Varcoe v Icom Corporation (NZ) Ltd - Reference No. MVD 351/2020 [2021] NZMVDT 9 (28 January 2021)

Last Updated: 26 February 2021

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 351/2020 [2020] NZMVDT 009 UNDER APPEAL BETWEEN MATTHEW JAMES VARCOE Applicant AND ICOM CORPORATION (NZ) LTD Respondent

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Gregory, Assessor

HEARING at Auckland on 22 January 2021

APPEARANCES

M J Varcoe, Applicant

Z Liang, for the Respondent

DATE OF DECISION 28 January 2021

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DECISION OF THE TRIBUNAL

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1. ICOM Corporation (NZ) Ltd shall, within 10 working days of the date of this decision, pay $2,500 to Matthew Varcoe.

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REASONS

Introduction

[1] Matthew Varcoe wants ICOM Corporation (NZ) Ltd (ICOM) to compensate him for the cost of replacing the clutch on the 2005 Mitsubishi Lancer Evolution IX he purchased from ICOM for $42,200 in August 2020. Mr Varcoe says the clutch failed two days after purchase and he replaced the clutch after ICOM refused to perform the work itself.

The issues

[2] 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 Varcoe entitled to under the CGA?

Issue 1: Has the vehicle been of acceptable quality?

[3] 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.
[4] 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.

[5] 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”.

Mr Varcoe’s evidence

[6] The vehicle was transported from ICOM’s premises in Auckland to Mr Varcoe’s home in Dunedin after purchase. Mr Varcoe took possession on 31 August 2020 and says that he noticed the clutch slipping the following day. The symptoms worsened and Mr Varcoe says that the clutch failed completely the next day. He contacted ICOM, which advised him to have the vehicle assessed.
[7] Mr Varcoe took the vehicle to Forbury Service Centre, which assessed the vehicle, and according to Mr Varcoe, was 99 per cent sure that the vehicle’s clutch required replacement. Mr Varcoe then contacted ICOM and asked it to rectify the defective clutch. After several conversations, ICOM ultimately declined to replace the vehicle’s clutch. Instead, it offered to either refund the purchase price or to provide a replacement clutch only, with Mr Varcoe bearing the labour cost.
[8] Mr Varcoe then asked Forbury Service Centre to perform repairs. It dis-assembled the clutch and found that the vehicle’s flywheel and clutch were worn. It then replaced the flywheel and clutch at a cost of $3,610.20.

ICOM’s response

[9] Zijan Liang, a director of ICOM, appeared for the company. Mr Liang disputes whether the vehicle had a defective clutch at the time of sale. Mr Liang had driven the vehicle for two days before sale and says that he noticed no sign of impending clutch failure. He also advised that the vehicle was carefully assessed before sale, including by two MTA approved workshops, and no fault with the clutch was found.
[10] Mr Liang also submitted that the vehicle is a performance vehicle and that the clutch damage may well have been caused by the manner in which Mr Varcoe used the vehicle after it was delivered to him. This allegation raises issues under s 7(4) of the CGA. Under that provision, although a vehicle may be defective, it will not breach the guarantee of acceptable quality if:

• (a) the vehicle was 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 vehicle would have complied with the guarantee of acceptable quality if it had not been used in that manner or to that extent.

[11] Mr Liang also says that ICOM has been prepared to assist Mr Varcoe throughout. It initially offered to either refund the purchase price or bring the vehicle to Auckland to be repaired. However, after speaking with its insurance company, which would not cover the cost of any repair because the insurance company considered the clutch failure to be wear and tear, ICOM withdrew the offer to repair the vehicle and instead offered to either refund the purchase price or provide a replacement clutch that would need to be installed at Mr Varcoe’s expense.

The Tribunal’s assessment

[12] I accept Mr Varcoe’s evidence that he did not misuse the vehicle. I found him to be a clear and consistent witness and I accept his evidence on this point. I therefore find that the clutch was not damaged by Mr Varcoe’s use of the vehicle. Further, Mr Gregory, the Tribunal’s Assessor, advises that even if Mr Varcoe had misused the vehicle, it is highly unlikely that the vehicle’s clutch could have failed in the manner described by Mr Varcoe and found by Forbury Service Centre so shortly after purchase due to that misuse.
[13] Instead, I consider that the evidence shows that the vehicle’s clutch was excessively worn and at the end of its life when the vehicle was sold to Mr Varcoe and that it failed and required replacement shortly thereafter. I accept ICOM’s evidence that it saw no sign of impending clutch failure when it had the vehicle, but I am nonetheless satisfied that the clutch was excessively worn to the extent that it failed almost immediately upon Mr Varcoe taking possession of the vehicle. There is no other plausible explanation as to how the clutch could have failed so shortly after purchase.
[14] That worn clutch means the vehicle was not 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 2: What remedy is Mr Varcoe entitled to under the CGA?

[15] 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.

[16] Under s 18(2)(b)(i) of the CGA, Mr Varcoe is entitled to recover the reasonable cost of replacing the vehicle’s clutch because ICOM refused to rectify the defect at its expense. Although ICOM was prepared to provide other remedies – including a refund or providing a replacement clutch – under ss 18(1) and 18(2), Mr Varcoe was entitled to ask for the clutch to be replaced at ICOM’s expense and ICOM declined to provide that remedy to Mr Varcoe.
[17] Mr Varcoe then spent $3,610.20 replacing the clutch and associated components – but he responsibly does not seek to recover that whole amount because he has installed a more expensive performance clutch in the vehicle rather than the less expensive standard clutch.
[18] Mr Varcoe paid $1,598.90 plus GST ($1,838.74) for the performance clutch. Mr Liang says that ICOM could have obtained a standard replacement clutch for $793 plus GST ($911.95), which Mr Gregory advises is a reasonable estimate of the cost of a suitable replacement clutch. Mr Gregory advises that the other expenses incurred by Mr Varcoe in replacing the clutch were all reasonable and necessary.
[19] Taking account of the difference in cost between the performance and a standard clutch and considering the betterment that Mr Varcoe has received by installing a new clutch in the vehicle, I consider it appropriate to reduce the amount payable to Mr Varcoe to $2,500, which in my view will reasonably compensate him for the cost he has incurred in replacing the vehicle’s clutch.
[20] The Tribunal therefore orders that ICOM shall, within 10 working days of the date of this decision, pay $2,500 to Mr Varcoe.

DATED at AUCKLAND this 28th day of January 2021

B.R. Carter
Adjudicator

This decision has been appealed. The outcome of that appeal was unknown at the date of the publication of this decision.