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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 24 January 2022
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BETWEEN STEPHEN SANGSTER
Applicant
AND FUZHOU HOLDING CO. 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 23 November 2021 (by audio-visual link)
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APPEARANCES
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S Sangster, Applicant
A Sangster, Witness for the Applicant
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W Yuan, for the Respondent
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DATE OF DECISION 3 December 2021
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] Stephen Sangster purchased a 2004 Lexus RX300 for $7,990 from Fuzhou Holding Co. Ltd in July 2021. Mr Sangster says that the vehicle has a fault that is draining the vehicle’s battery, a squeaking noise from the engine bay, a fault with its air conditioning system and a water leak into the vehicle that mean the vehicle is not of acceptable quality for the purposes of the Consumer Guarantees Act 1993 (the CGA). Mr Sangster says that the defects are a failure of a substantial character and that Fuzhou Holding Co has failed to rectify the vehicle’s defects within a reasonable time. He wants to reject the vehicle and obtain a refund of the purchase price and expenses he has incurred attempting to rectify the vehicle’s defects.
[2] Fuzhou Holding Co says that it is prepared to rectify the vehicle’s defects and has asked Mr Sangster to return the vehicle to Auckland for those repairs to occur. It also says that the vehicle’s defects are not so serious that Mr Sangster should be entitled to reject the vehicle.
Relevant background
[3] Mr Sangster saw this vehicle advertised online and was attracted to it as it was a large, comfortable vehicle for his wife Annette, who has back problems. On 11 July Mr Sangster travelled from his home in Kaikohe to Fuzhou Holding Co’s premises in Auckland to test drive the vehicle. Mr Sangster says that when he arrived, the vehicle’s engine was already running. He then test drove the vehicle and noticed a squeaking noise from the engine bay. Mr Sangster says that he was told by William Yuan, a salesperson at Fuzhou Holding Co, that he would investigate the squeaking noise.
[4] Mr Sangster agreed to purchase the vehicle and returned on 16 July 2021 to collect it. He noticed the vehicle being jump started as he arrived. The vehicle was then taken to a nearby mechanic for assessment. While driving there Mr Sangster noticed that the squeaking noise in the engine bay remained.
[5] Mr Sangster says that the mechanic advised him that the battery – which was near new – was “had it” and that the squeaking noise was coming from the brakes and should go away as the brakes were used. Mr Sangster says that he was in a hurry as he had an appointment in Auckland before returning home, so he decided to take the vehicle without the battery issue being resolved.
[6] Two days later, the vehicle would not start because it had a flat battery. Mr Sangster had also noticed that the squeaking noise in the engine bay remained. Mr Sangster then contacted Mr Yuan on 19 July 2021 and advised him that the battery was dead, and the squeaking noise remained and was not coming from the brakes. He asked Mr Yuan to replace the battery. Mr Yuan replied, saying “we can change the new battery or let me know how much to change the battery I check it with my manager”.
[7] On 25 July 2021, Mr Sangster took the vehicle to a local Toyota workshop to find the cause of the squeaking noise from the engine bay. Mr Sangster has no records relating to that assessment but says that the workshop could not find a squeaking noise from the engine bay but did advise him that the air conditioning clutch required replacement. In that regard, Mr Sangster says that the air conditioning makes an intermittent squeaking noise when turned on.
[8] On 29 July 2021, without contacting Fuzhou Holding Co, Mr Sangster then had the vehicle’s battery replaced by Cowan Auto Electrical, at a cost of $236.50. Mr Sangster says that Cowan Auto Electrical advised him that the removed battery was near new and had failed prematurely due to a “parasitic battery drain”. Cowan Auto Electrical was unable to provide an estimate to rectify that fault as it needed to be diagnosed first, which could be a time-consuming task.
[9] On 13 August 2021, Mr Sangster contacted Mr Yuan and advised him that it was impractical to return the vehicle to Auckland to have it repaired. Mr Sangster also sent a copy of the invoice for replacing the battery and asked Fuzhou Holding Co to reimburse him for that cost. Mr Sangster also asked Mr Yuan to advise how he intended to address the fault that was causing the battery to go flat.
[10] On 15 August 2021, Mr Sangster emailed Mr Yuan again asking for advice regarding the battery issue and whether he should take the vehicle to a local auto electrician. He received no response.
