Pogson v NZ Cars Direct Limited - Reference No. MVD 133/2022 [2022] NZMVDT 138 (11 July 2022)

Last Updated: 8 October 2022

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 133/2022
[2022] NZMVDT 138

BETWEEN ANGELA POGSON

Purchaser

AND NZ CARS DIRECT LIMITED

Trader

HEARING at WELLINGTON on 7 June 2022
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator
A B Cate – Assessor

APPEARANCES

A Pogson, Purchaser
P Thumparambil, Director of Trader (by VMR)
S Patel, Support Person for Trader (by VMR)
E Clayton, Technician, Maidstone Mechanical

DATE OF DECISION 11 July 2022

___________________________________________________________________

DECISION OF THE TRIBUNAL

___________________________________________________________________

1. Angela Pogson’s application to reject her Audi S5 is not upheld.
2. NZ Cars Direct Limited must:
   • (i) replace the middle resonator in the vehicle’s exhaust system;
   • (ii) replace the vehicle’s worn lower control arm joints;
   • (iii) repair the brake warning sensor wiring;
   • (iv) repair the plastic item referred to in the vehicle’s sales agreement.

100. These repairs should be carried within one month after the date of this decision. If there are difficulties in completing the repairs within that timeframe, NZ Cars Direct must contact the case manager before the expiry of this deadline to request an extension.

___________________________________________________________________

REASONS

Introduction

[1] On 19 July 2021, Angela Pogson purchased a 2012 Audi S5 from NZ Cars Direct Ltd. Ms Pogson alleges the vehicle has not been fit for purpose as it has had a number of mechanical faults.
[2] Ms Pogson is also concerned that the engine codes on different parts of the vehicle do not match. In that regard, she alleges that the vehicle’s engine may have been changed.
[3] In her claim against NZ Cars Direct, Ms Pogson seeks $43,219.19 comprising:

• (a) the purchase price, $38,000;
• (b) the cost of a mechanical breakdown insurance policy that she purchased at the same time for $1,800;
• (c) the cost of various repairs that she has had done to the vehicle that were not covered under the insurance policy.

[4] The following issues arise for the Tribunal to determine:

• (a) Did the vehicle fail to comply with the guarantee of acceptable quality?
• (b) Did the vehicle fail to comply with its description?
• (c) What, if anything, is the appropriate remedy?

Issue 1: Did the vehicle fail to comply with the guarantee of acceptable quality?

[5] Section 6(1) of the Consumer Guarantees Act 1993 (the Act) provides that “where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”. According to s 2 of the Act, “goods” includes vehicles.
[6] “Acceptable quality” is defined in s 7 of the Act (as far as is relevant) 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.

...

[7] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[8] Ms Pogson alleges the vehicle has or has had various faults, which I will now describe.

“LHS Rear plastic”

[9] In the bottom left corner of the vehicle sales agreement dated 19 July 2021 there is a handwritten promise: “LHS, Rear plastic will be fixed.” This promise was initialled by the trader. Ms Pogson says this item has not been fixed as agreed. There was very little detail provided as to the nature of this defect or why the trader had not fixed it. Pramod Thumparambil, NZ Cars Direct’s Director, indicated at the hearing that he is still willing to repair this defect.

Exhaust Issues

[10] On or around 18 October 2021, Ms Pogson took the vehicle to Mag & Turbo in Porirua to investigate a leaking exhaust. Mag & Turbo removed part of the rear exhaust to investigate the source of the leak. It patched the repair but noted that the exhaust appears to have had its rear muffler cut open to remove baffles. Mag & Turbo described the workmanship of the reinstatement and welding as “substandard”. According to Mag & Turbo, this resulted in the exhaust blowing a hole around the area where it was welded. Mag & Turbo advised that the rear half of the exhaust needs to be replaced. Mag & Turbo noted that engine leaks appear to be coming from the upper engine area. It advised Ms Pogson to ask a mechanical specialist to rectify the defect.
[11] Prior to the hearing, the Tribunal requested Ms Pogson to obtain a report from an MTA-assured exhaust specialist on the condition of the exhaust and a quote for repairs or replacement. In response to that request, Ms Pogson took the vehicle to Maidstone Mechanical on 20 May 2022. It inspected the exhaust system and reported that it appears to be a standard exhaust system for this model of vehicle. It reported the middle resonator had been welded and patched up. Maidstone Mechanical said that it was unable to repair or replace the exhaust. It recommended that the exhaust be replaced by NZ Cars Direct or an Audi specialist.
[12] Ms Pogson asked Armstrong’s Audi Wellington to provide a quote for an entire replacement exhaust system for a 2012 Audi S5. This was produced on 23 May 2022. Armstrong’s quoted $23,489.57 to replace the exhaust with a new exhaust system.
[13] At the hearing, the Tribunal telephoned Evan Clayton, the manager of Maidstone Mechanical, to ask him to elaborate on his report. Mr Clayton confirmed that his inspection of the vehicle revealed it had a standard exhaust system which was not currently leaking and therefore would not fail a warrant of fitness inspection. In Mr Clayton’s view, the exhaust system is currently not significantly defective. Nevertheless, Maidstone Mechanical recommends that the middle resonator[1] be replaced, due to the temporary nature of repairs that have been done to it. Although Mr Clayton did not think that the repair would be particularly difficult for an Audi specialist, it was outside the scope of the expertise of his workshop.
[14] In other words, Mr Clayton confirmed that there was no need to replace the entire exhaust system, just the middle resonator.

