the parties received legal advice
[13] Neither party sought legal advice, although I acknowledge that it would be unusual for a buyer or seller to seek legal advice before purchasing a $9,850 motor vehicle. However, it is relevant to my assessment of fairness and reasonableness that Tiscoski Renovation received no advice, either from a lawyer or Infinity Auto Import, on the existence and effect of the exclusion clause.
[14] Infinity Auto Import knew of the existence and effect of the exclusion clause. It is contained in the fine print of the VOSA, which is the trader’s own standard form agreement. Tiscoski Renovation did not have this extent of familiarity with the content of the VOSA. Clodoado Tiscoski, on behalf of Tiscoski Renovation, says that the exclusion clause in the fine print was never pointed out to him. Further, there is a much clearer, and more obvious, exclusion clause in the body of the VOSA that the purchaser is required to sign to acknowledge that it agrees to contract out of the Act. Tiscoski Renovation did not sign that clause.
[15] In those circumstances, I am satisfied that there was a real risk that Tiscoski Renovation did not realise that it was agreeing to exclude the protections in the Act.
[16] Ultimately, the Act is consumer protection legislation. Tiscoski Renovation is a consumer — it purchased a vehicle of a kind ordinarily acquired for personal, domestic or household use. Given the imbalance in the respective bargaining power of the parties and the absence of clear evidence that Tiscoski Renovation has knowingly agreed to contract out of the provisions of the Act, Tiscoski Renovation is entitled to the protections contained within the Act. I am therefore satisfied that the parties have not validly agreed to contract out of the Act and that the protections of the Act apply in this case.
Did the vehicle have faults that breach the acceptable quality guarantee?
[17] 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.
[18] 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.
[19] 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 Tiscoski Renovation’s subjective perspective.
[20] About 10 days after Tiscoski Renovation purchased the vehicle, its clutch plate and clutch actuator failed. Mr Tiscoski advises that he first discovered the fault when he noticed a burning smell and the vehicle would not engage gear.
[21] The vehicle was returned to Infinity Auto Import, who sent the vehicle to Infinity Autoworks, an Auckland-based repairer. Infinity Autoworks initially diagnosed a fault with the clutch plate. After replacing the clutch plate, it then discovered that the vehicle had a faulty clutch actuator, which it also replaced.
[22] I heard evidence from Giang Li, a director at Infinity Auto Import and from Tao You, a director and technician at Infinity Autoworks. Both Mr Li and Mr You considered that the vehicle initially had a fault with its clutch (or friction) plate, which could have been quickly and inexpensively rectified by adjusting the clutch actuator. Mr Li and Mr You say that Tiscoski Renovation then caused more extensive damage to the vehicle’s clutch plate and clutch actuator by continuing to drive the vehicle when it should not have. Both say that the vehicle would have displayed a warning light, in the shape of a spanner, that should have caused Tiscoski Renovation to stop driving the vehicle and have the fault diagnosed and repaired before further damage occurred. Mr You also says that other symptoms, such as difficulty engaging gear, a burning smell or the vehicle being low on power may also have been present.
[23] Mr Tiscoski says that none of these symptoms were present in the vehicle before its clutch failed. He says that he saw no warning light in the shape of a spanner illuminated on the dashboard and that the only signs of a gearbox fault (ie a burning smell and difficulty engaging gear) occurred after the clutch had failed. Mr Tiscoski did say that when he test drove the vehicle, he thought it was low on power, but he was reassured by Infinity Auto Import that this lack of power was normal for this vehicle, which has a 960cc engine.
[24] Mr Gregory, the Tribunal’s Assessor, advises that, based on the evidence presented by the parties, it is likely that the clutch fault was caused by the vehicle’s clutch actuator failing, which in turn caused sudden and irreparable damage to the vehicle’s clutch plate and clutch lining. Mr Gregory considers it unlikely that the damage occurred in the manner suggested by Mr Li and Mr You. Mr Gregory advises that a fault of the nature described by Mr Li and Mr You would certainly make gear selection more difficult but is unlikely to cause the clutch to slip to the extent that irreparable damage was then caused to the clutch plate. Instead, Mr Gregory advises that a faulty clutch actuator is much more likely to have caused the rapid wear and sudden failure of the clutch plate found in this case, because the actuator controls the pressure and movement to the clutch assembly, and any reduction in pressure or compromised movement would lead to significant damage to the clutch plate.
[25] I also note that Autosparx Ltd, an Auckland based auto electrician who assessed this vehicle on behalf of Infinity Autoworks in March 2019, considered that the damage was caused by an initial fault with the clutch actuator, which caused the clutch plate to slip, damaging the clutch lining.
[26] Accordingly, on the basis of the evidence presented by the parties, together with advice I have received from Mr Gregory, I am satisfied that the damage to the vehicle’s clutch plate and clutch actuator was due to an underlying fault with the vehicle’s clutch actuator, and not by the manner in which the vehicle was used by Tiscoski Renovation. In that regard, I accept Mr Tiscoski’s evidence that he saw no symptoms of imminent clutch failure before the clutch failed.
[27] I am also satisfied that the fault with the clutch actuator and clutch plate breach of the acceptable quality guarantee in s 6 of the Act because the vehicle has not been sufficiently durable. I consider that a reasonable consumer would not expect a vehicle of this price, age and mileage to develop such a fault so shortly after purchase.
Did Infinity Auto Import fail to repair the fault within a reasonable time?
[28] Tiscoski Renovation claims that it is entitled to reject the vehicle under s 18(2)(b)(ii) of the Act because Infinity Auto Import has failed to repair the clutch fault within a reasonable time.
[29] 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.
