Stevens v Adopt a Car Limited - Reference No. MVD 226/2020 [2020] NZMVDT 172 (15 October 2020)

Last Updated: 24 November 2020

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 226/2020
[2020] NZMVDT 172

BETWEEN STACEY MAREE STEVENS

Purchaser

AND ADOPT A CAR LIMITED

Trader

HEARING at Palmerston North on 18 September 2020
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator

R C Dixon – Assessor
APPEARANCES

S M Stevens, Purchaser
K Pakau, Support person for purchaser
J Jenkins, Witness for purchaser (by phone)
M L McQuade, Managing Director of Trader
L M Bayliss, Salesman for Trader
W Cleland, Witness for Trader (by phone)

DATE OF DECISION 15 October 2020

___________________________________________________________________

DECISION OF THE TRIBUNAL

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Adopt A Car Ltd must pay Stacey Stevens $2,435.35 no later than 29 October 2020.

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REASONS

Introduction

[1] Stacey Stevens seeks to recover repair costs she has paid in respect of the BMW X3 that she purchased from Adopt A Car Ltd for $9,990 on 9 June 2020. These repair costs, totaling $2,435.35, relate to the investigation and repair of various oil leaks and to replace a part of the drive shaft known as the drive shaft donut.[1]
[2] In the days before the hearing of this matter, Ms Stevens sought to amend her claim to include additional problems: an engine misfire and the re-illumination of the engine check light. Ms Stevens said that now she wants to reject her vehicle and receive a full refund. However, as these additional claims were only notified on the eve of the hearing, I considered that Adopt A Car did not have adequate time to respond to them and so I have not allowed Ms Stevens to include these matters within the current claim.
[3] At the hearing, Adopt A Car’s managing director, Michael McQuade, indicated he would be willing to assess Ms Stevens’ vehicle in relation to the engine misfire and engine check light issues and to remedy those problems as appropriate. Accordingly, I decided to proceed to consider Ms Stevens’ original application to seek reimbursement of the repair costs she has incurred in respect of her vehicle.
[4] From this background, the following issues arise for the Tribunal to determine:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality?
• (b) If so, what (if anything) is the appropriate remedy?

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

[5] 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.
[6] “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.

[7] 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.
[8] Ms Stevens told the Tribunal that soon after purchasing the vehicle:

• (a) its oil light and check engine light illuminated on the dashboard;
• (b) she noticed smoke coming from the engine bay; and
• (c) it was jolting excessively when she drove it.