Tribunal’s assessment

[15] In general, an exhaust system is somewhat of a wear and tear item that is known to deteriorate over time and require periodic replacement. However, the evidence produced by Ms Pogson suggests that this exhaust was subject to unprofessional modifications prior to her purchasing the vehicle. For that reason, I consider that the vehicle’s exhaust system did not measure up to the standard of what a reasonable consumer would regard as acceptable. I accept Mr Clayton’s evidence that in order to bring the vehicle up to the standard of acceptable quality as required under s 6 of the Act, its middle resonator needs to be replaced.

Transmission service

[16] On or around 22 October 2021, the vehicle underwent a transmission service, apparently at the behest of Mag & Turbo Warehouse, at a cost of $857.03. There was no evidence of any faults with the transmission. Rather, this appears to be ordinary maintenance for the vehicle which would not be regarded as a defect for the purposes of the guarantee of acceptable quality.

Oil leak at oil filter housing

[17] Around the same time as the transmission service, Motor Tech addressed an oil leak. It traced the leak to the oil filter housing, which it replaced. Apparently, this was covered by Ms Pogson’s mechanical breakdown insurance apart from an excess of $700 which she paid herself. At the time that this oil leak was rectified the vehicle’s odometer reading was 52,713 km, some 6,200 km more than at the date of purchase, some three months earlier. Given the reasonably short time after purchase when this fault occurred, I accept that it amounts to a further failure to comply with the guarantee of acceptable quality.

Supercharger belt

[18] Not long after this repair, Motor Tech replaced a faulty supercharger belt to address a rattle on start-up, at a cost of $139.07. Again, this repair appears to have been initiated by Mag & Turbo Warehouse and no evidence was presented that Ms Pogson herself paid for the work to be done. I accept that in light of the relatively short time after purchase that this fault occurred it amounts to a further failure by the vehicle to comply with the guarantee of acceptable quality.

Mechatronic repair

[19] A more significant repair was needed in or around early November 2021. Ms Pogson produced an invoice from Hutt Automatics 2019 indicating that it removed and repaired the vehicle’s transmission mechatronic[2] on or around 8 November 2021. The Tribunal was not informed of the full cost of this repair. However, the invoice produced indicates that Ms Pogson’s former partner was invoiced $1,154.25 representing the balance of a claim not covered under insurance.
[20] This defect appears to have occurred within four months after the date of purchase and the vehicle’s odometer reading at the time of the repair is recorded at 53,175 km, less than 7,000 km more than at the date of purchase.
[21] I consider that the mechatronic failure is a further breach of the acceptable quality guarantee.

Armstrong’s inspection report

[22] Ms Pogson continued to have concerns about the vehicle, which she raised with NZ Cars Direct. The parties agreed to have the vehicle inspected by an independent technician. Armstrong’s Audi was engaged to visually inspect the vehicle on 8 December 2021 and report.
[23] Armstrong’s report noted that there were several visual modifications to the vehicle noted at the time of inspection including:

• (a) an after-market air intake;
• (b) a modified exhaust system (the baffle box had been cut open and re-welded, but Armstrong’s could not confirm whether the inner honeycombs of the catalytic converters had been removed);
• (c) a modified front brake system, including a modified brake warning system. Specifically, it found that the brake pad wear sensor wiring was “bridged”, disabling the warning system. In addition, Armstrong’s noted that the vehicle had after-market brake rotors, pads, and callipers and braided brake hose lines; and
• (d) worn lower control joints.

[24] Armstrong’s considered whether to have the engine control unit (ECU) software checked in order to obtain further information on the vehicle. However, Ms Pogson was told this could render the ECU unusable if there was any after-market software currently loaded. As the risk of ECU failure would have fallen to Ms Pogson if Armstrong’s caused the system to fail, she decided not to have this work done.
[25] On the advice of Mr Cate, I conclude that the bridged wear-sensor wiring in the brake warning system amounts to a further failure to comply with the guarantee of acceptable quality, as do the worn lower control joints.