[30] The vehicle was returned to Infinity Auto Import on about 24 January 2019 for its faults to be rectified. Those repairs were not completed until approximately 29 March 2019.
[31] Mr You, who oversaw the repairs to the vehicle, advises that he initially diagnosed a fault with the vehicle’s clutch plate. To rectify the fault, he ordered a new clutch from Mercedes-Benz North Shore, which took about two weeks to arrive from Singapore. He then installed the new clutch plate and discovered that the repair did not rectify the fault. Mr You then contacted Autosparx Ltd to assist in the diagnosis of the fault. Mr You says that Autosparx Ltd was busy at the time and took about two weeks to inspect the vehicle. Autosparx Ltd considered that the travel sensor inside the clutch actuator was faulty. Mr You then ordered parts from Mercedes-Benz Auckland, which took about two weeks to arrive. Those parts were installed, and the repair was completed by 29 March 2019.
[32] Against this background, Infinity Auto Import says that the repair was conducted within a reasonable time.
[33] I do not agree. Although I acknowledge that some repairs can take time to diagnose and that parts for secondhand European vehicles can take some time to source, I consider that this repair nonetheless took too long.
[34] Mr Gregory advises that the diagnosis and repair was not a difficult task and that, even taking account of the delays in sourcing replacement parts from Singapore, the required repair should have taken no longer than one month. I accept Mr Gregory’s advice and consider that two factors led to this repair taking longer than was reasonable.
[35] First, Infinity Autoworks initially failed to identify the fault with the clutch actuator when it ought reasonably to have done so. Mr Gregory considers that a competent repairer would also have carefully assessed the clutch actuator when performing the initial diagnosis of the fault. I am not satisfied that Infinity Autowork’s initial diagnosis of the fault was sufficiently thorough, because it did not identify the fault with the clutch actuator. Second, after the clutch plate was replaced, no work was performed on the vehicle for two weeks while Infinity Autoworks waited for Autosparx Ltd to inspect the vehicle. While I accept Mr You’s evidence that Autosparx was busy, I do not consider it reasonable that a consumer wait that period of time for a vehicle to be assessed by an auto electrician.
[36] Accordingly, when I take account of the length of time taken and the reasons for the delays in diagnosing and rectifying the vehicle’s faults, I am satisfied that Infinity Auto Import failed to rectify the defects within a reasonable time.
What remedy is Tiscoski Renovation entitled to under the Act?
[37] Under s 18(2)(b)(ii) of the Act, Tiscoski Renovation is therefore entitled to reject the vehicle because Infinity Auto Import failed to rectify the clutch fault within a reasonable time. Under s 23(1)(a) of the Act, Tiscoski Renovation is entitled to recover any money paid or other consideration provided for the vehicle from Infinity Auto Import. In that regard, Tiscoski Renovation is entitled to recover:
- (a) $754.53 — being the capital component of all payments made by Tiscoski Renovation under the collateral credit agreement as from the date the collateral credit agreement was entered into until 26 March 2019 (the date it rejected the vehicle by filing its application with the Tribunal); and
- (b) $478.57— being all payments of principal and interest made by Tiscoski Renovation under the collateral credit agreement from 27 March 2019 until the date of this decision.
[38] Tiscoski Renovation is also entitled to have its ongoing rights and obligations under the collateral credit agreement with Marac assigned to Infinity Auto Import. The relevant provisions are set out in s 89(2) and (3) of the Motor Vehicle Sales Act 2003 (the MVSA), which state:
89 Jurisdiction of Disputes Tribunal
...
(2) A Disputes Tribunal may order that the rights and obligations of the buyer of a motor vehicle under a collateral credit agreement vest in a motor vehicle trader if—
(a) the collateral credit agreement is associated with the contract for the sale of that motor vehicle; and
(b) the motor vehicle trader is a party to that contract for sale; and
(c) either one of the following circumstances applies:
(i) the buyer exercises the right conferred by the Consumer Guarantees Act 1993 to reject that motor vehicle and, on a claim by the buyer under section 47(1) of that Act, the Disputes Tribunal orders the motor vehicle trader to refund any money paid, or other consideration provided, for that motor vehicle; or
(ii) the Disputes Tribunal finds that the buyer has suffered, or is likely to suffer, loss or damage by the conduct of the motor vehicle trader that constitutes, or would constitute, any of the conduct referred to in section 43(1) of the Fair Trading Act 1986 and the Disputes Tribunal makes an order under section 43(2) of that Act declaring the whole or any part of the contract for sale to be void.
(3) For the purposes of subsection (2), collateral credit agreement, in relation to a contract for the sale of a motor vehicle, means a contract or agreement arranged or procured by the motor vehicle trader or the buyer for the provision of credit by a person other than by the motor vehicle trader to enable the buyer to pay the price reserved by the contract for sale in respect of the motor vehicle.
[39] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement are all met in this case:
- (a) the agreement between Tiscoski Renovation and Marac is a collateral credit agreement for the purposes of s 89(2) of the MVSA. The agreement was arranged or procured by Tiscoski Renovation for the provision of credit by Marac to enable Tiscoski Renovation to purchase the vehicle;
- (b) Infinity Auto Import sold the vehicle to Tiscoski Renovation, so it is a party to the contract to purchase the vehicle; and
- (c) Tiscoski Renovation has exercised the right conferred by the Act to reject the vehicle, and the Tribunal has ordered that Infinity Auto Import must refund any money paid, or other consideration provided, for that vehicle.
[40] Accordingly, under s 89(2) of the MVSA, all of Tiscoski Renovation’s rights and obligations under the collateral credit agreement are assigned to Infinity Auto Import from the date of this decision.
DATED at AUCKLAND this 13th day of May 2019
B.R. Carter
Adjudicator
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2019/98.html