[9] From the chronology, it appears that these problems arose within the first week of Ms Stevens purchasing the vehicle. She contacted Adopt A Car and was asked to drop the vehicle to them to have it assessed.
[10] Adopt A Car asked Transpec Services to assess the vehicle. It checked the engine for a misfire and replaced the number 1 coil. It then cleared the fault codes and road tested the vehicle. Transpec Services also checked the engine for oil leaks. Transpec Services’ workshop managing owner, Warren Cleland, reported to Mr McQuade that he found a number of potential oil leaks, some minor and some not so minor. Mr Cleland noted that the vehicle was still considered “safe to drive at this point until the leaks were rectified”.
[11] While Adopt A Car was happy to pay for the replacement coil, it was not initially prepared to repair the oil leaks.
[12] Ms Stevens considered that Adopt A Car should repair the oil leaks. So she took the vehicle to Manawatu BMW, which assessed the vehicle on 10 July 2020.
[13] Manawatu BMW inspected the vehicle for oil leaks and found leaks at the oil filter housing, the rocker cover gasket, the eccentric shaft seal, the breather hose and the servo motor seal. Manawatu BMW’s technician, Jason Jenkins, who gave evidence at the hearing, confirmed that the vehicle’s gaskets were very hard and brittle and were leaking oil onto the exhaust manifold, creating a potential fire risk.
[14] Mr Jenkins also found that the drive shaft donut had split and that this was causing the vehicle to have a “jolting feeling” on take-off. Mr Jenkins confirmed that he observed the split drive shaft donut without having to remove any parts from the vehicle, through a gap in the vehicle’s undertray.
[15] Mr Cleland directly contradicted Mr Jenkins’ evidence. He said that he was unable to see the split drive shaft donut without removing the undertray that covered the entire drive shaft. The relevance of this evidence is that, as Mr Cleland says, no part of the vehicle should be removed in order to inspect a component for warrant of fitness compliance. Mr Cleland raised this point in opposition to Mr Jenkins’ evidence that, on his assessment, he would have failed the vehicle for a warrant of fitness on the basis of the defective drive shaft donut
[16] Mr Dixon, the Tribunal’s Assessor, and I preferred Mr Jenkins’ evidence that he was able to inspect the faulty drive shaft donut without removing any vehicle parts. He explained to us how he did so and we found his explanation to be credible. As well, it appears that Mr Jenkins’ conclusion that he would have failed the vehicle for a warrant of fitness, was based on an assessment of its performance, as well as his visual inspection. He confirmed that the vehicle had a vibration similar to that which would be experienced if there were a faulty engine mount, and which was particularly noticeable on heavy acceleration.
[17] Ms Stevens presented Manawatu BMW’s report on the matters requiring repairs at an estimated cost of $2,307.33 to Adopt A Car for its consideration. By email dated 21 July 2020, Adopt A Car responded that following its own independent inspection of the vehicle it agreed there were oil leaks of differing severity. The major oil leak that was causing smoke to come from the engine was from the rocker cover gasket. Adopt A Car agreed to replace the leaking seals and rectify the oil leaks. However, Adopt A Car said that its independent mechanic had been unable to fault the drive shaft donut and said that it was “within condition for age and mileage” of the vehicle. So, while Adopt A Car was by now prepared to go ahead and replace the defective oil seals, it required Ms Stevens to agree that this would be “full and final repairs” before proceeding.
[18] Adopt A Car’s response was based on Mr Cleland’s assessment of the vehicle on 13 July 2020, in which he removed the undertray to inspect the drive shaft coupling. In his opinion, the part was not unsafe and was in reasonable condition given the age and mileage of the vehicle.
[19] A number of photographs of the drive shaft donut were produced for the Tribunal. Mr Dixon assessed these photographs and noted that the rubber of the donut had broken away from the metal inserts. Mr Dixon also observed rust fretting. This was consistent with Mr Jenkins’ evidence that he could see damage and elongation without removing the vehicle’s heat shield undertray.
[20] Mr Dixon advised, based on his review of the photographs, that the drive shaft donut appeared quite badly worn. Mr Dixon was not persuaded that this presented a safety issue, but he agreed with Mr Jenkins’ assessment that the donut was liable to fail in the near future. Mr Dixon was concerned about the rust that he observed in the metal parts inserted into the donut, which was an indicator of advanced wear. Mr Dixon considered that the wear on the donut that he observed was consistent with Mr Jenkins’ evidence of vibrations that were quite harsh under acceleration. Mr Jenkins said he could feel these vibrations on his feet when he accelerated in the vehicle. Mr Dixon also agreed that, because there was an observable vibration in the vehicle, which Mr Jenkins knew about given his observation of the worn drive shaft donut, his conclusion that he would not be prepared to pass the vehicle for a warrant of fitness was justified.

Tribunal’s assessment

[21] It was not disputed that the oil leaks as assessed by Manawatu BMW needed to be repaired. I accept Ms Stevens’ evidence that these oil leaks appeared very soon after she purchased the vehicle and were of sufficient severity to cause smoke to come out of the engine bay. Because of these oil leaks, I find that the vehicle failed to comply with the guarantee of acceptable quality.
[22] All of the leaks identified by Manawatu BMW need to be repaired to ensure that the vehicle that Ms Stevens purchased is of acceptable quality.
[23] Furthermore, having reviewed the evidence of Mr Cleland and Mr Jenkins, and having carefully considered Mr Dixon’s advice, I consider that the drive shaft donut was worn to a point where it too failed to comply with the guarantee of acceptable quality. There was insufficient evidence to conclude that this was a safety issue, but the wear on this part was bad enough that the drive shaft donut was likely fail at any time. The consequence of that would be that the vehicle would lose drive, which goes to the vehicle’s fitness for purpose. Again, this issue arose very soon after Ms Stevens purchased the vehicle. The odometer reading at the time of assessment of the drive shaft donut indicates that Ms Stevens had travelled less than 2,000 km in the vehicle since purchasing it.

