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Han v Sunday Ltd - Reference No. MVD 336/2020 [2021] NZMVDT 173 (13 September 2021)

Last Updated: 26 October 2021

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 336/2020
[2021] NZMVDT 173

BETWEEN WEN HAN

Applicant

AND SUNDAY LTD
Respondent





MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Haynes, Assessor

HEARING at Auckland on 16 June and 29 July 2021



APPEARANCES
W Han, Applicant
M Hatch, witness for the Applicant
T Campbell for the Respondent

DATE OF DECISION 13 September 2021

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

  1. Wen Han’s application to return the vehicle and obtain a refund of the purchase price is declined.
  2. Sunday Ltd shall:

_________________________________________________________________

REASONS

Introduction

[1] Wen Han purchased a 3.6 litre petrol Porsche Panamera for $47,500 from Sunday Ltd in October 2020. Mr Han applied to the Motor Vehicle Disputes Tribunal shortly afterwards, alleging that the vehicle did not comply with its description and that Sunday Ltd engaged in misleading conduct by representing that it was a “2015 Porsche Panamera”, when it was manufactured in 2012 and did not have the specifications of a 2015 Porsche Panamera.
[2] The Tribunal found that, although the vehicle is considered to be a 2015 model for the purposes of Waka Kotahi NZ Transport Agency requirements and relevant Consumer Information regulations (because that was the year the vehicle was first registered), Sunday Ltd had engaged in misleading conduct by representing that the vehicle was a 2015 Porsche Panamera when it was manufactured in 2012. Despite finding that Sunday Ltd had engaged in misleading conduct, the Tribunal dismissed Mr Han’s claim because he had not proven that he had suffered any loss or damage recoverable under the Fair Trading Act 1986 (the FTA).
[3] Mr Han appealed to the District Court, claiming that he did not understand what evidence he was required to provide to prove that he had suffered loss or damage and Mr Han advised the District Court that he had since obtained that information. The District Court accepted Mr Han’s submission and has referred this matter back to the Tribunal to reconsider the question of loss.
[4] The Tribunal then heard this matter on 16 June and 21 July 2021. Mr Han alleged that, in addition to suffering loss due to being misled about the year of manufacture, he has suffered additional loss because the vehicle was made to Japanese specifications, not the higher European specifications, and it has no sunroof, factory radio head unit and lesser value wheels and brakes and the vehicle is not of acceptable quality because of faults caused by its aftermarket head unit.

The Issues

[5] Against this background, the issues requiring the Tribunal’s consideration in this case are:

Issue 1: Has Sunday Ltd engaged in conduct that breached s 9 of the FTA?

[6] Section 9 of the FTA provides:
  1. Misleading and deceptive conduct generally

No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

[7] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corporation Ltd v Ellis:[1]

The question to be answered in relation to s 9 ... is ... whether a reasonable person in the claimant’s situation — that is, with the characteristics known to the defendant or of which the defendant ought to have been aware — would likely have been misled or deceived. If so, a breach of s 9 has been established.

Sunday Ltd misrepresented the vehicle’s age

[8] The relevant background facts are set out in the Tribunal’s previous decision,[2] in which the Tribunal found that Sunday Ltd’s representations that the vehicle was a 2015 Porsche Panamera were misleading in breach of s 9 of the FTA because the vehicle was manufactured in 2012. A reasonable consumer would have understood the representations made by Sunday Ltd to mean that the vehicle was also manufactured in 2015, or if not manufactured in 2015, manufactured in 2014. A reasonable consumer would not have expected a vehicle described as a 2015 Porsche Panamera to have been manufactured in June 2012.
[9] Sunday Ltd has not appealed that finding, so it stands.

