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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 27 January 2022
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BETWEEN JAVIEN COLE RYAN HARRIS
Applicant
AND AUCKLAND BUDGET CARS LTD
Respondent
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Haynes, Assessor
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HEARING at Auckland on 16 and 20 December 2021 (by audio-visual
link)
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APPEARANCES
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J C R Harris, Applicant
L R Harris and A Singh, Witnesses for the Applicant
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S Soleimani, for the Respondent
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DATE OF DECISION 22 December 2021
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] Javien Harris wants to reject the high-mileage 2008 Nissan Navara he purchased for $13,495 from Auckland Budget Cars Ltd on 27 April 2021. Mr Harris says the vehicle’s clutch required replacement within two weeks of purchase and the vehicle has now suffered significant engine damage. He wants to return the vehicle, obtain a refund of all amounts he has paid for the vehicle and be relieved of his ongoing obligations under the loan dated 26 April 2021 he entered into with Finance Now Ltd to purchase the vehicle (the collateral credit agreement).
[2] Auckland Budget Cars denies liability. It says that the clutch was damaged by Mr Harris repeatedly accelerating from a standstill while in second gear and the engine damage was caused by Mr Harris continuing to drive the vehicle while it was low on coolant.
Relevant background
[3] Mr Harris is completing a plumbing, gasfitting and drainlaying apprenticeship and wanted to purchase a work vehicle. He saw the vehicle advertised on Trade Me and purchased it thinking that it would be ideal for his needs.
[4] On 26 April 2021, Mr Harris signed a vehicle offer and sale agreement (VOSA) to purchase the vehicle. Relevant to this claim, the VOSA records:
- (a) the purchase price was $13,495;
- (b) its odometer reading was 361,706 km; and
- (c) the special conditions clause of the VOSA stated “Trade-In Vehicle, End of life, Parts Only”.
[5] About two weeks after purchase, Mr Harris says that he noticed the vehicle’s clutch was faulty. He says the vehicle would not drive forward in first gear and when he released the clutch fully without pushing the accelerator, the vehicle did not stall. He says he contacted Shane Soleimani, of Auckland Budget Cars, who declined to take responsibility for any clutch fault because he considered that the damage to the clutch was caused by the manner in which Mr Harris had driven the vehicle.
[6] Mr Soleimani gave evidence at the hearing. He says that Mr Harris had returned the vehicle to Auckland Budget Cars some days prior complaining of a noise from the suspension. Mr Soleimani says that the immediately noticed a burning smell from the clutch. He says that he then spoke with Mr Harris, and Mr Harris told him that, on the advice of a friend, he had been using second, rather than first, gear when accelerating from a standstill. Mr Soleimani believes that Mr Harris’ use of the vehicle in this manner has caused the clutch to prematurely fail. Mr Harris denies this allegation and say that he only drove the vehicle in this manner on the day that he returned the vehicle to Auckland Budget Cars.
[7] Mr Harris then had the clutch replaced by GEM Automotive, at a cost of $2,737. Mr Harris seeks to recover that amount from Auckland Budget Cars. Mr Harris says that GEM Automotive also considered that the vehicle’s brake pads, turbo and starter motor/battery would soon require attention too.
[8] Mr Harris continued to use the vehicle, and on 11 July 2021, while driving on the North Western Motorway between Lincoln and Te Atatu Roads, the vehicle broke down. Mr Harris says that shortly before Te Atatu Road, he noticed white or grey smoke from the engine bay, accompanied by an engine warning light and oil pressure warning light. The vehicle then quickly lost all power and Mr Harris pulled onto the median strip.
[9] After some delay, the vehicle was then transported to Auckland Budget Cars, who sent the vehicle to Diesel Tune ‘N’ Turbo Chargers Ltd for assessment. The vehicle’s odometer reading at that time was 364,533 km.
[10] Diesel Tune ‘N’ Turbo’s assessed the vehicle in August 2021, but its findings are set out in a report dated 16 December 2021. That report states that it found that the vehicle had no water in the cooling system, and it looked like the engine had overheated. It also performed a compression test and found that the compression was 200 psi, which it considered to be “very low”. Its report also states that the vehicle was driven with a blown clutch, which “would add to the overheat issue”. Diesel Tune ‘N’ Turbo has also provided an estimate of $9,757.18 to replace the damaged engine.
[11] Mr Harris then rejected the vehicle. Auckland Budget Cars says that it should not have liability for the engine damage. Mr Soleimani says that he spoke with “Ashwin”, a mechanic from GEM Automotive. He says that Ashwin had advised Mr Harris that the vehicle had a coolant issue, which needed to be rectified before the vehicle could be driven. Mr Soleimani alleges that Mr Harris continued to drive the vehicle, causing the engine damage.
