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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 21 June 2021
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BETWEEN TATYANA MALISE KARAITI
Applicant
AND 0800 BEST DEAL CARS 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 4 May 2021
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APPEARANCES
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T M Karaiti, Applicant
K Karaiti, Witness for the Applicant
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P German for the Respondent (by telephone)
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DATE OF DECISION 11 May 2021
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] Tatyana Karaiti wants to reject the 2005 Subaru Impreza she purchased for $2,990 from 0800 Best Deal Cars Ltd in January 2021 because it has an oil leak from the rear main seal that 0800 Best Deal Cars has refused to rectify.
[2] After initially denying any liability, 0800 Best Deal Cars is now prepared to rectify the oil leak, but says that Ms Karaiti should not be entitled to reject the vehicle for such a minor fault.
The issues
[3] 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) Did 0800 Best Deal Cars unreasonably fail or refuse to rectify the oil leak?
- (c) Is the oil leak a failure of a substantial character?
- (d) What remedy is Ms Karaiti entitled to under the CGA?
Issue 1: Has the vehicle been of acceptable quality?
[4] 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.
[5] 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.
[6] 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”.
Ms Karaiti’s evidence
[7] Three days after purchasing the vehicle, Ms Karaiti noticed smoke from the engine bay and a burning, acrid smell inside the vehicle. She contacted 0800 Best Deal Cars who told her that the vehicle had an oil leak before sale but had rectified it. Ms Karaiti provided the Tribunal with a warrant of fitness inspection sheet from September 2020 (the vehicle’s most recent warrant of fitness) that shows that the vehicle initially failed that inspection because of “bad oil leaks onto exhaust”.
[8] Ms Karaiti then took the vehicle to her local mechanic, Grove Road Auto Clinic Ltd on 10 February 2021, which found “major oil leaks” from the rear main seal and kidney plate. Ms Karaiti returned the vehicle to 0800 Best Deal Cars on about 24 February 2021 for repairs to be performed. She says that 0800 Best Deal Cars had the vehicle for about 90 minutes and returned it without rectifying the oil leak. The vehicle was again assessed by Grove Road Auto Clinic on 5 March 2021, which serviced the vehicle and confirmed ongoing oil leaks from the rear main seal and rear kidney plate, which it estimated would cost $730.25 to rectify.
[9] Ms Karaiti returned the vehicle to 0800 Best Deal Cars and spoke with Paul German – an employee of the company. She says that Mr German refused to repair the oil leaks, saying that the vehicle was a trade in and that 0800 Best Deal Cars was not liable for minor faults that might arise. Ms Karaiti says that Mr German offered to repair the oil leak, if Ms Karaiti paid $300 for the repair. Ms Karaiti refused that offer and says that the vehicle continues to leak oil (she has put four litres of oil into the vehicle during her ownership) and that an acrid smell is still present inside the vehicle when driven.
0800 Best Deal Cars’ response
[10] Mr German appeared for 0800 Best Deal Cars. Mr German says that he told Ms Karaiti at the time of sale that the vehicle was a trade in and that minor repairs might be required, which 0800 Best Deal Cars would not take responsibility for. Mr German says that he had previously spoken with a Government agency, which had advised him that, if it described previously traded in vehicles in such terms, 0800 Best Deal Cars would not have liability under the CGA for minor faults that then arose. Mr German considers that the oil leak present in this vehicle is minor but advises that 0800 Best Deal Cars is nonetheless prepared to rectify the leak at its expense.
The Tribunal’s assessment
[11] A reasonable consumer should have very limited expectations as to the quality and durability of a 16-year-old, $2,990 Subaru Impreza with an odometer reading of more than 293,000 km at the time of sale and should understand that the vehicle is likely to have pre-existing defects consistent with its age and mileage and that the vehicle will require regular ongoing maintenance.
[12] However, I am satisfied that a reasonable consumer would not expect that vehicle to have such a significant pre-existing oil leak from its rear main seal. Mr Gregory, the Tribunal’s Assessor, advises that the vehicle will fail a warrant of fitness inspection because of this oil leak, as the oil is leaking onto the exhaust, causing smoke from the engine bay and an acrid smell inside the vehicle. An oil leak to this extent 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 as a reasonable consumer would consider acceptable.
[13] In reaching this conclusion, I acknowledge Mr German’s submission that he told Ms Karaiti that the vehicle was a trade in and that 0800 Best Deal Cars would not fix minor faults, but that disclosure does not enable 0800 Best Deal Cars to avoid all liability under the CGA for pre-existing faults, and certainly not for a significant oil leak from the rear main seal that will cause the vehicle to fail a warrant of fitness inspection.
Issue 2: Did 0800 Best Deal Cars unreasonably fail or refuse to rectify the oil leak?
[14] Ms Karaiti will be entitled to reject the vehicle under s 18(2)(b)(ii) of the CGA if 0800 Best Deal Cars has unreasonably failed or refused to rectify the oil leak. 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.
[15] 0800 Best Deal Cars did not initially refuse to rectify the oil leak. In that regard, I accept Mr German’s evidence that when the vehicle was first returned by Ms Karaiti, 0800 Best Deal Cars’ mechanic steam cleaned the engine and then could find no evidence of an ongoing oil leak, so returned the vehicle to Ms Karaiti. In my view, that was a reasonable first step in attempting to diagnose the oil leak, and in the absence of evidence of an ongoing leak at that time it was proper to return the vehicle to Ms Karaiti.
[16] It was not unreasonable for 0800 Best Deal Cars to then question its liability for the oil leak when Ms Karaiti returned the vehicle given the price, age and mileage of the vehicle and the pre-purchase comments it made about the vehicle being a trade in. Although I have ultimately concluded that 0800 Best Deal Cars should have liability for that oil leak, the position it took was understandable given the vehicle’s age and mileage, so I do not believe that its rejection of Ms Karaiti’s request to rectify the oil leak gives rise to a right to reject the vehicle.
Issue 3: Is the oil leak a failure of a substantial character?
[17] Ms Karaiti may also reject the vehicle if the oil leak is 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.
[18] The oil leak is not a failure of a substantial character for the purposes of s 21. It is the type of fault that can arise in a vehicle of this price, age and mileage, it is easily rectified, does not make the vehicle unsafe and is not such, in my view, that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would have declined to purchase the vehicle.
Issue 4: What remedy is Ms Karaiti entitled to under the CGA?
[19] The relevant remedies are set out in s 18 of the CGA, as set out above. For the reasons also set out above, Ms Karaiti is not entitled to reject the vehicle. Instead, under s 18(2)(a) of the CGA, Ms Karaiti is entitled to have the oil leak rectified within a reasonable time. Under s 18(4) of the CGA, she is also entitled to have the $30 cost of having the oil leak diagnosed by Grove Road Auto Clinic and the $137.11 cost of having the vehicle serviced by Grove Road Auto Clinic in March 2021, as she only incurred that service cost because the vehicle was leaking so much oil.
[20] The Tribunal therefore orders that 0800 Best Deal Cars shall, within 10 working days of the date of this decision:
- (a) rectify the oil leak from the rear main seal; and
- (b) pay $167.11 to Ms Karaiti.
DATED at AUCKLAND this 11th day of May 2021
B.R. Carter
Adjudicator
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