Sunday Ltd misrepresented the vehicle’s specifications

[10] Sunday Ltd also represented in the Trade Me listing for the vehicle that it was “high spec”, including that it had a sunroof. Mr Han says that the vehicle was not high spec, and certainly did not have the specifications that a reasonable consumer would expect for a vehicle that had been advertised as a 2015 Porsche Panamera. The vehicle had no sunroof (despite the Trade Me listing saying that it had a sunroof), it had no factory stereo head unit (the stereo head unit installed in the vehicle was an aftermarket unit) and many of the specifications present in a 2015 Porsche Panamera, such as updated lights, bumpers and engine, were missing.
[11] Sunday Ltd says that the vehicle was “high spec”. It says that the vehicle had numerous desirable specifications, many of which were listed in the Trade Me listing and that Mr Han knew that the vehicle did not have a sunroof before he purchased it, but nonetheless decided to purchase the vehicle.
[12] Sunday Ltd is correct. The vehicle does have many desirable specifications, including those listed in the Trade Me listing (excluding the missing sunroof) and Mr Han did know that the vehicle did not have a sunroof when he bought it. However, I consider that the representation in the Trade Me listing that the vehicle was “high spec” could also reasonably be interpreted as a representation that the vehicle would have higher than average specifications for a 3.6 litre petrol 2015 Porsche Panamera. The evidence shows that many of the specifications that can be present in such a vehicle, including a sunroof, factory head unit, updated lights, updated bumpers and upgraded engine were not present.
[13] Consequently, by representing that the vehicle was a high spec 2015 Porsche Panamera when it did not have many of the specifications a reasonable consumer would expect to find in such a vehicle, Sunday Ltd has also engaged in misleading conduct in breach of s 9 of the FTA.

Issue 2: What remedy is Mr Han entitled to under the FTA?

[14] The remedies available for a breach of the FTA are discretionary. They are set out in s 43 of the FTA which is as follows:

43 Other orders

(1) This section applies if, in proceedings under this Part or on the application of any person, a court or a Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:

(a) a contravention of a provision of Parts 1 to 4A (a relevant provision):

(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:

(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:

(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:

(e) conspiring with any other person in the contravention of a relevant provision.

(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—

(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and

(b) whether or not person A made the application or is a party to the proceedings.

(3) The orders are as follows:

(a) an order declaring all or part of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) to be void; and

(ii) if the court or the Disputes Tribunal thinks fit, to have been void at all times on and after a date specified in the order, which may be before the date on which the order is made:

(b) if an order described in paragraph (a) is made in respect of a contract that is associated with a collateral credit agreement, an order vesting in person B all or any of the rights and obligations of person A under the collateral credit agreement:

(c) an order in respect of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) varying the contract or the arrangement in the manner specified in the order; and

(ii) if the court or the Disputes Tribunal thinks fit, declaring the varied contract or arrangement to have had effect on and after a date specified in the order, which may be before the date on which the order is made:

(d) if an order described in paragraph (c) is made in respect of a contract that is associated with a collateral credit agreement, and if that order results in person A no longer having property in the goods that are the subject of the contract, an order vesting in person B the rights and obligations of person A under the collateral credit agreement:

(e) an order directing person B to refund money or return property to person A:

(f) an order directing person B to pay to person A the amount of the loss or damage:

(g) an order directing person B, at person B’s own expense, to repair, or to provide parts for, goods that have been supplied by person B to person A:

(h) an order directing person B, at person B’s own expense, to supply specified goods or services to person A.

(4) In subsection (3)(a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—

(a) is arranged or procured by the supplier of the goods; and

(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.

(5) An order made under subsection (3)(a) to (d) does not prevent proceedings being instituted or commenced under this Part.

(6) This section does not limit or affect—

(a) subpart 5 of Part 2 of the Contract and Commercial Law Act 2017; or

(b) section 317 of the Accident Compensation Act 2001.

