Paisley v Scooteria Ltd - Reference No. MVD [2020] NZMVDT 86 (25 June 2020)

Last Updated: 20 July 2020

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 089/2020 [2020] NZMVDT 086 BETWEEN JAMES DAVID PAISLEY Purchaser AND SCOOTERIA LTD Trader

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Haynes, Assessor

HEARING at Auckland on 18 June 2020

APPEARANCES

J D Paisley, Purchaser (by audio-visual link)

E Chang and R Lee, for the Trader

DATE OF DECISION 25 June 2020

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DECISION OF THE TRIBUNAL

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1. James Paisley’s application to reject the motorcycle is dismissed.
2. Scooteria Ltd shall, within 15 working days of the date of this decision, rectify the gearbox fault that affects the operation of the motorcycle’s sixth gear.

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REASONS

Introduction

[1] James Paisley wants to reject the 2001 Honda CB400-SFV he purchased for $7,200 from Scooteria Ltd in February 2020 because the motorcycle has a pre-existing gearbox fault.
[2] Scooteria Ltd agrees that the motorcycle has a fault with its gearbox. In its defence it says that this transaction was a private sale and that the damage to the gearbox may have been caused by the way Mr Paisley has ridden the motorcycle. It has also counterclaimed, seeking to recover $2,234.79 in costs and losses caused by an alleged breach of contract by Mr Paisley.

The issues

[3] The issues requiring the Tribunal’s consideration are:

• (a) Was this a private sale?
• (b) Has the motorcycle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
• (c) Are the motorcycle’s faults a failure of a substantial character?
• (d) What remedy is Mr Paisley entitled to under the CGA?
• (e) Can Scooteria counterclaim?

Issue 1: Was this a private sale?

[4] Eva Chang and Ron Lee, who appeared for Scooteria Ltd, say that this was a private sale. They say that Scooteria Ltd initially offered the motorcycle for sale on Trade Me, but Mr Paisley contacted them and asked to purchase the vehicle privately and “outside of Trade Me”. Ms Chang says that she discounted the motorcycle’s price by $600 to reflect that the sale was being conducted privately. Ms Chang and Mr Lee also advise that the purchase price was paid to their personal bank account.
[5] Mr Paisley says that he never suggested that this be a private sale. He says he simply suggested that the transaction occur outside of the Trade Me platform to allow Scooteria Ltd to avoid paying success fees to Trade Me, which he hoped would result in the price being lower. Mr Paisley says that he proceeded on the belief that he was purchasing the motorcycle from a trader.
[6] I am satisfied that this motorcycle was sold by Scooteria Ltd. Scooteria Ltd is a registered motor vehicle trader and it advertised the motorcycle for sale on Trade Me under the username “Scooteria”. I also accept Mr Paisley’s evidence that he thought he was dealing with Scooteria Ltd and never asked for the transaction to be treated as a private sale. In their minds, Ms Chang and Mr Lee may well have thought that Mr Paisley’s request that the transaction occur outside of Trade Me to avoid success fees converted the transaction to a private one, but the evidence does not show that. In substance the transaction continued to be a transaction between a consumer and a motor vehicle trader.

Issue 2: Has the vehicle been of acceptable quality?

[7] 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.
[8] 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.

[9] 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 gearbox fault

[10] The evidence shows that the vehicle has an undiagnosed internal gearbox fault.
[11] Mr Paisley says that the day after he took possession of the motorcycle, he noticed that it had a “bad sound and vibration” in sixth gear. Scooteria Ltd then arranged for the vehicle to be inspected by Euromarque Holdings Ltd in Christchurch, which found that the motorcycle “jumps out of 6th gear under light acceleration”. Euromarque removed the clutch cover and clutch to inspect the gear mechanism and could find no fault with those components. It considers that there is likely to be an internal issue within the gearbox, such as a bent shift fork and/or bent dog on the gearbox gears.
[12] Mr Haynes, the Tribunal’s Assessor, advises that the Euromarque diagnosis is consistent with the symptoms described by Mr Paisley. Mr Haynes advises that the shift fork and dog gear hold the selected gear, and if the shift fork is bent or the dog gear is worn, the gearbox will not hold the selected gear. Mr Lee, who is a Director of Scooteria Ltd and a motorcycle mechanic, also agrees that the symptoms described by Euromarque are consistent with an internal gearbox fault.

