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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 27 January 2022
BETWEEN SAFE DRIVE NZ LTD
Applicant
AND AUTO AUCTIONEERS (HAMILTON) 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 and 17 December 2021 (by audio-visual
link)
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APPEARANCES
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D McNally for the Applicant
J McNally, Witness for the Applicant
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K Hayward for the Respondent
P Conaghan, M Curtis and R Bun-Thoeun, Witnesses for the Respondent
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DATE OF DECISION 21 December 2021
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_________________________________________________________________
DECISION OF THE TRIBUNAL
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Auto Auctioneers (Hamilton) Ltd shall, within 10 working days of the date of this decision, pay $4,884.60 to Safe Drive NZ Ltd.
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REASONS
Introduction
[1] Safe Drive NZ Ltd operates a passenger transport business. On 9 April 2021, it purchased a 2014 Citroen D55 D Sport for $13,950 from Auto Auctioneers (Hamilton) Ltd to use in its business. The vehicle has subsequently suffered significant engine damage, which cost $4,884.60 to rectify.
[2] Safe Drive NZ says that the vehicle has not been of acceptable quality for the purposes of the Consumer Guarantees Act 1993 (the CGA) so it now seeks to recover that cost, and other costs related to the engine damage from Auto Auctioneers. Auto Auctioneers says that the CGA does not apply to this transaction, so it has no liability for the engine damage.
Relevant background
[3] About two and a half months after purchase, David McNally, a director of Safe Drive NZ, was driving the vehicle from Cambridge to Auckland Airport. The engine seized up on that journey. Mr McNally then arranged to have the vehicle transported to Keyte Automotive in Cambridge and notified Auto Auctioneers.
[4] Auto Auctioneers declined to assist. It advised Mr McNally that Safe Drive NZ had purchased the vehicle for business purposes and had agreed to contract out of the CGA. Auto Auctioneers referred to a clause (the exclusion clause) stamped onto the Sale and Purchase Agreement Form signed by Mr McNally on 9 April 2021, which states:
I confirm that the goods to be supplied are being acquired for the purposes of the Purchaser’s business in terms of sections 2 and 43 of the CGA and accordingly the parties agree that the provisions of the CGA will not apply
[5] Auto Auctioneers says that this clause was stamped onto the agreement in Mr McNally’s presence, and its receptionist, Rany Bun-Thoeun, advised Mr McNally that the CGA would not apply because the vehicle was purchased for a business purpose.
[6] Mr McNally denies speaking to Ms Bun-Thoeun and believes that he spoke with a different employee. He says that he was told that Auto Auctioneers could not contract out of the CGA. Mr McNally says that he was told words to the effect that he had to accept that clause if he wanted to purchase the vehicle.
[7] I heard evidence from Ms Bun-Thoeun on 17 December 2021. Ms Bun-Thoeun says that she spoke with Mr McNally and advised him that the CGA would not apply because the vehicle was being purchased by a business. Ms Bun-Thoeun says that, where a customer is not satisfied with the agreement, she usually refers them to the salesperson who dealt with them. Ms Bun-Thoeun says that she did not need to do that with Mr McNally, as he agreed to sign the agreement.
[8] Because Auto Auctioneers had declined to assist, Mr McNally asked Keyte Automotive to assess and rectify the engine damage. In an email of 13 December 2021, Matt Keyte of Keyte Automotive states:
The engine presented with a very audible bad bearing rattle (knocking) from the bottom end (crankshaft). This is often caused by lack of oil or insufficient oil changes. The engine had plenty of oil in it. The cambelt has not failed and was intact. To rebuild the engine was not a viable financial option, so a second hand engine was installed. As we have not carried out any further investigative dismantling to inspect the removed engine internally, we are unable to say what exactly has failed, or what has caused it, except that it is a major mechanical internal failure.
[9] An invoice dated 1 July 2021 states that Keyte Automotive replaced the engine with a secondhand unit, at a cost of $4,884.60.
The issues
[10] The issues requiring the Tribunal’s consideration in this case are:
- (a) Have the parties contracted out of the Consumer Guarantees Act 1993 (the CGA)?
- (b) Has the vehicle been of acceptable quality for the purposes of s 6 of the CGA?
- (c) What remedy is Safe Drive NZ entitled to under the CGA?
Issue 1: Have the parties contracted out of the CGA?
[11] Parties who are in trade may contract out of the CGA, provided the provisions in s 43(2) of the CGA, which sets out the rules for contracting out of the CGA, are complied with:
43 No contracting out except for business transactions
(2) However, despite subsection (1), parties to an agreement may include a provision in their agreement to the effect that the provisions of this Act will not apply to that agreement, provided that—
(a) the agreement is in writing; and
(b) the goods or services are, or (in connection only with the guarantee of acceptable quality in section 7A) the gas or electricity is, supplied and acquired in trade; and
(c) all parties to the agreement—
(i) are in trade; and
(ii) agree to contract out of the provisions of this Act; and
(d) it is fair and reasonable that the parties are bound by the provision in the agreement.
