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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 25 November 2021
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BETWEEN ASHLEY BIRD & DANIELLE POATA
Applicants
AND AUTO SPOT WEST 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 10 August and 21 September 2021
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APPEARANCES
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A Bird and D Poata, the Applicants
M Owen, Witness for the Applicant
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A Brown and R Stratford for the Respondent
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DATE OF DECISION 12 October 2021
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] Ashley Bird and Danielle Poata want to reject the 2009 Jeep Wrangler Unlimited Sport[1] they purchased for $30,585 from Auto Spot West Ltd in February 2020. They say that the vehicle has been unsafe and of unacceptable quality because of defects, including a broken trailing arm bracket, a loose front ball joint nut, and at least four pre-existing modifications that do not have the required low volume vehicle (LVV) certification.[2]
[2] Auto Spot West says that it has already rectified broken trailing arm bracket and that it is prepared to perform all repairs required to obtain LVV certification for the vehicle.
Relevant background
Pre-purchase compliance
[3] Auto Spot West imported the vehicle from Japan in July 2019. The vehicle failed its initial compliance testing performed by Fasttrack Automotive Compliance because both front ball joints required replacement, the right headlight was too low, and the LED fog lights needed to be replaced. The vehicle then passed compliance testing on 24 September 2019. It appears that Fasttrack Automotive Compliance identified no modifications that required LVV certification.
The four wheel drive fault
[4] Mr Bird and Ms Poata purchased the vehicle on 5 February 2020. Due to COVID-19 related travel restrictions, Mr Bird and Ms Poata did not use the vehicle in four wheel drive mode until 27 April 2020. On that day, and while using the vehicle in four wheel drive mode, a plastic cable attached to the gearbox broke. The vehicle was taken to Water Street Motors 2015 Ltd in Whangārei, which replaced the broken cable.
The airbag recall
[5] Mr Bird and Ms Poata collected the vehicle from Water Street Motors on 22 June 2020 and were advised by a mechanic at Water Street Motors that the vehicle was subject to a recall for its airbags. Auto Spot West advised Mr Bird and Ms Poata to contact Union Car Spares, which could install replacement airbags. There were no replacement parts available until 27 August 2020, and the vehicle’s airbags have not been replaced because other faults have occurred.
The broken differential trailing arm bracket
[6] Mr Bird and Ms Poata say that they barely used the vehicle since discovering that the airbags needed replacement. On 25 August 2020, Ms Poata then took the vehicle for a short drive “around the block” and four warning lights appeared on the dashboard display. Ms Poata says that it also felt like the body of the vehicle was moving excessively when turning. She immediately drove home. Mr Bird then looked under the vehicle and found what he thought to be a broken front lower control arm, which was hanging down beneath the engine.
[7] Mr Bird and Ms Poata then had the vehicle assessed by Water Street Motors, which found that the front differential trailing arm bracket (which attaches the trailing arms to the differential housing) had snapped, and the trailing arms were hanging loose.
[8] Mr Bird and Ms Poata then attempted to reject the vehicle, but Auto Spot West refused to accept that rejection, claiming on advice from the Motor Trade Association (MTA) that the fault was minor and easy to fix and that it should be given an opportunity to do so. Reluctantly (and persuaded by the opinion of the MTA), Mr Bird and Ms Poata agreed to let Auto Spot West repair the broken trailing arm bracket. The vehicle was then transported to Torbay Service Station, which removed the broken bracket, welded a new bracket in place and refitted the trailing arm.
[9] The vehicle was returned to Mr Bird and Ms Poata on 24 December 2020. They immediately took the vehicle to Vehicle Testing New Zealand (VTNZ) in Whangārei for a safety inspection. A VTNZ Safety Inspection report dated 24 December 2020 records that the vehicle failed the safety inspection because:
- (a) its headlights focus and alignment was not to warrant of fitness standard;
- (b) its steering had been modified and required certification;
- (c) its suspension had been modified and required certification;
- (d) the brake fittings were corroding to the extent that they would fail a warrant of fitness inspection; and
- (e) the right hand front lower ball joint nut was loose.
[10] Mr Bird and Ms Poata then called Reade Stratford, from Auto Spot West, on 23 February 2021. After receiving no meaningful response from Auto Spot West, Mr Bird rejected the vehicle in an email dated 17 May 2021. When the company refused to accept that rejection, Mr Bird and Ms Poata filed this claim.
[11] During the hearing on 10 August 2021, it became apparent that the vehicle may have had modifications that required LVV certification. The hearing was then adjourned to enable Mr Bird and Ms Poata to have the vehicle assessed by an LVV certifier.