[15] I have no doubt that Mr Han was misled by Sunday Ltd’s representations about the vehicle’s age and specifications. He saw those representations in the Trade Me listing and relied on them when purchasing the vehicle. However, to obtain a remedy under s 43 of the FTA, Mr Han must prove that he has suffered, or that he is likely to suffer, loss or damage as a result of those misleading representations. The Tribunal cannot simply assume that loss necessarily follows misleading conduct. Mr Han will only be entitled to a remedy if he can prove that he has suffered, or is likely to suffer, such loss.
[16] In cases such as this, the normal measure of loss under s 43 of the FTA is the “difference between the value of what was acquired and the price paid”.[3] That means Mr Han will only have suffered loss recoverable under s 43 of the FTA if he paid more for the vehicle than it was worth. The vehicle may be worth less than a higher specification Porsche Panamera manufactured in 2015, but Mr Han is not entitled to recover loss on that basis alone. Instead, Mr Han must show that the vehicle is worth less than the amount he paid for it because of the differences in its age and specification from that represented by Sunday Ltd.

Mr Han’s evidence regarding loss

The Trade Me listings

[17] When the Tribunal first heard this application, Mr Han provided four Trade Me listings for other Porsche Panameras with a vehicle year of between 2009 and 2011:[4]
[18] Relying on those comparison vehicles, and the additional cost of replacing the vehicle’s head unit and servicing the vehicle that Mr Han considered to be required to bring this vehicle to an acceptable standard, Mr Han submitted that he has suffered a loss of between $6,500 and $22,202.20 in purchasing the vehicle. I concluded that this evidence was not sufficiently reliable to prove that Mr Han had suffered any recoverable loss.
[19] Although those Trade Me listings are not conclusive proof, on their own, that Mr Han has suffered loss, I will consider those listings alongside the other evidence of the vehicle’s value when considering whether Mr Han has suffered or is likely to suffer loss.

The Auckland Auto Valuations Ltd valuation

[20] Mr Han has now provided a written valuation from Auckland Auto Valuations Ltd, which he says proves that he has suffered loss of $17,500 by purchasing the vehicle. That valuation was prepared by Michael Hatch, who gave evidence on 29 July 2021. Mr Hatch advised that he has over 40 years’ experience as a valuer of motor vehicles. In that valuation, Mr Hatch considered that Mr Han has suffered loss because:
[21] Mr Hatch also noted that his valuation is based on “little to no sales with in NZ to make strong comparisons”, but, considered it appropriate to value this vehicle as if the seller had valued the vehicle as a “Euro Spec” and not a lower value Japanese specification vehicle. Mr Hatch therefore provided the following valuation:

“START VALUE (as sold) $47,500

LESS EURO SPEC $15,000 Factory Sun Roof Head Unit

Wheels & Brakes

3 YEARS OLDER LESS $2,500

VALUE (should have been) $30,000

LOSS TO PURCHASER $17,500”

The Continental Cars Offer

[22] Mr Han also provided an email from Continental Cars, an Auckland based Porsche franchise, in which Continental Cars offered to purchase the vehicle for $29,000.

Sunday Ltd’s valuation evidence

[23] Sunday Ltd says that Mr Han has suffered no loss. It provided valuations from Tandarra Enterprises Ltd and Markham Motors Ltd, which are both Auckland-based motor vehicle traders.
[24] Tandarra Enterprises considered that:
[25] Markham Motors considered that:
[26] Sunday Ltd also provided the results of a Trade Me search for Porsche Panameras, which it performed on 1 December 2020. Sunday Ltd says that it found only three comparable vehicles, but I do not consider those vehicles to be a reasonable comparison with the vehicle purchased by Mr Han as they are all diesel vehicles, whereas Mr Han’s vehicle has a 3.6 litre petrol engine. Given the differences in price between a petrol and diesel vehicle, I am not satisfied that the vehicles found on Trade Me by Sunday Ltd are a reasonable or useful comparison.
[27] Taylor Campbell, a director of Sunday Ltd, also gave evidence that his company is experienced in selling such vehicles and considers that the price paid by Mr Han was reasonable given the vehicle’s age and specifications. Mr Campbell says that the vehicle would probably sell for more now than the price Mr Han paid for it.