[11] On 17 August 2021, Mr Sangster noticed a leak from the roof lining above the driver’s door. He emailed Fuzhou Holding Co that day and rejected the vehicle. He received no response from Fuzhou Holding Co until 9 September 2021, when Mr Yuan advised him that if he was having issues with the vehicle, he would need to bring it back to Fuzhou Holding Co for its mechanic to assess and fix. Mr Sangster asked to correspond directly with Mr Yuan’s manager. That did not occur, so he filed this claim.
[12] Mr Sangster has since kept the vehicle stored under a cover. He says that the water leak into the vehicle – which has been not dried out – has left a musty and damp smell in the vehicle.
The issues
[13] 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) Has Fuzhou Holding Co failed to rectify the vehicle’s defects within a reasonable time?
- (d) What remedy is Mr Sangster entitled to under the CGA?
Issue 1: Has the vehicle been of acceptable quality?
[14] 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.
[15] 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.
[16] 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 vehicle’s defects
[17] The evidence presented by Mr Sangster shows that the vehicle has four defects:
- (a) A fault within the vehicle’s electrical system that is draining the battery when the vehicle is turned off (the parasitic battery drain). I accept Mr and Mrs Sangster’s evidence as to the existence of this fault and note that Mr Sangster has had to keep the vehicle on permanent trickle charge to prevent the battery discharging completely.
- (b) A squeaking noise from the engine bay when the vehicle is cold. Mr Gregory advises that this noise – which occurs when the vehicle is cold and increases with speed – is most likely caused by a worn fan belt.
- (c) A faulty air conditioning compressor. Mr Gregory advises that the noise described by Mr Sangster is consistent with a faulty air condition compressor clutch.
- (d) A water leak. The cause of this water leak is undiagnosed. Mr Sangster took the vehicle to Matt Clifford Panelbeater, which confirmed the existence of the water leak but did not diagnose the cause of the leak, other than to say that the vehicle could need a new sunroof.
The Tribunal’s assessment
[18] Mr Sangster paid $7,990 for a 17-year-old vehicle with an odometer reading of 103,150 km. A reasonable consumer who has purchased a vehicle of this price, age and mileage must have realistic expectations as to its quality and durability and should understand that the vehicle will have pre-existing wear and tear consistent with its age and mileage and that defects may arise from time to time.
[19] Nonetheless, I am satisfied that the defects listed above mean the vehicle has not been as free of minor defects or as durable as a reasonable consumer would consider acceptable. I therefore find that the vehicle is not of acceptable quality for the purposes of s 6 of the CGA.
Issue 2: Are the vehicle’s defects a failure of a substantial character?
[20] Mr Sangster may reject the vehicle if its defects are a failure of a substantial character, which 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.
[21] As noted above, the purchaser of a vehicle of this price, age and mileage should understand that the vehicle may have pre-existing wear and tear and that defects may develop. Certainly, a reasonable consumer would expect the supplier to rectify the defects present in this vehicle within a reasonable time, but I am not satisfied that the defects, either separately or cumulatively, are a failure of a substantial character.
[22] The defects are all relatively minor (in the sense that each should be easily and inexpensively repaired once diagnosed) and have not made the vehicle unsafe and are 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 3: Did Fuzhou Holding Co fail to rectify the vehicle’s defects within a reasonable time?
[23] Mr Sangster also wants to reject the vehicle because Fuzhou Holding Co has failed to rectify the parasitic battery drain despite being asked to do so. Under s 18(2)(b)(ii) of the CGA, Mr Sangster will be entitled to reject the vehicle if he can show that Fuzhou Holding Co refused or failed to rectify that defect within a reasonable time.
[24] Section 18 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.
Fuzhou Holding Co knew of the parasitic battery drain at the time of sale
[25] Despite the vehicle’s battery being nearly new, Fuzhou Holding Co had to jump start the vehicle on the day of purchase. Mr Yuan’s submission that the battery may have been flat at that time due to a lack of use does not withstand scrutiny. The evidence shows that Mr Sangster had test driven the vehicle a week before, so the battery would have been charged during that test drive and should not have discharged to the extent that the vehicle required jump starting over the following week. I find that Fuzhou Holding Co knew that the vehicle had a fault that was causing its battery to discharge but took no steps to rectify that fault before supplying the vehicle to Mr Sangster.
