Kung v Giona NZ Ltd - Reference No. MVD 320/2021 [2021] NZMVDT 225 (10 November 2021)

Last Updated: 1 January 2022

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 320/2021 [2021] NZMVDT 225 BETWEEN NATHAN KUNG Applicant AND GIONA NZ LTD Respondent

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Gregory, Assessor

HEARING at Auckland on 2 November 2021 (by audio-visual link)

APPEARANCES

N Kung, Applicant D Phan, Witness for the Applicant

K Chen, for the Respondent

DATE OF DECISION 10 November 2021

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DECISION OF THE TRIBUNAL

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1. Giona NZ Ltd shall:
   • (a) within a reasonable time, replace the vehicle’s integrated motor assist battery; and
   • (b) within 10 working days of the date of this decision, pay $245.25 to Nathan Kung.

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REASONS

Introduction

[1] Nathan Kung purchased a 2006 Honda Civic Hybrid for $6,990 from Giona NZ Ltd on 20 May 2021. Mr Kung says that the vehicle’s hybrid battery was in poor condition at the time of sale and he now seeks orders that Giona NZ replace the integrated motor assist (IMA) hybrid battery or compensate him for the decrease in the vehicle’s value due to the worn hybrid battery. Giona NZ says that it has always been prepared to assist Mr Kung, but before agreeing to replace the IMA battery, it has insisted that he drive the vehicle for a reasonable distance to determine whether the battery does require replacement.

Relevant background

[2] Shortly after purchasing the vehicle, Mr Kung noticed that the hybrid battery was performing erratically. He says that the battery would often not hold charge and the charge display would fluctuate between fully charged and discharged. On 9 June 2021 he had the vehicle assessed by Battery Clinic Hybrid & Electric (Battery Clinic). Mr Kung was charged $90 for this assessment.
[3] I heard evidence from David Phan, the owner of Battery Clinic. Mr Phan says that he used genuine Honda diagnostic equipment to extract information about the IMA battery from the vehicle’s control modules. He found a “high degree of cell voltage variation and a maximum of 7% usable capacity remaining.” Mr Phan considered that the battery was “dead” because its cells were dry and could not be reconditioned. He considered that the battery required replacement.
[4] Mr Kung then contacted Giona NZ, who suggested that the vehicle’s low IMA battery capacity may have been due to the vehicle being unused for many months and could improve as the vehicle was driven. It also offered to assess, and if necessary, to replace the IMA battery. Mr Kung then returned the vehicle to Giona NZ and it had the IMA battery assessed by Roma Automotive on about 5 July 2021. Roma Automotive found error codes and that the battery temperature was abnormal. It considered that the IMA battery was in poor condition, with an estimated capacity of 18%.
[5] Despite these findings, Giona NZ was not convinced that the IMA battery required replacement, so the vehicle was returned to Mr Kung. Mr Kung then had the vehicle assessed by Honda Cars East Auckland on about 26 July 2021. Honda Cars East Auckland found a “POA7F” fault code, that indicated serious deterioration of the IMA battery. It also found that the IMA battery’s capacity was 11%. It advised Mr Kung to replace the battery. Mr King was charged $155.25 for this assessment.
[6] Mr Kung says that the vehicle’s IMA warning light has since illuminated on the dashboard display. He provided photographs from 3 and 7 August 2021, which show the IMA warning light illuminated.

The issues

[7] 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) What remedy is Mr Kung entitled to under the CGA?

Issue 1: Has the vehicle been of acceptable quality?

[8] 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.
[9] 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.

[10] 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”.
[11] The evidence presented by the parties shows that the vehicle’s IMA battery was in poor condition at the time of sale and has deteriorated since. Mr Gregory, the Tribunal’s Assessor, agrees with Mr Phan’s assessment, and says that the evidence presented, particularly the usable capacity readings and the presence of the IMA warning light, shows that the IMA battery is effectively dead and requires replacement.
[12] On the basis of the evidence presented by both parties and the advice I have received from Mr Gregory, I am satisfied that the condition of the IMA battery means the vehicle has not been 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. The IMA battery is an important component in a hybrid vehicle. In this vehicle, the IMA battery assists the internal combustion engine, increasing power and fuel economy. Although a reasonable consumer purchasing a 15 year old hybrid vehicle for $6,990 should understand that the hybrid battery will not be new and its usable capacity will have diminished over time, I am satisfied that a reasonable consumer would not expect the IMA battery to be in such poor condition at the time of sale.

Issue 2: What remedy is Mr Kung entitled to under the CGA?

[13] The relevant remedies 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.

[14] Under s 18(2)(a), Mr Kung is entitled to have the IMA battery replaced within a reasonable time. Mr Kung sought a reassurance that Giona NZ would install an acceptable replacement battery and asked the Tribunal to provide comprehensive guidance as to the repair that Giona NZ should perform. The Tribunal cannot provide that comprehensive guidance. Section 18(2)(a) of the CGA simply provides that the supplier must, within a reasonable time, remedy the failure to comply with the guarantee of acceptable quality. Ultimately, how the supplier remedies the failure is up to it, but the Tribunal would expect Giona NZ to ensure that the replacement IMA battery is of acceptable quality and that it will be sufficiently durable considering the vehicle’s price, age and mileage.
[15] Under s 18(4) of the CGA, Mr Kung is also entitled to recover the cost of the assessments performed by Battery Clinic and Honda Cars East Auckland. Both assessments were necessary to prove that the IMA battery was in poor condition and required replacement. Giona NZ says that it should not have to compensate Mr Kung for these costs, as it offered to assess the vehicle itself.
[16] Mr Kung acted reasonably in having the vehicle assessed by Battery Clinic before approaching Giona NZ. The report from Battery Clinic provided Mr Kung with the evidence he needed to demonstrate to Giona NZ that the vehicle was defective and required repair under the CGA. Mr Kung then allowed Giona NZ to assess the vehicle. Giona NZ denied that the IMA battery required replacement. Mr Kung was therefore within his rights to have the vehicle assessed further by Honda Cars East Auckland to obtain evidence that the IMA battery did require replacement.
[17] The Tribunal therefore orders that Giona NZ shall:

• (a) within a reasonable time from the date of this decision, replace the vehicle’s IMA battery; and
• (b) within 10 working days of the date of this decision, pay $245.25 to Mr Kung.
  

DATED at AUCKLAND this 10th day of November 2021

B.R. Carter
Adjudicator