The Tribunal’s assessment of the valuation evidence

Auckland Auto Valuations Ltd valuation

[28] I accept Mr Hatch’s opinion that a 2012 Porsche Panamera is worth $2,500 less than a 2015 Porsche Panamera solely because of the age difference. Although Mr Hatch did not specify how he arrived at that figure, I accept that Mr Hatch’s many years of experience as a motor vehicle valuer are likely to give him a reasonable sense of the extent to which a vehicle will depreciate due to its age.
[29] I also accept Mr Hatch’s opinion that the missing “European Specifications” will be expensive to install, and that Mr Han will need to incur a substantial cost to bring this vehicle up to that specification. However, I have reservations about some of the assumptions made by Mr Hatch and about the methodology he has used, which in my view has resulted in a valuation for this vehicle that is inconsistent with the other evidence provided and is unrealistically low.
[30] My reservations about the assumptions that Mr Hatch has relied upon when valuing the vehicle are:
[31] The methodology then used by Mr Hatch to value the vehicle and calculate the loss suffered by Mr Han is flawed because it fails to consider the market value of a 2012 Porsche Panamera with this vehicle’s specifications and modifications.
[32] Instead, Mr Hatch has taken the purchase price of $47,500 (on the assumption that the price was set as if the vehicle had European specifications and without determining whether $47,500 was a reasonable price for a vehicle of this age and specification) and then subtracted his estimated value of the missing European specifications and an allowance for the fact that the vehicle was manufactured in 2012 before concluding that the vehicle’s value is only $30,000. When subtracting $15,000 to reflect that the vehicle was not “Euro Spec”, Mr Hatch has taken the estimated replacement cost of the missing specifications (head unit, sunroof, wheels and brakes) without considering the value of the additional specifications that the vehicle has, such as 19 inch wheels and tyres and an aftermarket head unit. Mr Hatch’s belief that Mr Han has suffered loss because of the absence of the sunroof also fails to recognise that Mr Han knew that the vehicle did not have a sunroof when he purchased it.
[33] I therefore consider there to be a real risk that Mr Hatch’s valuation of the vehicle at $30,000 is unrealistically low and does not reflect the market value of this vehicle, particularly when one considers the other evidence presented by Mr Han and Sunday Ltd.

The Continental Cars offer

[34] Continental Cars has advised Mr Han that it would offer him $29,000, for the vehicle. That is presumably a wholesale price which also takes into account the vehicle’s true age and the fact that the vehicle has an aftermarket head unit. In my view, it is highly likely that Continental Cars would then sell the vehicle at a retail price substantially higher than the $30,000 valuation provided by Mr Hatch.
[35] Mr Han has since attempted to “withdraw” the Continental Cars offer from the evidence, saying that Continental Cars may not have known of the vehicle’s “model year, airbag issue, difference in spec etc” when it valued the vehicle.
[36] Continental Cars does know of many of this vehicle’s alleged deficiencies. Emails between Mr Han and Continental Cars on 28 November 2020 shows that the company knew that the vehicle was a 2012 model and that it did not have a stereo head unit when manufactured and that an aftermarket unit has been installed. Consequently, I intend to consider the Continental Cars offer when assessing the value of this vehicle. Continental Cars is a Porsche franchise, and in my view has expertise in the valuation of such vehicles and I consider its offer to purchase the vehicle at a wholesale price of $29,000 to be highly relevant to my assessment of the reliability of Auckland Auto Valuation Ltd’s valuation and of the vehicle’s actual market value.

The Tandarra Enterprises and Markham Motors valuations

[37] I also have some reservations about the Tandarra Enterprises and Markham Motors valuations. Those valuations are somewhat higher than the valuation information provided by Mr Han and contain no detail as to how those companies arrived at those valuations. Tandarra Enterprises and Markham Motors also did not inspect this vehicle and appear to only have seen photographs provided by Sunday Ltd. However, I accept that Tandarra Enterprises and Markham Motors, as registered motor vehicle traders, are qualified to provide an opinion on the vehicle’s market value and I will take account of those valuations in assessing whether Mr Han has suffered loss.