[26] It is also noteworthy that the vehicle was taken to one of Fuzhou Holding Co’s mechanics on the day that Mr Sangster collected it. Mr Sangster’s evidence that the mechanic advised Mr Sangster that the nearly new battery was “had it” was not challenged by Fuzhou Holding Co and is evidence that the company was aware of this defect on the day of sale.
Fuzhou Holding Co knew that the fault was ongoing and that Mr Sangster had asked it to rectify the fault
[27] Mr Sangster advised Fuzhou Holding Co on 19 July 2021 that the battery was flat again. Mr Sangster had recently driven the vehicle from Auckland to Kaikohe, so the battery could not have lost charge through lack of use. Fuzhou Holding Co asked Mr Sangster to return the vehicle to Auckland for repairs, or to provide an estimate for a replacement battery, which it would consider replacing.
[28] On 13 and 15 August 2021, Mr Sangster then contacted Mr Yuan again and asked Mr Yuan to advise how he intended to address the fault that was causing the battery to go flat. Mr Sangster also advised Fuzhou Holding Co that it was impractical for him to return the vehicle to Auckland for repairs. He received no response from Fuzhou Holding Co. Mr Sangster then rejected the vehicle on 17 August 2021.
Mr Sangster was not required to return the vehicle to Auckland for repairs
[29] Fuzhou Holding Co says that it has not failed in its obligation to repair the vehicle within a reasonable time and that it asked Mr Sangster to return the vehicle to Auckland for repairs to be performed, but he declined to do so.
[30] There is no provision in the CGA which allocates responsibility for the return of the goods to the supplier where defects are to be remedied. However, s 22 of the CGA, which relates to the manner in which a consumer may reject a vehicle, provides guidance.
[31] Section 22 provides:
22 Manner of rejecting goods
(1) The consumer shall exercise the right to reject goods under this Act by notifying the supplier of the decision to reject the goods and of the ground or grounds for rejection.
(2) Where the consumer exercises the right to reject goods, the consumer shall return the rejected goods to the supplier—
(a) unless,—
(i) because of the nature of the failure to comply with the guarantee in respect of which the consumer has the right to reject the goods; or
(ii) because of the size or height or method of attachment,—
the goods cannot be returned or removed or transported without significant cost to the consumer, in which case the supplier shall collect the goods at the expense of the supplier; or
(b) unless the goods have already been returned to, or retrieved by, the supplier.
(3) Where the ownership in the goods has passed to the consumer before the consumer exercises the right of rejection, the ownership in the goods revests in the supplier upon notification of rejection.
[32] Relevantly, s 22(2)(a)(i) imposes an obligation on the supplier to collect the vehicle at its expense following rejection where the nature of the failure to comply with the guarantee means the vehicle cannot be returned or transported without significant cost to the consumer.
[33] I consider that the requirement in s 22(2)(a)(i) that the supplier will bear responsibility for the return of the vehicle where significant cost is involved applies to repairs required under s 18(2)(a), where the supplier must rectify defects that breach the guarantee of acceptable quality within a reasonable time.
[34] The CGA is consumer protection legislation and must be interpreted in a manner consistent with that purpose. Under s 18(2)(a) of the CGA, the supplier has an obligation to rectify defects that breach the guarantee of acceptable quality in s 6 of the CGA at its expense. Implied in that requirement, is a requirement that the supplier should bear responsibility for the cost of transporting a vehicle for repairs where the vehicle cannot be transported without significant cost to the consumer. Any other interpretation would be inconsistent with that consumer protection purpose and would undoubtedly lead to many situations where consumers are unable to access their CGA rights because they cannot afford the cost of transporting a faulty vehicle to the supplier for repairs.
[35] The parasitic battery drain made it unwise to drive from Kaikohe to Auckland because of the risk of the battery draining during that journey if the vehicle was turned off and then unable to restart. The vehicle therefore needed to be transported if Fuzhou Holding Co wanted to perform the required repairs in Auckland, rather than to have the vehicle repaired in Kaikohe. In the Tribunal’s experience, the cost of transporting a vehicle this distance is significant – many hundreds of dollars.
