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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 19 March 2022
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BETWEEN ANDREA STAFFORD SHAW & TUTAHI TURNER
Applicant
AND TE RAPA WHOLESALE CARS 2009 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 1 February 2022 (by audio-visual link)
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APPEARANCES
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A Stafford Shaw and T Turner, the Applicants
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J Haitana for the Respondent
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DATE OF DECISION 16 February 2022
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] On 4 February 2021, Andrea Stafford Shaw and Tutahi Turner purchased a 2009 Mazda Axela from Te Rapa Wholesale Cars 2009 Ltd for $17,995. They now seek to reject the vehicle because the vehicle’s engine has suffered significant damage and requires replacement and other defects have arisen. Ms Stafford Shaw and Mr Turner also allege that the vehicle offer and sale agreement and the terms of the loan they entered into to purchase the vehicle were not adequately disclosed to them at the time.
[2] Te Rapa Wholesale Cars agrees that the vehicle’s engine requires replacement. However, it says that Ms Stafford Shaw and Mr Turner should not be entitled to reject the vehicle as they agreed to allow Te Rapa Wholesale to replace the engine and it then purchased a replacement engine before Ms Stafford Shaw and Mr Turner rejected the vehicle.
Relevant background
Pre-purchase
[3] The vehicle offer and sale agreement records that Ms Stafford Shaw and Mr Turner paid $17,995 for the vehicle. Although neither could remember the exact price advertised on the vehicle before they purchased it, both Ms Stafford Shaw and Mr Turner say that the advertised price was lower than $17,995.
[4] Ms Stafford Shaw and Mr Turner borrowed money from MARAC, a division of Heartland Bank Ltd to purchase the vehicle. They had no money themselves to contribute towards the purchase of the vehicle, so intended to borrow the entire purchase price.
[5] Ms Stafford Shaw says that the purchase of the vehicle was rushed and that she was not given a proper opportunity to consider the loan agreement before she signed it. She says it was not until some time later that she realised that the vehicle offer and sale agreement and loan agreement both stated that Ms Stafford Shaw and Mr Turner had paid a cash deposit of $2,000. They had paid no such deposit.
[6] Jamie Haitana, a reconditioning manager at Te Rapa Wholesale Cars, appeared for the company. Mr Haitana was not involved in the transaction, but advised that it is likely that the $2,000 figure recorded on the vehicle offer and sale agreement and loan agreement was what he called a “dealer deposit”, which I understood to be a euphemism for a situation where the seller raises the price of the vehicle by adding an illusory deposit to enable the purchaser to obtain finance where they do not have sufficient funds to pay a deposit. That practice is also colloquially known as “price hydraulicing”.
The engine damage
[7] Ms Stafford Shaw first contacted Te Rapa Wholesale Cars about the vehicle’s oil consumption in early September 2021. She was told by Mr Haitana to put oil in the engine and take the vehicle to Deane Mark Auto Electrical in Te Awamutu.
[8] Deane Mark Auto Electrical assessed the vehicle on 13 September 2021 and found significant engine damage. In an invoice dated 6 October 2021, Deane Mark Auto Electrical states that it found that the compression on all four cylinders in the engine was lower than the normal level of 180 psi. It also performed a cylinder leakage test and found “excessive blow by”.[1]
The other defects
[9] Ms Stafford Shaw and Mr Turner allege that the vehicle has two other defects – vehicle’s I-stop function is faulty and the vehicle has a knocking noise from its front suspension. Neither fault has been diagnosed, but Te Rapa Wholesale Cars has offered to rectify any such fault that might exist.
The issues
[10] 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 Ms Stafford Shaw and Mr Turner entitled to under the CGA?
- (c) Did Te Rapa Wholesale Cars engage in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA)?
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.
[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”.
[14] There is no dispute between the parties that the vehicle suffered severe engine damage and that the most economic repair is to replace the engine. There is also no suggestion that the engine damage was caused by Ms Stafford Shaw and Mr Turner’s use of the vehicle. Consequently, I am satisfied that the vehicle is not of acceptable quality, because the engine damage means that the vehicle has not been as free of minor defects or as durable as a reasonable consumer would consider acceptable.
[15] Ms Stafford Shaw and Mr Turner have not proven the existence of any fault with the I-Stop function or any unacceptable noise from the front suspension, so I am not satisfied that the vehicle has any such defect that would breach the guarantee of acceptable quality. Indeed, with respect to the I-Stop function, I note that Deane Mark Auto Electrical considered that the I-Stop function was working as it should.
Issue 2: What remedy is Ms Stafford Shaw and Mr Turner entitled to under the CGA?
[16] 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.
[17] Ms Stafford Shaw and Mr Turner want to reject the vehicle because they consider that the engine damage is a failure of a substantial character and Te Rapa Wholesale Cars has taken too long to repair the vehicle.
[18] I agree that the engine damage is a failure of a substantial character for the purposes of s 21(a) of the CGA because a reasonable consumer would not have purchased the vehicle if they had known that the engine would require replacement so shortly after purchase. However, Ms Stafford Shaw and Mr Turner cannot reject the vehicle on this basis, because they agreed to allow Te Rapa Wholesale Cars to repair the vehicle and then did not give it a reasonable opportunity to complete the repair before attempting to reject the vehicle.
[19] Ms Stafford Shaw initially wanted to reject the vehicle. Mr Haitana advised her that he could not authorise the return of the vehicle and that he would have to talk to his boss. After speaking with the company’s owner, Mr Haitana advised Ms Stafford Shaw that Te Rapa Wholesale Cars would not accept the return of the vehicle. Instead, Te Rapa Wholesale Cars said it should be given the opportunity to replace the engine.