Mr Han has suffered loss

[38] The valuation evidence from Auckland Auto Valuations Ltd, Tandarra Enterprises and Markham Motors all shows that a 2012 Porsche Panamera is worth less than a 2015 Porsche Panamera with the same mileage and specifications. Mr Hatch considered the difference to be $2,500, with Tandarra Enterprises and Markham Motors considering the difference to be $12,495 and $7,000 respectively.
[39] However, although the vehicle may be worth less than a similar vehicle manufactured in 2015, Mr Han is not entitled to recover loss on that basis alone. Instead, Mr Han must show that the vehicle is worth less than he paid for it because of the differences in its age and specification from that represented by Sunday Ltd.
[40] The evidence presented by the parties – particularly the Continental Cars offer, the Trade Me listings provided by Mr Han in 2020, the valuations from Tandarra Enterprises and Markham Motors and Mr Hatch’s opinion that a 2012 Porsche Panamera is worth only $2,500 less than a similar 2015 Porsche Panamera because of the age discrepancy, leads me to conclude that a fair market value for a Porsche Panamera manufactured in 2012 with this vehicle’s mileage, manufacturer’s specifications and modifications is somewhere between $38,000 and $45,000. Given the significant discrepancies between the valuations provided by either side and the flaws in that valuation evidence (as discussed above), arriving at this range has been more of an art than a science, but I am satisfied that the evidence provided by the parties shows that this is the most likely valuation range for this vehicle.
[41] Mr Han paid $47,500 for the vehicle, which is $2,500 more than the higher end of that range. I am satisfied that Mr Han has therefore suffered loss of $2,500 because of the misleading representations made by Sunday Ltd about the vehicle’s age and specifications.
[42] To reiterate, the loss that Mr Han is entitled to recover under the FTA is the difference between what he paid for the vehicle and what it is worth – which in this case is $2,500. Mr Han is not entitled to recover the difference between the value of this vehicle and the value of a high spec 2015 Porsche Panamera. Likewise, he is not entitled to recover loss on the basis calculated by Mr Hatch (ie loss calculated with reference to the value of the missing specifications).
[43] Mr Han also considered that the Tribunal should take account of the cost of replacing the vehicle’s head unit and servicing the vehicle when assessing the loss he has suffered. The vehicle’s airbag light is on and the vehicle has a fault code relating to its air conditioning, which may be related to the wiring of the aftermarket head unit, but the evidence presented does not show that the head unit needs to be completely replaced to rectify that defect. Likewise, although the vehicle may require servicing, Mr Han was not misled about that fact, so it is not something I can consider when determining the amount of loss suffered due to Sunday Ltd’s misleading conduct. Consequently, I decline to take the cost of replacing the head unit and servicing the vehicle into account when assessing the value of this vehicle.

Compensation is the appropriate remedy

[44] The remedies in s 43(3) of the FTA are discretionary, and the discretion is to be exercised so as to give effect to the purpose of the FTA, which includes to protect the interests of consumers. The object of the remedies in s 43(3) of the FTA is to do “justice to the parties in the circumstances of the particular case”.[5]
[45] Mr Han seeks orders requiring Sunday Ltd to refund the purchase price and allowing him to return the vehicle. I do have the power under s 43(3)(a) and (e) to make such orders, but given the relatively minor loss suffered by Mr Han (when compared to the value of the vehicle), I am not satisfied that such an outcome is one that best does justice between the parties in the circumstances of this case. Instead, I consider that the remedy that best does justice to the parties is an order under s 43(3)(f) requiring Sunday Ltd to pay $2,500 to Mr Han, which is the financial loss he has suffered because he was misled about the vehicle’s age and specifications.
[46] If he was unsuccessful in his claim for a refund of the purchase price, Mr Han sought alternative orders requiring Sunday Ltd to pay him:
[47] Mr Han is not entitled to either remedy. For the reasons set out earlier in this decision, he has not suffered the loss estimated by Auckland Auto Valuations Ltd, so there is no basis for awarding that amount. Further, the evidence simply does not prove that the vehicle’s head unit requires replacement, so Mr Han is not entitled to an order compensating him for the cost of that replacement.
[48] Finally, Mr Han seeks to recover the cost he has incurred in engaging Auckland Auto Valuations Ltd in this matter, which appears to have been about $1,000. Given the reservations I have about the assumptions and methodology used by Auckland Auto Valuations, which in my view led to an unrealistically low valuation, I do not consider that Mr Han should be entitled to recover that cost in full. However, because the valuation was useful in understanding the difference between a 2012 and 2015 Porsche Panamera with similar specifications, Mr Han is entitled to recover some of that cost, and I order that Sunday Ltd must contribute $250 towards the cost of that valuation.
[49] Consequently, Mr Han’s application to return the vehicle and obtain a refund of the purchase price under the FTA is declined. Instead, the Tribunal orders that Sunday Ltd shall, within 10 working days of the date of this decision, pay $2,750 to Mr Han.

