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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 1 February 2021
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BETWEEN ROBERT KHAN
Applicant
AND NOVA MOTORS PENROSE LTD
Respondent
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Haynes, Assessor
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HEARING at Auckland on 25 November 2020
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APPEARANCES
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R Khan, Applicant
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V Odintsov and E Kuklina, for the Respondent
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DATE OF DECISION 8 December 2020
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] Robert Khan wants to reject the 2008 Audi A3[1] he purchased for $9,100 from Nova Motors Penrose Ltd in January 2020. The vehicle now has a serious transmission fault, and Mr Khan has obtained an estimate of more than $16,000 to replace the transmission. Mr Khan seeks a refund of the purchase price, together with other costs incurred. Nova Motors agrees that the transmission now requires replacement but denies that it should be liable to refund the purchase price or replace the transmission.
The Issues
[2] The issues requiring the Tribunal’s consideration in this case are:
- (a) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
- (b) Are the vehicle’s defects a failure of a substantial character?
- (c) What remedy is Mr Khan entitled to under the CGA?
Issue 1: Has the vehicle been of acceptable quality?
[3] Section 6 of the CGA imposes on suppliers and manufacturers of consumer goods a guarantee that the goods are of acceptable quality. Section 2 of the CGA defines “goods” as including vehicles.
[4] The expression "acceptable quality" is defined in s 7(1) 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] 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 CGA 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 Khan’s subjective perspective.
[6] On 30 August 2020, when the vehicle’s odometer reading was about 58,889 km,[2] Mr Khan noticed that the vehicle was jerking and that the gear shift was “playing up”. He had the vehicle assessed by his local mechanic who considered that the vehicle had a transmission fault. Mr Khan then performed research and found that the manufacturer had issued a recall for the vehicle due to concerns about its mechatronic unit.
[7] Mr Khan then contacted Southern Motor Group ― a Dunedin based Audi franchise ― which assessed the vehicle on about 21 September 2020 to determine whether the symptoms experienced by Mr Khan were caused by a fault with the mechatronic unit.
[8] Southern Motor Group considered that the vehicle had a fault with its transmission, rather than its mechatronic unit and it has since removed the mechatronic unit and inspected the inside of the transmission. It found “a lot of metal filings” inside the transmission and “large metal flakes” in the transmission fluid. Southern Motor Group considers that the gearbox is “failing internally” and requires replacement, at an estimated cost of $16,074.65.
[9] Mr Khan has also provided colour photographs of the transmission taken by Southern Motor Group. Those photographs clearly show metal filings on the pick up in the transmission pan, which is consistent with an internal bearing or clutch pack failure.
[10] Nova Motors Penrose Ltd does not dispute that the vehicle now has a damaged transmission, but it considers that the vehicle was of acceptable quality and that it had been sufficiently durable. It remains prepared to assist Mr Khan but denies that it should have responsibility under the CGA for a fault that occurred seven and a half months after purchase, by which time Mr Khan had driven about 9,500 km in the vehicle.
The Tribunal’s assessment
[11] The evidence is clear that the vehicle now has irreparable transmission damage, and that the transmission will require replacement.
[12] In determining whether the vehicle has then been of acceptable quality for the purposes of s 6 of the CGA, I must take account of the fact that the purchaser of a $9,100,12-year-old Audi A3 vehicle should understand that defects that would not be present in a new vehicle may arise. The purchaser should also understand that the protections in s 6 of the CGA are not indefinite, and last only as long as is reasonable in the circumstances of each case, taking account of the factors set out in s 7(1)(f) to (j) of the CGA.
[13] In this case, although the vehicle was 12 years old and its purchase price of $9,100 was a significant reduction on the price of a new vehicle, I am nonetheless satisfied that the low mileage of this vehicle relative to its age (it had travelled about 4,100 km per year since first registered) would have reassured a reasonable consumer that it was unlikely that the vehicle would develop any significant mechanical faults in the foreseeable future. Given this low mileage, a reasonable consumer would not have expected the vehicle’s transmission to fail and require complete replacement only seven and a half months later, after about 9,500 km of driving.
[14] In those circumstances, I am satisfied that the vehicle has not been as durable as a reasonable consumer would consider acceptable, in breach of s 6 of the CGA.
Issue 2: Are the vehicle’s defects a failure of a substantial character?
[15] A failure of a substantial character is defined in s 21 of the CGA:
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.
