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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 26 March 2021
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BETWEEN SAEED HAJI KARIMIAN
Applicant
AND 1388 GROUP LTD
Respondent
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Gregory, Assessor
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HEARING at Auckland on 26 January and 5 February 2021
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APPEARANCES
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S H Karimian, Applicant
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J Singh, for the Respondent
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DATE OF DECISION 17 February 2021
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] Saeed Karimian wants to reject the 2013 Mercedes-Benz E350[1] he purchased for $24,495 from 1388 Group Ltd in August 2020. Mr Karimian says that the vehicle has been of unacceptable quality because of several defects that became apparent after purchase. He is also concerned that the vehicle is not the original factory colour, which causes him to suspect that the vehicle had previously been stolen or severely damaged. Mr Karimian wants to return the vehicle and recover the purchase price, the $1,395 he paid to 1388 Group to purchase a one year Autosure mechanical breakdown insurance policy and other repair and travel costs he has incurred.
[2] 1388 Group Ltd disputes that Mr Karimian should be entitled to reject the vehicle. It says that it has been prepared to rectify the vehicle’s defects, but Mr Karimian has refused to let it do so, and instead has had the vehicle repaired using the Autosure mechanical breakdown insurance policy he purchased with the vehicle.
The issues
[3] 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 Karimian entitled to under the CGA?
Issue 1: Has the vehicle been of acceptable quality?
[4] 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.
[5] 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.
[6] 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 agreed defects
[7] Both parties agree that the vehicle has had the following defects since purchase:
- an oil leak from the oil filter housing gasket;
- fuel leaks from the top and bottom of the engine;
- an electric power steering (EPS) fault, which caused the anti-lock braking system (ABS) light to illuminate;
- a leaking water pump;
- a fault with the inlet port shut-off motor on the inlet manifold;
- a fault with the auxiliary battery that affected the operation of the vehicle’s keyless entry; and
- an oil leak from the vacuum pump, which is allowing oil to leak on to the exhaust.
The disputed faults
[8] Mr Karimian also alleges that the vehicle has a missing air pump, misaligned wheels and a fault with the boot opening switch on the driver’s door.
[9] 1388 Group does not accept the existence of these faults and considers that any issue with the wheel alignment or air pump are not matters that it should be liable for.
[10] I agree with 1388 Group’s submission in respect of the air pump, misaligned wheels and faulty boot opening switch. The evidence presented by Mr Karimian does not prove the existence of any defect with those components that would breach the guarantee of acceptable quality.
The Tribunal’s conclusion on acceptable quality
[11] A reasonable consumer purchasing a seven-year-old Mercedes-Benz imported from Singapore (as this vehicle was) with an odometer reading of nearly 69,000 km should understand that the vehicle may have defects consistent with its age and mileage and use in the humid Singapore environment — which can cause plastic and rubber components to degrade more quickly than in more temperate environments.
[12] Many of this vehicle’s agreed defects — such as oil leaks, degraded hoses and electrical faults — are consistent with the type of fault that can be present in such vehicles. Nonetheless, given the nature and sheer number of defects present in this vehicle at the time of sale and shortly thereafter, I am satisfied that the vehicle has not been of acceptable quality for the purposes of s 6 of the CGA because it was not as free of minor defects or as durable as a reasonable consumer would consider acceptable.
Issue 2: Are the vehicle’s defects a failure of a substantial character?
[13] A failure of a substantial character is defined in s 21 of the CGA:
- 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.
[14] Section 21(a) of the CGA is relevant in this case. The question I must answer is whether the faults that this vehicle has, are such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle.
[15] Most of the vehicle’s defects have already been rectified, either at 1388 Group’s expense or by Mr Karimian using the Autosure policy he purchased with the vehicle. However, the vehicle has an ongoing oil leak from the vacuum pump that is allowing oil to leak on to the exhaust and will cost more than $2,000 to rectify based on an estimate provided by Mercedes-Benz Botany. I consider that this ongoing oil leak, when combined with all of the vehicle’s other defects means that the vehicle’s accumulated defects are a failure of a substantial character.
[16] In Cooper v Ashley & Johnson Motors Ltd, the District Court noted that a purchaser may reject a vehicle where there has been an accumulation of defects that amount to a failure of a substantial character.[2] The Court noted that a point will eventually be reached where the purchaser could “say convincingly that he or she had no ‘confidence in the reliability of the vehicle’”.[3]
[17] In this case, the vehicle’s accumulated faults are such that a reasonable consumer fully acquainted with the true nature and extent of those defects would not have purchased the vehicle and are also such that a reasonable consumer would have no confidence in the ongoing reliability of the vehicle.
Issue 3: What remedy is Mr Karimian 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), Mr Karimian is entitled to reject the vehicle because its defects are a failure of a substantial character. Under s 23(1)(a) of the CGA, Mr Karimian is therefore entitled to recover all amounts paid to 1388 Group in respect of the vehicle, which in this case is the purchase price of $24,495 and the $1,395 Mr Karimian paid to 1388 Group to purchase the Autosure mechanical breakdown insurance policy. Mr Karimian sought to recover interest at 12 per cent per annum on those amounts but presented to evidence to show that he had incurred that interest, so I make no such order.
[20] Under s 18(4) of the CGA, Mr Karimian is also entitled to recover the reasonable cost of diagnosing the ongoing vacuum pump leak. The actual cost incurred by Mr Karimian in towing the vehicle to Mercedes-Benz Botany and having it inspected was $591.10, but I do not consider that this cost was reasonably incurred.
[21] The hearing on 26 January 2021 was adjourned to allow Mr Karimian to have that defect assessed, and I understood that Mr Karimian would have the oil leak assessed by a mobile mechanic, which would have been a much less expensive exercise than having the vehicle towed to and assessed by a Mercedes-Benz franchise. Mr Gregory, the Tribunal’s Assessor, also advises that the nature of the oil leak was such that it could easily have been diagnosed by a mobile mechanic. Because this ongoing oil leak could and should have been diagnosed at a much lower cost, I intend to reduce the amount recoverable to $175, which I consider to be a reasonable estimate of the cost of diagnosing the ongoing oil leak.
[22] Mr Karimian also seeks to recover the insurance excesses he incurred in repairing the vehicle and UBER costs he incurred in travelling to and from Mercedes-Benz Botany when the vehicle was being assessed and repaired. All of those costs were incurred after he had rejected the vehicle on 17 November 2020, and it is not appropriate to allow Mr Karimian to recover those costs under the CGA. Those costs were incurred because Mr Karimian chose to have the vehicle repaired after he had already rejected it. Having exercised his right under the CGA to reject the vehicle, Mr Karimian is not entitled to recover the costs he then incurred in repairing the defects upon which he based his rejection.
Orders
[23] The Tribunal therefore upholds Mr Karimian’s rejection of the vehicle and orders that 1388 Group pay $26,065 to Mr Karimian within 10 working days of the date of this decision. Mr Karimian must then make the vehicle available to be collected by 1388 Group, at its expense.
DATED at AUCKLAND this 17th day of February 2021
B.R. Carter
Adjudicator
[1] Registration number NAJ350
[2] Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407 (DC).
[3] At 417.
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