[12] The vehicle was then assessed by Michael Owen of Progress Vehicle Certifications Ltd. Mr Owen gave evidence during the hearing on 21 September 2021. Mr Owen considered:
- (a) The vehicle has aftermarket seats and seatbelts that require LVV certification. The seats and seatbelts have not been certified and are, in Mr Owen’s opinion, unsafe and uncertifiable. Mr Owen says that the vehicle has “stressed seats”, which means that the seatbelts are attached to the seat rather than mounted to the vehicle’s structure. Mr Owen says that the seats are not secured to the factory seat mounts and the seatbelts need to be removed and mounted to the vehicle’s body before the vehicle can pass LVV certification.
- (b) The vehicle has an aftermarket steering damper that requires LVV certification. Mr Owen says that the steering damper has not been fitted in accordance with the relevant regulations and should be removed.
- (c) The vehicle’s front and rear panhard rods[3] have been cut and welded to enable them to be adjustable and require LVV certification.
- (d) The vehicle has aftermarket 20 inch wheels that may require LVV certification.
- (e) The right hand front lower ball joint nut was loose
[13] Auto Spot West did not dispute the existence of the uncertified modifications. Adam Brown, who appeared for Auto Spot West, submitted that Auto Spot West had relied upon the compliance inspector who assessed the vehicle and that Auto Spot West was unaware of any uncertified modifications. Mr Brown considered that each of the uncertified modifications could be easily rectified and advised that Auto Spot West was prepared to perform that work.
The issues
[14] Against this background, 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) Is the failure to comply with the guarantee of acceptable quality a failure of a substantial character?
- (c) What remedy are Mr Bird and Ms Poata entitled to under the CGA?
Issue 1: Has the vehicle been of acceptable quality?
[15] 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.
[16] 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.
[17] 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 Tribunal’s assessment
The vehicle defects mean the vehicle was not of acceptable quality
[18] The broken trailing arm bracket was a significant fault that made the vehicle unsafe. Mr Gregory, the Tribunal’s Assessor, advises that the trailing arm is an important part of the vehicle’s steering and suspension system, and once disconnected the vehicle’s steering is compromised. At low speed, the driver will maintain some control over the vehicle, but at higher speeds, the vehicle can become uncontrollable. That fault has now been adequately rectified by Auto Spot West.
[19] The vehicle also has a loose ball joint nut, as identified by both VTNZ and Mr Owen. Mr Gregory advises that this loose ball joint nut may also make the vehicle unsafe, because if it is not adequately tightened that nut will inevitably loosen further and fall off, compromising the vehicle’s steering in the same manner as the broken trailing arm.
[20] Based on the evidence presented, the loose ball joint nut is likely to have been present since purchase. The ball joints were replaced by Ashfield Automotive on 24 September 2019 as part of the compliance process and the evidence relating to other repairs done since purchase does not show that the ball joint nuts were loosened as part of any of those repairs. I am therefore satisfied that the pre-existing loose ball joint nut means the vehicle has not been of acceptable quality for the purposes of s 6 of the CGA.
The uncertified modifications mean the vehicle was not of acceptable quality
[21] The vehicle also has modifications – the aftermarket seats, seat belts and wheels and modified steering damper and panhard rods - that require LVV certification that should have been identified during the compliance process and subsequent warrant of fitness inspection. Mr Gregory considers that these modifications, particularly the aftermarket seats and seatbelts and the modified panhard rods, mean that there is a real likelihood that the vehicle is unsafe.
[22] Mr Gregory says that the vehicle is not designed for a stressed seat, and in the event of a moderate frontal impact (at speeds as low as 25 km per hour) there is a real risk that the seat will become detached from its front mountings. The seat and seatbelts are not adequately secured to the vehicle’s structure and the force of the impact, combined with the weight of the occupant, will cause the seat to become detached, endangering the occupant.
[23] Mr Gregory considers that the modified steering damper and wheels are relatively minor issues that are easy to fix and unlikely to affect the safety of the vehicle. However, Mr Gregory advises that the cut and welded panhard rods are potentially dangerous. The panhard rods hold the differential in place and if the modifications to the panhard rods have not been done properly, the panhard rods will be compromised and may fail, causing the driver to lose control of the vehicle.
[24] In my view, those uncertified modifications therefore mean that the vehicle is not of acceptable quality for the purposes of s 6 of the CGA because it is not as free of minor defects as a reasonable consumer would consider acceptable.
Issue 2: Is the failure to comply with the guarantee of acceptable quality a failure of a substantial character?
[25] 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.
[26] Section 21(a) of the CGA applies and I am satisfied that the failure to comply with the guarantee is a failure of a substantial character. Aside from the broken trailing arm bracket (which has been adequately repaired), the vehicle has uncertified modifications and a loose ball joint nut that will all cause the vehicle to fail a warrant of fitness inspection and are such that a reasonable consumer fully acquainted with the nature and extent of those issues would not have purchased the vehicle. In particular, the presence of the uncertified modifications – which were inexplicably overlooked during compliance testing – mean that a reasonable consumer would not have purchased the vehicle because they could have no reassurance that this vehicle was safe or fit for use on the road.