Issue 4: Has the vehicle been of acceptable quality?

[50] 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.
[51] 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.

[52] 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”.
[53] Mr Han alleges that the vehicle’s aftermarket head unit is faulty and is causing issues with the vehicle’s air conditioning and airbags. The vehicle’s airbag warning lights have been illuminated since purchase and Incar Automotive performed a diagnostic scan on the vehicle in October 2020 and found fault codes relating to the vehicle’s airbags and air conditioning.
[54] The cause of the illuminated airbag light and the fault codes remains unknown as Mr Han has not had those faults properly diagnosed. Sunday Ltd has told him (in an email of 20 October 2020) that the airbag light is caused by the installation of the aftermarket head unit, which has led Mr Han to conclude that the fault codes and airbag light are due to the aftermarket head unit, but I am not satisfied that the opinion of an employee of Sunday Ltd is conclusive evidence that the airbag light and fault codes are caused by the head unit – although that is certainly a possible cause of that fault.
[55] Although the cause of the fault remains unknown, I am satisfied that the vehicle has an undiagnosed fault – most likely an electrical fault – that causes the airbag light to illuminate and has generated fault codes. That undiagnosed fault is a breach of the guarantee of acceptable quality in s 6 of the CGA. A reasonable consumer who has purchased a $47,500 Porsche Panamera would not expect such a fault to be present at the time of purchase.

Issue 4: Are the vehicle’s defects a failure of a substantial character?

[56] Under s 18(3) of the CGA, Mr Han may reject the vehicle if its defects amount to a failure of a substantial character. A failure of a substantial character is defined in s 21 of the CGA:
  1. 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.

[57] I am not satisfied that the undiagnosed fault that causes the airbag light to illuminate and has generated fault codes relating to the airbags and air conditioning is a failure of a substantial character in a vehicle of this price, age and mileage. The defect does not make the vehicle unsafe or substantially unfit for purpose and is not such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased a vehicle of this price, age and mileage.

Issue 5: What remedy is Mr Han entitled to under the CGA?

[58] The relevant remedies are set out in s 18 of the CGA, which provides:
  1. 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.

[59] Under s 18(2)(a), Mr Han is entitled to have the defects that breach the guarantee of acceptable quality rectified within a reasonable time. The Tribunal therefore orders that Sunday Ltd shall, within a reasonable time (taking account of COVID-19 related restrictions) rectify the fault or faults that causes the airbag lights to illuminate and generates fault codes relating to the vehicle’s airbags and air conditioning.

Outcome

[60] Mr Han’s application to return the vehicle and obtain a refund of the purchase price is declined. Instead, the Tribunal orders that Sunday Ltd shall:

DATED at AUCKLAND this 13th day of September 2021

B.R. Carter
Adjudicator


[1] Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

[2] Han v Sunday Ltd [2020] NZMVDT 226 (10 December 2020).
[3] Narayan v Arranmore Developments Ltd [2011] NZCA 681, (2011) 13 NZCPR 123 at [49].

[4] Mr Han provided information in respect of a fifth vehicle – a 2012 Porsche Panamera that was listed on Trade Me for $48,900 ($1,390 more than he paid for his vehicle), but then submitted that this fifth vehicle was not relevant to any loss assessment as it was a diesel rather than petrol vehicle.

[5] Red Eagle Corporation Ltd v Ellis, above n 1, at [31].

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