Conclusion

[24] I conclude that the evidence clearly establishes a failure to comply with the guarantee of acceptable quality.

Issue two: What (if anything) is the appropriate remedy?

[25] The remedies available to a consumer where a vehicle fails to comply with the guarantee of acceptable quality 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.

[26] As provided in s 18(2)(b)(i) (above), where a supplier who has been required to remedy a failure refuses to do so, the purchaser has the option of having that failure remedied elsewhere and then recovering the reasonable costs of doing so from the supplier.
[27] This is exactly what has happened in the present case.
[28] While Adopt A Car agreed to repair the oil leaks, this was only on the basis that it would be a full and final settlement of Ms Stevens’ claim. In other words, to get the oil leaks repaired by Adopt A Car at its expense, she would have had to concede that she was not entitled to recover the repair costs in respect of the drive shaft donut.
[29] In my view, this amounts to a refusal by Adopt A Car to repair the vehicle.
[30] It was unfair to require Ms Stevens to concede her entitlement to have all of the repairs done. I put it to Mr McQuade that he could have offered to repair the oil leaks without prejudice to Ms Stevens’ right to claim the drive shaft donut repair costs in the Tribunal. That way, he could have obtained trade pricing for the oil leak repairs without conceding his right to test whether he was obliged to pay for the full repair costs. However, Mr McQuade was also entitled to test his “all or nothing” approach in the Tribunal, which is what he has done.
[31] Mr McQuade quite properly did not dispute that Manawatu BMW applied its expertise to the job and he accepted that it carried out its repairs in a professional and efficient manner. Mr McQuade did not criticise as excessive the eventual repair costs that Ms Stevens has now paid.
[32] For that reason, and on Mr Dixon’s advice, I confirm that I consider that the repair costs paid by Ms Stevens to have her vehicle’s oil leaks and drive shaft donut repaired, $2,435.35, were “reasonable” in terms of s 18(2)(b)(i) of the Act and that she is entitled to recover the full amount of those repair costs from Adopt A Car.

Conclusion

[33] Accordingly, I order Adopt A Car to pay Stacey Stevens $2,435.35 within 14 days of the date of this decision.

Post-script

[34] It is also necessary to mention that Ms Stevens alleged that she was not given a vehicle offer and sale agreement or consumer information notice in respect of this vehicle. I asked Adopt A Car to provide the Tribunal with a copy of these documents. It did so after the hearing, however they were not signed. Ms Stevens indicated that the reason they were not signed is that she was never presented with these documents at all.
[35] If this is correct, and I have no reason to doubt it, this is a serious breach of Adopt A Car’s obligations under the Motor Vehicle Sales Act 2003 and the Motor Vehicle Sales Regulations 2003, as well as the Consumer Information Standards (Used Motor Vehicles) Regulations 2008.
[36] These enactments require the sales and disclosure documents in respect of a vehicle to be retained by the trader and, importantly, there must be a written acknowledgement that the buyer has received a copy of the consumer information notice.[2] I did not receive a satisfactory answer from Adopt A Car as to why these documents were not retained in signed form. Absent such explanation, it seems that Ms Stevens’ assertion that she was not presented the documents at all may be correct. If this is so, then Adopt A Car is failing to comply with its basic obligations as a motor vehicle trader. Similar conduct that the Tribunal becomes aware of will be reported to the Commerce Commission for it to investigate.

J S McHerron
Adjudicator

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[1] The drive shaft donut is also known as a drive shaft flex disc or giubo. It connects the drive shaft to the transmission and provides a buffer to absorb drive line vibrations. It is a rubber disc which takes the torque coming out of the transmission and delivers a seamless transition to the drive shaft. Over time, the rubber breaks down due to the constant loading and unloading it receives. The rubber is designed to be the weakest link so the rest of the drive line lasts longer.

[2] Consumer Information Standards (Used Motor Vehicles) Regulations 2008, reg 8.