[16] The transmission is an essential component of the vehicle’s operation and will be expensive to repair. According to an estimate from Southern Motor Group, a new transmission will cost more than $16,000 to purchase and install, and Mr Haynes, the Tribunal’s Assessor, advises that a replacement secondhand transmission is likely to cost between $4,500 and $5,000.
[17] Applying s 21(a) of the CGA, I am satisfied that the transmission fault is a failure of a substantial character because it is such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle.
Issue 3: What remedy is Mr Khan entitled to under the CGA?
[18] The relevant remedies are set out in s 18 of the CGA, which 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.
[19] Under s 18(3)(a) of the CGA, Mr Khan is entitled to reject the vehicle because the transmission fault is a failure of a substantial character. Under s 23(1)(a) of the CGA, he is therefore entitled to a refund of all amounts paid to Nova Motors in respect of the vehicle, being the purchase price of $9,100.
[20] Mr Khan seeks to recover other costs, specifically:
- (a) $871 ― being the cost of renting a car from USAVE Car & Truck Rentals in Dunedin between 7 and 28 September 2020;
- (b) an unspecified amount for the cost of storing the vehicle; and
- (c) compensation for time spent dealing with Nova Motors, preparing his claim and attending the hearing ― calculated at $35 per hour.
[21] Section s 18(4) of the CGA applies to the recovery of such costs and under that section, costs are only recoverable if they are a reasonably foreseeable consequence of the vehicle’s failure to comply with the guarantee of acceptable quality.
Rental car costs
[22] I am satisfied that the cost of renting a car from USAVE is a reasonably foreseeable consequence of the vehicle’s failure to comply with the guarantee of acceptable quality. The vehicle could not be driven because of the transmission fault and Mr Khan had asked Nova Motors for assistance. It declined, so Mr Khan was entitled to incur costs to secure alternative transportation.
[23] Mr Khan seeks to recover the cost of renting the vehicle between 7 September and 28 September 2020. I decline to award that whole amount to Mr Khan. Mr Khan spends his time between Auckland and Dunedin and he was in Dunedin for only 11 days over that time, and I do not consider it appropriate to require Nova Motors to compensate Mr Khan for the days he did not need the rental car. Mr Khan is therefore entitled to recover $456.24, being the proportionate cost of 11 days rental.
Storage costs
[24] In Mr Khan’s application, he claimed storage costs of $40 plus GST per day. During the hearing he said that he had not paid those costs, that the per day charge may be less and that those costs may not ever become payable, depending on the outcome of this case.
[25] Because those costs have not yet been incurred, are uncertain and may never be incurred, I cannot make any orders requiring Nova Motors to pay unincurred storage costs. If Mr Khan does ultimately incur storage costs, he may be able to recover any reasonably incurred costs under the CGA, but he will need to bring a separate claim ― either in this Tribunal or the Disputes Tribunal ― to seek to recover those amounts.
Time spent
[26] In his application, Mr Khan also advised that he had to stop work for two days and forfeit his wages for those days to deal with Nova Motors and to speak with “Consumer Protection, CAB and community law office”. He seeks to recover $560 (at an hourly rate of $35) for that time. During the hearing Mr Khan also sought compensation for the time spent attending the hearing.
[27] Mr Khan has not provided evidence to corroborate his claim that he had to forfeit wages in dealing with Nova Motors, seeking advice, preparing his claim and attending the hearing. He provided no bank account statements, payslips or other evidence from his employer to prove that he had lost those wages. In the absence of that evidence, I cannot be satisfied that Mr Khan has actually suffered that loss or that Nova Motors should be required to compensate him for that amount.
Conclusion
[28] The vehicle has not been of acceptable quality for the purposes of s 6 of the CGA, and the vehicle’s significant transmission fault is a failure of a substantial character. Mr Khan’s rejection of the vehicle is therefore upheld, and Mr Khan is entitled to recover the purchase price, together with the reasonable cost of renting a car while the vehicle could not be used.
[29] The Tribunal therefore orders that Nova Motors shall, within 10 working days of the date of this decision, pay $9,556.24 to Mr Khan. Mr Khan must then make the vehicle available to be collected by Nova Motors, at its expense.
DATED at AUCKLAND this 8th day of December 2020
B.R. Carter
Adjudicator
[1] Registration number MRB720
[2] Mr Khan provided a photograph taken on 26 November 2020, which shows an odometer reading of 58,889 km.
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2020/223.html