Magan v Glenfield Wholesale Ltd - Reference No. MVD 102/2022 [2022] NZMVDT 107 (14 June 2022)

Last Updated: 25 July 2022

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 102/2022 [2022] NZMVDT 107 BETWEEN KETAN MAGAN & JYOTI MAGAN Applicant AND GLENFIELD WHOLSALE LTD Respondent

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Gregory, Assessor

HEARING at Auckland on 17 May and 7 June 2022 (by audio-visual link)

APPEARANCES

K & J Magan, Applicants

A Revich and A Harris for the Respondent

DATE OF DECISION 14 June 2022

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DECISION OF THE TRIBUNAL

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1. Glenfield Wholsale Ltd shall, within 10 working days of the date of this decision, pay $6,669.25 to Ketan and Jyoti Magan.

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REASONS

Introduction

[1] Ketan and Jyoti Magan want to recover the $11,843.87 they have spent diagnosing and repairing defects that have arisen in the 2009 Audi A3 Sportsback they purchased for $14,000 from Glenfield Wholsale Ltd in December 2020.
[2] Glenfield Wholsale denies liability. It says that the vehicle’s defects all occurred too long after purchase for it to have responsibility. Glenfield Wholsale also says that Mr and Mrs Magan incurred many of the costs without notifying it and that the most significant fault – a transmission fault – may have been caused by the vehicle being misused.

Relevant background

[3] The vehicle’s odometer reading at the time of sale was 51,930 km. Mr and Mrs Magan used the vehicle without issue until about 13 October 2021, when the driver’s doors would not lock or unlock from the key. Mr and Mrs Magan had the vehicle assessed by Armstrong Prestige (Wellington) Ltd, which replaced the driver’s door actuator, at a cost of $1,092.02. Mr and Mrs Magan did not contact Glenfield Wholsale before performing this repair.
[4] The following day, the vehicle would not go into gear. Mr and Mrs Magan paid $100 to Dave Ward Towing Ltd to have the vehicle transported to Armstrong Prestige for diagnosis. The vehicle’s odometer reading at that time was about 59,255 km.
[5] Armstrong Prestige performed a diagnostic scan and found the following fault codes:

• P073A00 – stuck in gear 5
• P073B00 – stuck in gear 6

[6] Armstrong Prestige considered that the “fault lies with the gear selector position sensor in the mechatronics unit”. Armstrong Prestige also considered that the bearings inside the transmission had failed. It partially dismantled the transmission and found evidence of metal filings attached to magnets in the transmission, which it considered to be metal fragments from worn bearings. It recommended that the transmission and mechatronics unit should be replaced at a cost exceeding $17,000. Mr and Mrs Magan were charged $569.25 for this diagnosis (invoice date 20 October 2021).
[7] Surprised by the estimated cost of repair, Mr and Mrs Magan then had the vehicle assessed by Hutt Automatics, which replaced the mechatronics unit and reconditioned the transmission, at a cost of $9,074.08 (invoice dated 9 November 2021). Hutt Automatics declined to attend the hearing to give evidence, but provided photographs of a worn transmission bearing, a copy of a job card and an invoice detailing the repair work performed.
[8] Mr Magan emailed Glenfield Wholsale on 21 October 2021, advising that Armstrong Prestige had “diagnosed the problem with the car as an electrical transmission fault” and asked for assistance “to put this situation right”. On 27 October 2021, Glenfield Wholsale responded, advising that the vehicle had two inspections before purchase, the vehicle was in excellent order when it left the dealership, and that it “cannot assist in repairs on this vehicle”. Glenfield Wholsale subsequently suggested how the Magans might reduce the cost of repairs and advised them to purchase a mechanical warranty in the future.
[9] Other issues have since arisen. On 11 January 2022, Mr and Mrs Magan paid $399.02 to Armstrong Prestige to replace a faulty fuel flap actuator and on 19 January 2022, they paid Hutt Automatics $609.50 to replace a worn front wheel bearing. Mr Magan says that the wheel bearing had been noisy since October 2021 but was not repaired at that time because he thought the noise was coming from the transmission.

The issues

[10] 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) What remedy is Mr and Mrs Magan entitled to under the CGA?

Issue 1: Has the vehicle been of acceptable quality?

[11] 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.
[12] 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.

[13] 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 and Mrs Magan’s subjective perspective.

The damaged transmission breached the guarantee of acceptable quality

[14] Despite Glenfield Wholsale’s submission that the transmission fault may not have been properly diagnosed, and that Hutt Automatics may not have performed any diagnosis before it repaired the vehicle, I find that the evidence presented by Mr and Mrs Magan shows that the mechatronics unit required replacement and that the transmission was damaged and required expensive overhaul.
[15] Mr Gregory, the Tribunal’s Assessor, advises that the evidence provided by Armstrong Prestige and Hutt Automatics, particularly the photographs of the worn bearings and the metal filings within the transmission, shows that the bearings have worn to the extent that the transmission overhaul was required. Mr Gregory advises that the wear to the bearings, as shown in the photographs from Hutt Automatics, is longstanding and that the bearings are likely to have started to wear before the vehicle was purchased by the Magans.
[16] Mr Gregory also advises that the two fault codes found by Armstrong Prestige, together with the fact that the vehicle would not engage gear, is evidence that the mechatronics unit was faulty and required replacement. Mr Gregory advises that it is reasonably common for mechatronics units to fail in Audi A3s of this age.
[17] The faulty mechatronics unit and damaged transmission breach the guarantee of acceptable quality in s 6 of the CGA. Although the purchaser of a vehicle of this price, age and mileage should have realistic expectations about the vehicle’s quality and durability and should understand that faults, that can be expensive to rectify, may occur from time to time, I am satisfied that a reasonable consumer would not expect to replace the mechatronics unit and overhaul the transmission nearly 11 months after purchase and less than 8,000 km of driving.
[18] Glenfield Wholsale says that it should not have liability for these faults as the transmission damage may have been caused by misuse. That submission is speculative and unsupported by any credible evidence. The fact that Mr Magan may have driven the vehicle once at a speed of 170 km/h (which Mr Magan denies), will not cause transmission damage. There is also no evidence to show that Mr and Mrs Magan’s son has misused the vehicle. Likewise, the tyre wear (as much as 5mm per tyre over about 10,000 km of driving), although more than would ordinarily be expected, is not evidence that the vehicle was misused to the extent that the transmission has been damaged. There is also no evidence that the Magans have ever raced the vehicle, as suggested by Anatoly Revich, a director of Glenfield Wholsale.