[36] I am therefore satisfied that it was impractical for Mr Sangster to return the vehicle to Fuzhou Holding Co without significant cost to him due to the defects that caused it to breach the guarantee of acceptable quality. Fuzhou Holding Co was therefore obliged to collect the vehicle if it wanted to return it to Auckland for repairs. It did not do so and did not take reasonable steps to do so.
Mr Sangster is entitled to reject the vehicle
[37] Considering the matters discussed above, I am satisfied that Mr Sangster was entitled to reject the vehicle because Fuzhou Holding Co failed to rectify the parasitic battery drain within a reasonable time. Mr Sangster rejected the vehicle on 17 August 2021. By then, Fuzhou Holding Co knew:
- (a) the vehicle was defective at the time of sale, more than one month earlier;
- (b) Mr Sangster was experiencing ongoing problems caused by the parasitic battery drain within two days of purchase;
- (c) Mr Sangster had been unable to rectify the parasitic battery drain and had asked Fuzhou Holding Co to rectify the battery charging system fault; and
- (d) Fuzhou Holding Co had not rectified the parasitic battery drain or given Mr Sangster any reasonable guidance as to how it would rectify that fault.
[38] Although it never refused to rectify the fault, by the time Mr Sangster rejected the vehicle, Fuzhou Holding Co had known of the existence of a fault that was causing the vehicle’s battery to discharge for more than one month and it was much too passive in providing Mr Sangster with the remedy he was entitled to under the CGA.
Issue 4: What remedy is Mr Sangster entitled to under the CGA?
[39] 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.
[40] Mr Sangster is entitled to reject the vehicle because Fuzhou Holding Co failed to rectify the parasitic battery drain within a reasonable time. He is therefore entitled to a refund of all amounts paid in respect of the vehicle,[1] which in this case is the purchase price of $7,990.
[41] In concluding that Mr Sangster is entitled to reject the vehicle, I note that the vehicle now has a musty interior smell due to the water leak. Mr Gregory advises that the smell will not be permanent and can be removed by drying the vehicle out properly and treating the vehicle with an anti-bacterial aerosol. I also note that the smell has been allowed to develop because Mr Sangster has stored the vehicle under a cover due to Fuzhou Holding Co’s refusal to accept his valid rejection of the vehicle. I consider it entirely fair that the cost of rectifying that musty smell should now rest with Fuzhou Holding Co.
[42] Mr Sangster also sought to recover the cost of having the battery replaced by Cowan Auto Electrical and the $50 fee for filing this claim. He is entitled to neither.
The battery
[43] In Acquired Holdings Ltd v Turvey, the High Court found that, under s 18(2) of the CGA, a consumer must first give the supplier a reasonable opportunity to remedy a failure before having it rectified elsewhere and recovering the cost of repairs from the supplier.[2]
[44] On 19 July 2021, Mr Yuan advised Mr Sangster that Fuzhou Holding Co would consider paying for a replacement battery, but he should provide an estimate. Rather than provide an estimate, Mr Sangster paid to have the battery replaced without telling Fuzhou Holding Co that he was doing so or seeking its consent. Consequently, Mr Sangster did not give Fuzhou Holding Co a reasonable opportunity to replace the battery and is not entitled to recover that cost.
The filing fee
[45] With respect to the filing fee, under cl 14(1)(a)(ii) and (b) of Sch 1 to the Motor Vehicle Sales Act 2003, the Tribunal may award costs against a party where the matter ought to have been settled before a hearing, but that party fails to participate in pre-hearing settlement discussions, or where the other party fails to attend without reasonable cause.
[46] I am not satisfied that this is a claim that ought reasonably to have been settled before the hearing. I consider that Fuzhou Holding Co was entitled to have the matter heard and for Mr Sangster’s evidence to be tested and clarified. Its defence of this claim, although unsuccessful, was not unreasonable. Further, Fuzhou Holding Co attended the hearings, so Mr Sangster is not entitled to recover costs on that basis.
Outcome
[47] Mr Sangster’s application to reject the vehicle is allowed, and the Tribunal orders that Fuzhou Holding Co shall, within 10 working days of the date of this decision, pay $7,990 to Mr Sangster. Fuzhou Holding Co may then collect the vehicle, at its cost.
DATED at AUCKLAND this 3rd day of December 2021
B.R. Carter
Adjudicator
[1] Consumer Guarantees Act 1993, s 23(1)(a).
[2] Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 (HC).
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