Issue 3: What remedy is Mr Bird and Ms Poata entitled to under the CGA?
[27] 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.
[28] Although the vehicle’s defects can all be repaired, under s 18(3) of the CGA, Mr Bird and Ms Poata are entitled to reject the vehicle because the failure to comply with the guarantee of acceptable quality is a failure of a substantial character.
[29] Under s 23(1)(a) of the CGA, because Mr Bird and Ms Poata have exercised their right to reject the vehicle, they are entitled to recover the following amounts paid with respect to the vehicle:
- (a) $4,682.68 — being the capital component of all payments (ie all payments less interest, credit fees and default interest and fees) made by Mr Bird and Ms Poata under the loan they entered into with Finance Now Ltd on 4 February 2020 (the collateral credit agreement) as from the date the collateral credit agreement was entered into until 17 May 2021 (the date that Mr Bird and Ms Poata unequivocally rejected the vehicle); and
- (b) $3,136.41 - being all payments paid since 17 May 2021, excluding default interest charges.
The collateral credit agreement
[30] Under ss 89(2) and (3) of the Motor Vehicle Sales Act 2003 (the MVSA), Mr Bird and Ms Poata are also entitled to have their ongoing rights and obligations under the collateral credit agreement assigned to Auto Spot West:
89 Jurisdiction of Disputes Tribunal
...
(2) A Disputes Tribunal may order that the rights and obligations of the buyer of a motor vehicle under a collateral credit agreement vest in a motor vehicle trader if—
(a) the collateral credit agreement is associated with the contract for the sale of that motor vehicle; and
(b) the motor vehicle trader is a party to that contract for sale; and
(c) either one of the following circumstances applies:
(i) the buyer exercises the right conferred by the Consumer Guarantees Act 1993 to reject that motor vehicle and, on a claim by the buyer under section 47(1) of that Act, the Disputes Tribunal orders the motor vehicle trader to refund any money paid, or other consideration provided, for that motor vehicle; or
(ii) the Disputes Tribunal finds that the buyer has suffered, or is likely to suffer, loss or damage by the conduct of the motor vehicle trader that constitutes, or would constitute, any of the conduct referred to in section 43(1) of the Fair Trading Act 1986 and the Disputes Tribunal makes an order under section 43(2) of that Act declaring the whole or any part of the contract for sale to be void.
(3) For the purposes of subsection (2), collateral credit agreement, in relation to a contract for the sale of a motor vehicle, means a contract or agreement arranged or procured by the motor vehicle trader or the buyer for the provision of credit by a person other than by the motor vehicle trader to enable the buyer to pay the price reserved by the contract for sale in respect of the motor vehicle.
[31] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to Auto Spot West are all met in this case:
- (a) the agreement between Mr Bird and Ms Poata and Finance Now Ltd is a collateral credit agreement for the purposes of s 89(2) of the MVSA. The agreement was arranged or procured by Mr Bird and Ms Poata for the provision of credit by Finance Now to enable Mr Bird and Ms Poata to purchase the vehicle;
- (b) Auto Spot West sold the vehicle to Mr Bird and Ms Poata, so it is a party to the contract to purchase the vehicle; and
- (c) Mr Bird and Ms Poata have exercised the right conferred by the CGA to reject the vehicle and the Tribunal has ordered that Auto Spot West must refund any money paid, or other consideration provided, for the vehicle.
[32] Accordingly, under s 89(2) of the MVSA, all of Mr Bird and Ms Poata’s rights and obligations under the collateral credit agreement are assigned to Auto Spot West from the date of this decision.
Outcome
[33] The Tribunal therefore upholds Mr Bird and Ms Poata’s rejection of the vehicle and further orders that:
- (a) Mr Bird and Ms Poata’s rights and obligations under the collateral credit agreement with Finance Now dated 4 February 2020 are assigned to Auto Spot West the date of this decision.
- (b) Auto Spot West shall, within 15 working days of the date of this decision, pay $7,819.09 to Mr Bird and Ms Poata.
Referral to Waka Kotahi NZ Transport Agency
[34] The evidence presented shows that the vehicle had at least four modifications that should have been identified during compliance testing. Waka Kotahi NZ Transport Agency has regulatory responsibility for the compliance testing regime and given the extent of the oversights in this case, I consider that the matter should be referred to that agency. In making this referral, I note that there was no evidence to show that Auto Spot West had any knowledge of the uncertified modifications when it sold the vehicle to Mr Bird and Ms Poata.
DATED at AUCKLAND this 12th day of October 2021
B.R. Carter
Adjudicator
[1] Registration plate number MRD10
[2] LVV certification is required if a vehicle is heavily modified, and where LVV certification is required, that certification must be obtained before a vehicle can pass a warrant of fitness inspection.
[3] A panhard rod is a suspension link that stabilises the front and rear axle and prevents lateral movement of the axle.
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2021/193.html