The fault was not caused by Mr Paisley

[13] Ms Chang and Mr Lee say that the gearbox fault may have been caused by the way Mr Paisley rode the motorcycle. They allege that he is an inexperienced rider, who may have caused the gearbox damage when changing roughly between gears. In support of this submission, Ms Chang and Mr Lee say that the motorcycle was assessed by VTNZ and ridden by Mr Lee before it was sold, and no fault with the sixth gear was found before the motorcycle was delivered to Mr Paisley. They therefore suspect that Mr Paisley has caused the internal gearbox damage.
[14] I am satisfied that Mr Paisley did not cause the damage to the gearbox. Graeme Powell, the mechanic from Euromarque who inspected the motorcycle, gave evidence and advised that the suspected damage to the shift fork and/or dog gear would have been developing for a long period of time and would not have been caused during the short time in which Mr Paisley used the motorcycle. Mr Haynes agrees with Mr Powell’s assessment, and advises that even if Mr Paisley had shifted roughly between gears as alleged, the internal gearbox fault could not have been caused during his ownership.

The Tribunal’s conclusion

[15] The motorcycle had a pre-existing defect with its gearbox and has not been of acceptable quality for the purposes of s 6 of the CGA. A reasonable consumer purchasing a motorcycle of this age and mileage would not expect a fault of this nature to be present.

Issue 3: Is the fault a failure of a substantial character?

[16] Mr Paisley may reject the vehicle if it has a fault that amounts to a failure of a substantial character. A failure of a substantial character is defined in s 21 of the CGA:

21. 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] I am not satisfied that the gearbox fault amounts to a failure of a substantial character. Although a reasonable consumer would not expect such a fault to be present at the time of purchase, the fault is not so significant that a reasonable consumer, fully acquainted with its true nature and extent, would not have purchased the motorcycle, or that the fault makes the motorcycle substantially unfit for purpose or unsafe.
[18] In reaching this conclusion, I am particularly persuaded by three factors.
[19] First, a reasonable consumer buying a motorcycle of this age and mileage should understand that faults due to the past use of the motorcycle may arise from time to time. Certainly, the consumer would expect a fault such as that which exists in this motorcycle to be promptly fixed, but I do not consider that a reasonable consumer would have declined to purchase the motorcycle or consider the motorcycle substantially unfit for purpose because of the existence of the fault.
[20] Second, the motorcycle remains usable. Although the gearbox fault requires repair to restore its full functionality, the first five gears remain operable, and Mr Haynes advises that the motorcycle can still be easily and safely ridden at open road speeds using those five gears only.
[21] Third, the required repairs will not be difficult, and the cost will not be prohibitive. Mr Powell advises that the repairs are likely to take about nine hours of labour, with the required parts costing between approximately $100 and $500 depending on the nature of the fault ultimately found.

The Tribunal’s conclusion

[22] The gearbox fault is not a failure of a substantial character.

Issue 4: What remedy is Mr Paisley entitled to under the CGA?

[23] The remedies relevant to this claim are set out in s 18 of the CGA, 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] Under s 18(2)(a) of the CGA, Mr Paisley is entitled to have the gearbox fault rectified within a reasonable time. The Tribunal therefore orders that Scooteria Ltd shall, within 15 working days of the date of this decision, rectify the gearbox fault that affects the operation of sixth gear. Scooteria Ltd must pay all transportation associated with this repair.

Issue 5: The counterclaim

[25] Scooteria Ltd has filed a counterclaim. It says that the parties had agreed that Mr Paisley would return the motorcycle to Auckland and that Scooteria Ltd would provide a replacement motorcycle. Scooteria Ltd says that Mr Paisley then breached that agreement by changing his mind and seeking to instead reject the motorcycle and obtain a refund. It is now seeking to recover $2,234.79 in costs and loss it says it suffered when Ms Chang and Mr Lee travelled to Christchurch to assess the motorcycle on 4 March 2020.
[26] The Motor Vehicle Disputes Tribunal’s jurisdiction is set out in s 89(1)(a) of the Motor Vehicle Sales Act 2003. Under that section, the Tribunal only has jurisdiction to enquire into and determine claims in respect of the sale of any motor vehicle under the Fair Trading Act 1986, the CGA and subpart 3 of Part 2 or Part 3 of the Contract and Commercial Law Act 2017.
[27] The Tribunal does not have jurisdiction to consider the counterclaim because it does not relate to the sale of a motor vehicle. Instead it relates to an apparent agreement for the return of a motor vehicle entered into some time after the sale of the motor vehicle. The counterclaim also does not raise obvious issues under the Fair Trading Act, CGA or subpart 3 of Part 2 or Part 3 of the Contract and Commercial Law Act.
[28] The Tribunal therefore declines to consider the counterclaim. Scooteria Ltd is entitled to pursue the counterclaim in another jurisdiction, but I note that if Scooteria Ltd wants to pursue this matter further, it should carefully consider:

• (a) whether there was any binding contract between the parties for the return of the motorcycle; and
• (b) if, so whether the loss it says it suffered was caused by Mr Paisley’s breach of that contract to return the motorcycle.
  

DATED at AUCKLAND this 25th day of June 2020

B.R. Carter
Adjudicator