[20] Ms Stafford Shaw was reluctant to allow Te Rapa Wholesale Cars to repair the vehicle but on 21 September 2021 she wrote to the company advising that, having “gathered legal advice”, she would allow Te Rapa Wholesale Cars to replace the engine at its cost. At the hearing, Ms Stafford Shaw submitted that the 21 September 2021 email did not constitute an agreement to repair. I disagree. In the email, Ms Stafford Shaw clearly agrees to allow Te Rapa Wholesale Cars to repair the vehicle.
[21] Te Rapa Wholesale Cars then purchased a replacement engine on 22 September 2021 for $747.50, as evidenced by an invoice of that date from Lovegrove Auto Parts provided to the Tribunal after the hearing.
[22] On 23 September 2021, Ms Stafford Shaw then wrote to Te Rapa Wholesale Cars, seeking to reject the vehicle. On 24 September 2021, Mr Haitana advised Ms Stafford Shaw that Te Rapa Wholesale Cars had already purchased a replacement engine and that the repair could be completed at a total cost of about $1,600.
[23] Ms Stafford Shaw says that she was concerned that Te Rapa Wholesale Cars had not provided any information about the quality of repairs. She was also concerned about the low cost of the replacement engine (Ms Stafford Shaw had been told by another mechanic that a replacement engine might cost much more), the fact that the engine was being sourced from a wrecker’s yard and the low estimated cost of the total repair. Ms Stafford Shaw says she was worried that Te Rapa Wholesale Cars may perform a substandard repair. On 26 September 2021, Ms Stafford Shaw restated her rejection of the vehicle.
[24] I acknowledge that Ms Stafford Shaw and Mr Turner reluctantly agreed to allow Te Rapa Wholesale Cars to repair the vehicle and were at least in part, influenced by Te Rapa Wholesale Cars’ insistence that it had a right to replace the engine. I also acknowledge Ms Stafford Shaw and Mr Turner’s submission that they felt as if they had no other choice but to agree to Te Rapa Wholesale Cars repairing the vehicle.
[25] Nonetheless, Ms Stafford Shaw and Mr Turner were not entitled to reject the vehicle at that time. They had agreed to allow Te Rapa Wholesale Cars an opportunity to repair the vehicle and it then purchased a replacement engine in reliance on Ms Stafford Shaw and Mr Turner’s agreement to repair. By the time Ms Stafford Shaw and Mr Turner attempted to reject the vehicle on 23 September 2021, Te Rapa Wholesale Cars had not failed to repair the vehicle within a reasonable time. Further, Ms Stafford Shaw and Mr Turner have not since given Te Rapa Wholesale a chance to repair the vehicle, so they cannot reject the vehicle due to any subsequent delay in replacing the engine.
[26] Ms Stafford Shaw and Mr Turner’s application to reject the vehicle is therefore dismissed. Instead, under s 18(2)(a) of the CGA, they are entitled to have the vehicle repaired within a reasonable time.
[27] I also note that Te Rapa Wholesale Cars has agreed to repair any defects with the vehicle’s I-Stop function and any unacceptable noise from the front suspension. I make no orders relating to those repairs, because Ms Stafford Shaw and Mr Turner have not proven that any such defects would breach the guarantee of acceptable quality.
Issue 3: Has Te Rapa Wholesale Cars engaged in misleading conduct?
[28] Ms Stafford Shaw and Mr Turner also alleged that the vehicle offer and sale agreement and the terms of the loan they entered into to purchase the vehicle were not adequately disclosed to them at the time they purchased the vehicle and that the purchase price included a $2,000 deposit they did not pay.
[29] This allegation raises issues under s 9 of the FTA, which provides:
- Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[30] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd v Ellis:[2]
The question to be answered in relation to s 9 ... is ... whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established.
Disclosure of the vehicle offer and sale agreement and loan agreement
[31] I am not satisfied that Ms Stafford Shaw and Mr Turner have proven that Te Rapa Wholesale Cars engaged in misleading conduct in breach of s 9 of the FTA by failing to adequately disclose the terms of the vehicle offer and sale agreement and loan agreement. Those documents were disclosed to Ms Stafford Shaw and Mr Turner and they signed them. Although the transaction may have felt rushed, and Ms Stafford Shaw and Mr Turner may not have closely read the documents, the relevant information was made available to them in advance of purchasing the vehicle.
The vehicle’s price
[32] Likewise, I am not satisfied that Te Rapa Wholesale Cars misled Ms Stafford Shaw or Mr Turner regarding the vehicle’s price. Ms Stafford Shaw and Mr Turner were aware of the vehicle’s $17,995 price before they agreed to purchase the vehicle. They may not have been aware that the price had been hydrauliced, but they did not pay more for the vehicle than was agreed because the $2,000 “dealer deposit” included in the purchase price was entirely fictional and they have no obligation to ever pay that amount. In effect, Ms Stafford Shaw and Mr Turner have only paid $15,995 for the vehicle.
[33] If anything, Te Rapa Wholesale Cars’ manipulation of the purchase price by including the dealer deposit was an attempt to mislead the lender, not Ms Stafford Shaw or Mr Turner. Consequently, Ms Stafford Shaw and Mr Turner’s claim under the FTA is dismissed.
Outcome
[34] Ms Stafford Shaw and Mr Turner’s application to reject the vehicle is dismissed and Te Rapa Wholesale Cars shall, within a reasonable time from the date of this decision, replace the vehicle’s engine.
DATED at AUCKLAND this 16th day of February 2022
B.R. Carter
Adjudicator
[1] Blow-by occurs when the compressed air in the combustion chamber leaks past the piston rings into the sump, which in turn over-pressurises the sump causing oil to be pushed into the combustion chamber, contaminating the spark plugs and leading to excessive oil consumption.
[2] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
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