Assessment

[26] Accordingly, Ms Pogson has established that her vehicle failed to comply with the guarantee of acceptable quality in the following respects:

• (a) the defective exhaust middle resonator;
• (b) the oil filter housing leak;
• (c) the faulty supercharger belt;
• (d) the faulty mechatronic;
• (e) the bridged brake warning sensor system;
• (f) the worn lower control joints.

Failure of a substantial character?

[27] A failure of a vehicle to comply with the guarantee of acceptable quality will be a failure of a substantial character under the criteria outlined in s 21 of the Act:

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.

[28] The two most relevant of these criteria are those in paras (a) and (d).
[29] Occasionally, a consumer can establish that an “accumulation of small defects”, in combination, is a failure of a substantial character, even though any one of those faults on its own might not have prevented a reasonable buyer from purchasing the vehicle.[3] However, a reasonable purchaser of a nine-year-old European performance vehicle such as this, especially one with an unknown service history from its previous life overseas, can reasonably expect to experience some defects. A purchaser of such a vehicle will still be protected under the guarantee of acceptable quality, as far as it goes. But the nature of the vehicle is relevant in assessing whether a reasonable consumer would have acquired the vehicle in the first place. There are certain vehicles, and this is undoubtedly one of them, where a reasonable purchaser would expect that faults may arise.
[30] The defects listed in [26] above, whether considered individually or in combination, are not sufficiently serious in my view to trigger s 21(a) of the Act. In the present case, Ms Pogson has not established a failure of a substantial character in her vehicle under s 21(a).
[31] There was insufficient evidence to allow a conclusion that any of these matters compromised vehicle safety. Therefore, I do not consider there to be any basis for concluding that the failure to comply with the guarantee of acceptable quality amounted to a failure of a substantial character in accordance with s 21(d) of the Act.
[32] Accordingly, although Ms Pogson has established that her vehicle failed to comply with the guarantee of acceptable quality in several respects. Neither any one of them, nor all of them in combination, amount to a failure of a substantial character.

Issue 2: Did the vehicle fail to comply with its description?

[33] Section 9 of the Act provides that where goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description. Ms Pogson outlined a number of concerns that the vehicle she purchased is different from the one that she understood that she was purchasing, from the description supplied by NZ Cars Direct.

Exhaust

[34] First, Ms Pogson said that she had purchased a vehicle that she understood, from a description supplied by the trader, would have an “after-market exhaust system fitted”. However, she has since discovered that the vehicle’s exhaust is a “standard exhaust” that has been unprofessionally repaired.
[35] Very little detail was supplied to the Tribunal to confirm the manner in which the vehicle’s exhaust had been described in pre-sale advertising. No copies of the advertisement of the vehicle were produced and nor was there any description of the exhaust system on the vehicle sales agreement.
[36] Ms Pogson was unable to provide specific information as to the nature of the exhaust system that she thought she was purchasing and so it was very hard for the Tribunal to reach any finding on this aspect that there was a breach of the guarantee that goods comply with their description. That is because it was not possible to pin down exactly what the relevant pre-sale description of the exhaust system was.
[37] In the hearing it was alleged the word “upgraded” was used to describe the exhaust, but there was little clarity offered as to what that word might have meant, if indeed it was used when the vehicle was sold.
[38] In conclusion, I am not able to reach any finding that the vehicle did not correspond with its description in respect of its exhaust system. However, in light of my earlier finding that the vehicle’s exhaust system did not comply with the guarantee of acceptable quality, Ms Pogson will have a remedy in respect of that which I will come to later in this decision.

Concerns about engine and chassis numbering

[39] Secondly, Ms Pogson expressed several concerns that the vehicle she purchased did not correspond with its description in respect of its engine and chassis numbering. In particular, Ms Pogson referred to discrepancies she had observed between numbers on a sticker on the engine block compared with a different number on a metal tag under the bonnet. In addition, Ms Pogson expressed concerns that the vehicle identification number (VIN) indicates that the vehicle was in fact an Audi A5 rather an S5 on a database she had looked at online.
[40] Mr Cate has carefully reviewed the information that Ms Pogson produced in respect of the numbering discrepancies she alleges. Despite Ms Pogson’s concerns, Mr Cate said that he was unable to share her concerns about the vehicle.
[41] Mr Cate explained that one possible reason why there are different engine numbers visible on the vehicle is that the engine may have been replaced earlier in the vehicle’s life. As the vehicle did not come with a service history in respect of its time in Singapore before being imported to New Zealand, it is not possible to explore this possibility further. However, it is clear from the compliance certification check sheet supplied by the trader, that the vehicle as imported appears to be the same vehicle, with the same engine, as that which Ms Pogson purchased.
[42] In addition, Armstrong’s inspection report confirmed:

• (a) the engine’s code is correct, although its serial number could not be confirmed due to the rest of the numbers not being visible without removing components to gain access to that area;
• (b) the VIN number associated with the vehicle is correct and matches the stamped VIN number in the engine bay. However no VIN number was visible through the windscreen, perhaps because an after-market windscreen had been installed with a blacked-out VIN display slot;
• (c) the vehicle is confirmed as a 2012 Audi S5 Quattro 3 litre V6 245KW 7 speed automatic imported from Singapore;
• (d) no service history was available for the vehicle;
• (e) visual modifications were noted (as described at [23] above).