The remaining faults do not breach the guarantee of acceptable quality

[19] The remaining defects complained of by the Magans – the faulty door actuator, faulty fuel flap actuator and worn wheel bearing do not breach the guarantee of acceptable quality. Each of these faults is relatively minor, is the type of fault that can arise in a vehicle of this age and mileage due to ordinary wear and tear and occurred too long after purchase for Glenfield Wholsale to have any liability.

Issue 2: What remedy is Mr and Mrs Magan entitled to under the CGA?

[20] 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.

[21] Under s 18(2)(b)(i) of the CGA, Mr and Mrs Magan are entitled to recover the reasonable cost of replacing the mechatronics unit and rebuilding the transmission. They asked Glenfield Wholsale to rectify those faults, and it refused to do so. They were therefore entitled to have the repairs performed elsewhere and recover the reasonable cost from Glenfield Wholsale.
[22] Glenfield Wholsale says that Mr and Mrs Magan should not be entitled to any remedy because the transmission was partially stripped as part of the diagnostic process performed by Armstrong Prestige and Hutt Automatics. Mr Revich relied on the following statement on the consumerprotection.govt.nz website in support of that submission:

Don’t get the car checked by a mechanic or anyone else before you contact the dealer. You could lose your right to a remedy if you do.[1]

[23] That statement is an oversimplification of the relevant provisions of the CGA. There is no provision in the CGA that says a consumer will lose any right to a remedy by having a vehicle assessed and diagnosed by a mechanic without first advising the supplier. Instead, the CGA provides that:

• (a) a consumer can lose the right to reject a vehicle if it has been damaged;[2] or
• (b) a consumer can lose the right to recover the cost of rectifying a vehicle’s defects if it did not first give the supplier a reasonable opportunity to rectify those defects.[3]

[24] There is no prohibition on a consumer having defects diagnosed without contacting the supplier. Indeed, in this Tribunal’s experience, many motor vehicle traders insist that the consumer provide evidence of a diagnosis before they provide any remedy under the CGA. Consequently, Mr and Mrs Magan have not lost the right to a remedy by having the transmission fault diagnosed and are therefore entitled to recover the reasonable cost of that repair.
[25] Mr and Mrs Magan paid $9,074.08 to have the mechatronics unit replaced and the transmission reconditioned. Glenfield Wholsale says that this cost was not reasonable, and it could have performed the repair for much less. It says that it found a secondhand transmission, which it offered to the Magans, for $3,372.
[26] Mr Gregory advises that the $9,074.08 cost of replacing the mechatronics unit and overhauling the transmission was reasonable. Mr Gregory says that cheaper alternatives were available, such as replacing the transmission and mechatronics unit with secondhand parts, but there can be no certainty as to the quality or durability of secondhand parts, so it was reasonable of the Magans to choose to overhaul the transmission and replace the mechatronics unit.
[27] However, in determining the amount ultimately recoverable by the Magans, I must also take account of the significant betterment they have obtained by replacing the mechatronics unit and overhauling the transmission.
[28] The vehicle is 11 years old and has travelled more than 59,000 km. Given its age and mileage, a reasonable consumer would have understood that the mechatronics unit and transmission would be showing signs of wear and may well require repairs or maintenance in the future.
[29] Following the repair performed by Hutt Automatics, the vehicle has a new mechatronics unit and an overhauled transmission. Those repairs will undoubtedly increase the value of the vehicle and durability of the transmission and have put the vehicle in a condition that far exceeds the usual condition of a vehicle of this age and mileage. Mr and Mrs Magan have therefore obtained betterment by this repair and Glenfield Wholsale should not be liable for that betterment. I therefore reduce the amount recoverable under s 18(2)(b)(i) to $6,000 to reflect that betterment.
[30] Under s 18(4) of the CGA, Mr and Mrs Magan are entitled to recover the following costs relating to the transmission fault:

• (a) $100 – the cost of having the vehicle towed by Dave Ward Towing; and
• (b) $569.25 – the cost of the Armstrong Prestige diagnosis.

Outcome

[31] Glenfield Wholsale shall, within 10 working days of the date of this decision, pay $6,669.25 to Mr and Mrs Magan.

DATED at AUCKLAND this 14th day of June 2022

B.R. Carter
Adjudicator

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[1] https://www.consumerprotection.govt.nz/help-product-service/cars/solving-issues-car-dealer/

[2] Consumer Guarantees Act 1993, s 20(1)(c).

[3] Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 (HC).