[12] Ashwin Singh, a part time technician at GEM Automotive, gave evidence. Mr Singh says that he assessed the vehicle and determined that the clutch required replacement. He says that he also noticed a noise from the brakes and black smoke from the exhaust. He says that the vehicle’s coolant levels were normal, and he noticed no issues with the cooling system. He also denied telling Mr Soleimani that the vehicle had any cooling system issues.
The issues
[13] 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) Are the vehicle’s defects a failure of a substantial character?
- (c) What remedy is Mr Harris 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.
(2) Where any defects in goods have been specifically drawn to the consumer's attention before he or she agreed to the supply, then notwithstanding that a reasonable consumer may not have regarded the goods as acceptable with those defects, the goods will not fail to comply with the guarantee as to acceptable quality by reason only of those defects.
(3) Where goods are displayed for sale or hire, the defects that are to be treated as having been specifically drawn to the consumer's attention for the purposes of subsection (2) are those disclosed on a written notice displayed with the goods.
(4) Goods will not fail to comply with the guarantee of acceptable quality if—
(a) the goods have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods; and
(b) the goods would have complied with the guarantee of acceptable quality if they had not been used in that manner or to that extent.
(5) A reference in subsections (2) and (3) to a defect means any failure of the goods to comply with the guarantee of acceptable quality.
[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 test is an objective one; it is not a view of those factors from Mr Harris’ subjective perspective.
The clutch
The clutch required replacement
[17] I accept the evidence from Mr Harris that, within two weeks of purchase, the clutch required replacement. The main issue for determination is whether the clutch was defective and not as durable as a reasonable consumer would consider acceptable or whether the clutch failure was caused by the manner in which Mr Harris drove the vehicle.
The clutch had no obvious defect at the time of sale
[18] The vehicle had an odometer reading of more than 360,000 km at the time of sale. Consistent with that odometer reading, the clutch would undoubtedly have had some wear. However, there was no sign of excessive clutch wear at that time, or any symptoms that the clutch was about to fail. Mr Soleimani says he drove the vehicle before it was sold and noticed no abnormal clutch symptoms. Mr Harris also says that the vehicle drove normally after he purchased it.
Mr Harris’ use of the vehicle caused the clutch failure
[19] Mr Soleimani alleged that Mr Harris has damaged the clutch by consistently accelerating from a standstill in second gear. Mr Haynes, the Tribunal’s Assessor, advises that consistently driving a vehicle in this manner will cause premature wear to the clutch.
[20] Mr Harris denied consistently accelerating from a standstill while in second gear. He says that the only time he did that was on the day that he returned the vehicle to Auckland Budget Cars and spoke to Mr Soleimani.
[21] I found Mr Harris’ response to the Tribunal’s questions about the number of times he had accelerated from a standstill in second gear to be unpersuasive, and I accept Mr Soleimani’s evidence that Mr Harris told him that he had been regularly driving the vehicle in that manner on the advice of a friend.
[22] Mr Haynes also advises that, if the clutch had failed due to normal wear and tear, there would have been symptoms of the impending clutch failure. For example, the clutch may have started to slip, or the clutch pedal would become “higher”, with more travel in the clutch before gear was engaged. There was no evidence that these symptoms were present. Instead, Mr Harris simply advised that one day he noticed that the clutch was faulty. Mr Haynes advises that sudden failure of this nature is consistent with the clutch being burned out through misuse rather than failure due to normal wear and tear.
The engine damage
[23] The evidence is clear that the engine now requires replacement, and in that regard, I accept the assessment from Diesel Tune ‘N’ Turbo that the engine has been damaged because it has overheated due to coolant loss. The question then for determination is whether the engine damage was caused by the engine lacking durability or whether it was caused by Mr Harris driving the vehicle when he knew that the vehicle was low on coolant.
There was no known cooling system fault
[24] Auckland Budget Cars says that the engine damage was caused by Mr Harris knowingly driving the vehicle while it was low on coolant. It says that GEM Automotive advised Mr Harris that the vehicle was low on coolant or otherwise had a cooling system problem when it assessed the vehicle, but he nonetheless continued to drive it.
[25] Mr Harris and his father Ryan both say that they spoke with Mr Singh of GEM Automotive and were not told that the vehicle was low on coolant or that it had any cooling system problem. I accept their evidence on this point, which was clear and consistent. I also accept Mr Singh’s evidence that the coolant levels were normal when he assessed the vehicle and that he found no evidence of any coolant fault. Mr Singh’s evidence was contrary to Mr Soleimani’s claim that Mr Singh told him that the vehicle had a coolant issue, but Mr Singh’s recollection of assessing the vehicle was clear, and as an independent party to this claim, he has no apparent reason to give untruthful evidence on this point.
[26] I am therefore satisfied that the vehicle had no readily identifiable cooling system fault before the engine was damaged on 11 July 2021.
The cooling system suffered sudden failure
[27] Given the absence of evidence proving a coolant leak or cooling system fault before 11 July 2021, I am therefore satisfied that it is likely that the engine damage was caused because it overheated due to a sudden, unexpected loss of coolant.