[43] Armstrong’s was unable to confirm whether parts dated with the year 2009 in the engine bay had been installed after the manufacture of the vehicle.

Tribunal’s assessment

[44] In summary, Armstrong’s inspection confirms that the vehicle’s VIN number is correct. There remains though some uncertainty about the engine serial number. However, as Mr Cate explained, this may relate to the fact that the engine may have been replaced prior to its importation to New Zealand.
[45] In summary, Ms Pogson has not established any discrepancies that give Mr Cate any cause for concern. If the engine was replaced at an earlier stage that is something that the trader may not have been aware of. There is certainly no reason to suggest that it was misleading conduct on the part of the trader or that it suggests any on-going fault with the vehicle. Engines can be replaced for a range of reasons and there does not seem to have been any undertaking by the trader before selling the vehicle that it had its original engine.
[46] The fact that the vehicle’s service history prior to importation is not traceable is also not uncommon for an imported used vehicle. A purchaser of a second-hand European vehicle that has been imported from overseas may need to take their own precautions in relation to the period of the vehicle’s history that remains unknown. Of course, a purchaser is entitled to protections under relevant consumer legislation. However, this generally requires proof the vehicle has a defect or the trader has misled the purchaser. None of the concerns raised by Ms Pogson as to numerical discrepancies on stickers and plates in the vehicle amount to any proven defect.

Conclusion

[47] Accordingly, I am not persuaded that Ms Pogson has established any failure of the vehicle to comply with its description either in respect of its exhaust system or in respect of the VIN number or engine number on the vehicle.

Issue 3: What is the appropriate remedy?

[48] The remedies available to a consumer where a vehicle does not comply with the guarantee of acceptable quality are set out in s 18 of the Act, 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.

[49] The primary remedy available to a consumer where a vehicle fails to comply with the guarantee of acceptable quality is set out in s 18(2)(a) and allows the consumer to require the supplier to remedy the failure within a reasonable time.
[50] To summarise, I have found that Ms Pogson established that there were a number of faults amounting to failures to comply with the guarantee of acceptable quality, but not amounting to a failure of a substantial character.
[51] In those circumstances Ms Pogson needed to give the trader a chance to remedy the matters requiring repairs before going ahead and having those repairs carried out.[4]
[52] Although Ms Pogson alleged that she had sought NZ Cars Direct’s assistance with repairs, my assessment of the evidence is rather that she had repairs carried out to the vehicle and only then sought the trader’s assistance. According to Mr Thumparambil, Ms Pogson only visited him to ask for his assistance for repairs after she already had the repairs carried out. His evidence was not contradicted by any written evidence to the contrary. Ms Pogson’s own evidence in her statement accompanying her application was that she visited Mr Thumparambil in November 2021, which appears to have been after all of the relevant repairs were carried out.
[53] In correspondence leading up to the hearing, NZ Cars Direct confirmed that it was willing to repair the matters identified in Armstrong’s report, namely the faulty lower control arm joints and the brake warning sensor wiring. In addition, at the hearing, Mr Thumparambil indicated that he would be prepared to pay for the exhaust to be repaired by replacing the middle resonator as well as repairing the plastic item referred to in the vehicle sales agreement.

Conclusion

[54] Ms Pogson’s application to reject the vehicle is not upheld. NZ Cars Direct Ltd must replace the middle resonator in the vehicle’s exhaust system, as well as replace the worn lower control arm joints identified by Armstrong’s, repair the brake warning sensor wiring and repair the plastic item referred to in the vehicle’s sales agreement. These repairs should be carried within one month after the date of this decision.
[55] If there are difficulties in completing the repairs within that timeframe, NZ Cars Direct must contact the case manager before the expiry of this deadline to request an extension.

J S McHerron
Adjudicator

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[1] A resonator is part of the vehicle’s exhaust system. Its purpose is to change the sound of the vehicle’s engine. The purpose of the muffler is normally then to reduce the volume of the engine sound.

[2] The mechatronic unit houses the electronic gearbox computer module and the valves that control the flow of hydraulic fluid to different parts of the transmission.

[3] Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170.

[4] Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2007) 8 NZBLC 102,107 (HC) at [14].