(2A) If, in any case, a court is required to decide what is fair and reasonable for the purposes of subsection (2)(d), the court must take account of all the circumstances of the agreement, including—
(a) the subject matter of the agreement; and
(b) the value of the goods, services, gas, or electricity (as relevant); and
(c) the respective bargaining power of the parties, including—
(i) the extent to which a party was able to negotiate the terms of the agreement; and
(ii) whether a party was required to either accept or reject the agreement on the terms and conditions presented by another party; and
(d) whether all or any of the parties received advice from, or were represented by, a lawyer, either at the time of the negotiations leading to the agreement or at any other relevant time.
[12] This agreement complies with many of the requirements in s 43(2) of the CGA. For example:
- (a) The agreement was in writing – as evidenced by the Sale and Purchase Agreement Form.
- (b) The vehicle was supplied and acquired in trade. Both parties are in trade.
- (c) The exclusion clause (see paragraph [4] above) is an acknowledgement that the parties have agreed to contract out of the CGA.
[13] However, I am not satisfied that it is fair and reasonable that the parties should be bound by the exclusion clause, in terms of s 43(2)(d), because the exclusion clause was not subject to negotiation and Safe Drive NZ was required to accept the agreement on the terms and conditions presented by Auto Auctioneers.
[14] I accept Mr McNally’s evidence that the exclusion clause on which Auto Auctioneers relies was not the subject of separate negotiation and that he was told that Safe Drive NZ had to accept the terms mandated by Auto Auctioneers to purchase the vehicle. I found Mr McNally’s evidence on this point to be clear and consistent, and I accept his recollection of his discussions with Auto Auctioneers’ staff. In accepting Mr McNally’s evidence, I consider that Ms Bun-Thoeun, who I am satisfied did speak with Mr McNally, gave evidence to the best of her recollection, but Mr McNally’s recollection of the discussion was clearer and more reliable. I therefore conclude that Safe Drive NZ was told that, to purchase the vehicle, it was required to accept the exclusion clause, without negotiation.
[15] The fact that a party is required to either accept or reject the agreement on the terms and conditions presented by another party, as in the present case, is a relevant "circumstance of the agreement" that the Tribunal must take into account, under s 43(2A)(c)(ii). Accordingly, I conclude that it is not fair and reasonable that the parties should be bound by the exclusion clause and Safe Drive NZ is entitled to the protections in the CGA.
[16] Generally, I also observe that the current provisions relating to contracting out, in effect since s 43(2) and (2A) were amended on 17 June 2014, do not lend themselves to boilerplate, opt-out clauses of the type Auto Auctioneers attempted to rely on in the present case. Sections 43(2A)(c) and (d) suggest that contracting out will ordinarily require a specifically negotiated provision that is tailored to the particular circumstances, accompanied by legal advice where that is appropriate. Where a boilerplate clause is used, or where legal advice is not taken, there should be clear evidence to show that the purchaser has understood the effect of the exclusion clause and has freely agreed to its inclusion after negotiation.
Issue 2: Has the vehicle been of acceptable quality?
[17] 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.
[18] 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.
[19] 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”.
[20] During the first hearing, Mr Gregory, the Tribunal’s Assessor, advised that the symptoms described by Mr McNally suggested that the vehicle’s cambelt may have snapped, causing the engine damage. Mr McNally has since provided photographs of the dismantled engine, which show that the cambelt is intact and there is no obvious damage relating to the cambelt. Considering that information, Mr Gregory says that the cause of the engine damage remains unknown, but he agrees with Matt Keyte’s assessment that there has been major engine failure and the engine requires replacement.
[21] I am satisfied that the engine damage was not caused by Safe Drive NZ’s use of the vehicle, and given the short length of Safe Drive NZ’s ownership and the distance travelled in that time (about 2,600 km), I am satisfied that the engine damage means 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 3: What remedy is Safe Drive entitled to under the CGA?
[22] 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.
[23] Safe Drive NZ asked Auto Auctioneers to rectify the engine damage. It refused to do so. Consequently, under s 18(2)(b)(i) of the CGA, Safe Drive NZ was entitled to have the engine damage rectified elsewhere and recover the reasonable cost of that repair from Auto Auctioneers.
[24] Mr Gregory advises that the cost of the repair was reasonable, and such repairs can cost as much as $6,000. Safe Drive NZ is therefore entitled to recover the full cost of that repair and the Tribunal orders that Auto Auctioneers shall, within 10 working days of the date of this decision, pay $4,884.60 to Safe Drive NZ.
DATED at AUCKLAND this 21st day of December 2021
B.R. Carter
Adjudicator
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2021/268.html