[28] Mr Haynes advises that the symptoms experienced by Mr Harris are consistent with a sudden evacuation of coolant from the cooling system. Mr Haynes says that that the sudden illumination of the engine warning light, the engine losing power and the billows of white smoke from the engine bay are consistent with a sudden evacuation of coolant, most commonly caused by a burst or disconnected hose. Mr Haynes says that a sudden loss of coolant can cause a vehicle to overheat within as little as one or two minutes, leaving little time for the driver to detect the problem and stop driving before significant engine damage can occur.
Mr Harris’ driving after noticing the coolant symptoms was not unreasonable
[29] I accept Mr Harris’ evidence that he pulled over within about minute of noticing symptoms, by which time significant damage had already been done. Mr Harris is not to blame for that damage, as the time he took to pull over after he first noticed symptoms consistent with overheating due to coolant loss was reasonable.
The engine damage was not caused by Mr Harris accelerating from a standstill in second gear
[30] Mr Haynes also advises that the engine damage was not caused by Mr Harris accelerating from a standstill in second gear. Mr Haynes says that using second gear in this manner can put additional load on the engine, but not to the extent that the vehicle will suddenly overheat in the manner described by Mr Harris.
The engine damage means the vehicle has not been of acceptable quality
[31] I am therefore satisfied that the engine damage was not caused by Mr Harris using the vehicle in a manner inconsistent with the manner in which a reasonable consumer would use it. Instead, I am satisfied that the engine damage means the vehicle was not of acceptable quality for the purposes of s 6 of the CGA. Although the purchaser must have realistic expectations for the quality and durability of a 13-year-old vehicle with an odometer reading of 361,706 km, the engine damage occurred after less than 3,000 km of driving and means the vehicle was not as free of minor defects or as durable as a reasonable person would consider acceptable.
[32] In concluding that the vehicle has not been of acceptable quality for the purposes of the CGA, I note that Auckland Budget Cars described the vehicle in the VOSA as “Trade-In Vehicle, End of life, Parts Only”. Describing a vehicle in this way does not affect a consumer’s right to a remedy under the CGA if the vehicle is not of acceptable quality. Indeed, such clauses have the potential to be misleading, in breach of the Fair Trading Act 1986, as they can be reasonably interpreted as an illegitimate attempt to avoid the CGA. If Auckland Budget Cars chooses to continue to use this clause in its agreement, the Tribunal suggests that Auckland Budget Cars exercise real care that it does not mislead its customers.
Issue 2: Are the vehicle’s defects a failure of a substantial character?
[33] 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.
[34] The engine damage is a failure of a substantial character. The vehicle is now unusable and will require expensive repair after less than 3,000 km of driving. Diesel Tune ‘N’ Turbo has provided an estimate of $9,757.18 to replace the engine. Mr Haynes advises that the engine may be able to be overhauled, but any repair will cost at least $5,000.
[35] Given the significance of the engine damage and the cost of the required repairs, I am satisfied that a reasonable consumer would have declined to purchase this vehicle if they had known that such engine damage would occur so shortly after purchase, even in a vehicle of this high mileage.
Issue 3: What remedy is Mr Harris entitled to under the CGA?
[36] 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.
[37] Under s 18(3)(a), Mr Harris is entitled to reject the vehicle because the engine damage is a failure of a substantial character. Under s 23(1)(a) of the CGA, because Mr Harris has exercised his right to reject the vehicle, he is entitled to recover all amounts paid with respect to the vehicle, which in this case are:
- (a) $2,000 – the deposit he paid when purchasing the vehicle; and
- (b) $2,518.58 – all payments made under the collateral credit agreement (less interest paid before 11 July 2021, when the engine failed and Mr Harris stopped using the vehicle).
The collateral credit agreement
[38] Under ss 89(2) and (3) of the Motor Vehicle Sales Act 2003 (the MVSA), Mr Harris is also entitled to have his ongoing rights and obligations under the collateral credit agreement assigned to Auckland Budget Cars:
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.
...
[39] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to Auckland Budget Cars are all met in this case:
- (a) the agreement between Mr Harris 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 Auckland Budget Cars and Mr Harris for the provision of credit by Finance Now to enable Mr Harris to purchase the vehicle;
- (b) Auckland Budget Cars sold the vehicle to Mr Harris, so it is a party to the contract to purchase the vehicle; and
- (c) Mr Harris has exercised the right conferred by the CGA to reject the vehicle and the Tribunal has ordered that Auckland Budget Cars must refund any money paid, or other consideration provided, for the vehicle.
[40] Accordingly, under s 89(2) of the MVSA, all of Mr Harris’ rights and obligations under the collateral credit agreement shall vest in Auckland Budget Cars from the date of this decision.
Outcome
[41] The Tribunal therefore upholds Mr Harris’ rejection of the vehicle and further orders that:
DATED at AUCKLAND this 22nd day of December 2021
B.R. Carter
Adjudicator
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2021/269.html