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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 9 October 2022
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BETWEEN KIWI SECURITY NZ LTD
Applicant
AND VEHICLE LOGISTICS LTD, TRADING AS TAKANINI
SSANGYONG
Respondent
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MEMBERS OF TRIBUNAL
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D Watson, Barrister – Adjudicator
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S Gregory, Assessor
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HEARING at Auckland on 15 June 2022 (by audio-visual link)
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APPEARANCES
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Nikhil Yanala, Director of Applicant
Utsav Pathak, Witness for Applicant
Goutham Racharla, Witness for Applicant
Mark Alexander, Witness for Respondent
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DATE OF DECISION 12 July 2022
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] On 16 November 2021 Kiwi Security NZ Limited (KSNZ) agreed to buy a new SsangYong EV Van from Vehicle Logistics Ltd, trading as Takanini SsangYong (VLL) (registration number NWN928). KSNZ wants to reject the vehicle. It says the handbrake does not hold the van and it also claims the vehicle has an acceleration fault. It says the vehicle is unsafe to drive.
[2] VLL has inspected the vehicle and denies it has any faults. It says the vehicle performs according to its specifications.
Relevant background
[3] KSNZ is a security firm. Mr Yanala, a director of KSNZ, was interested in purchasing an electric van for the business. He test drove a SsangYong EV van on the premises of VLL on 16 November 2021 and was happy with it. He signed an agreement for sale and purchase of a new SsangYong EV van.
[4] Mr Yanala uplifted the vehicle on 18 December 2021 and signed a replacement agreement for sale and purchase for $66,677 (the purchase agreement). The purchase was funded by a loan between KSNZ and UDC Finance Ltd (UDC) of the same date (the loan agreement).
The handbrake issue
[5] After uplifting the vehicle, Mr Yanala drove the vehicle to his home. He parked the vehicle in his driveway. His driveway slants up away from the footpath towards his garage. He put the handbrake on and went inside to have a shower.
[6] He returned to the vehicle about 30 minutes later and was shocked to see that it had rolled backwards towards the footpath by about 2 metres. Mr Yanala produced video footage showing the vehicle rolling back. This video footage was taken from a security camera at his premises.
[7] Mr Yanala lives near a school and children frequently walk past his house. He was very concerned about the safety of the vehicle and so parked the vehicle out on the road. He was also worried about the performance of the handbrake once the vehicle had been fitted out with shelving and loaded up with heavy equipment, required for his security business.
[8] He contacted VLL and sent the video footage to it. VLL then assessed the vehicle.
[9] Mr Alexander, the then after sales manager employed by VLL, gave evidence on behalf of VLL. He said that VLL has fully tested the vehicle’s handbrake but cannot find any problem, other than the brakes needed to be “bedded in”. He said that the brakes have now been bedded in adequately, by cleaning and deglazing them.
[10] Mr Alexander also said that the vehicle has been through substantial testing. He produced service records which recorded that the vehicle had been road tested with weights of 620 kg loaded into the vehicle. The road tests took place on the hills of Clevedon and the vehicle did not roll away at any stage whether forward or rearward facing. Mr Alexander said that there were 9 or 10 such handbrake tests performed on the hills of Clevedon.
[11] Mr Alexander gave evidence that the vehicle has also been tested on VLL’s brake machine and performs in accordance with manufacturers’ and Warrant of Fitness specifications. He believes that Mr Yanala has simply had a change of heart and does not want this vehicle anymore.
[12] KSNZ alleges that the handbrake is still not holding the vehicle in place. It produced additional video footage, taken after the vehicle was seen by VLL, showing the vehicle moving backwards when parked in his driveway and when someone leaned on the front bumper.
[13] KSNZ then had the vehicle assessed by Tony’s Tyre Service (Albany). It tested the handbrake pulled up 100%, with the vehicle unladen, over three days when parked on a steep hill. The report of Tony’s Tyre Service recorded:
- (a) on day one, the vehicle was parked down the hill, and rolled back,
- (b) on day two, the vehicle was parked up the hill and rolled forward, and
- (c) on day three, the vehicle was parked up the hill again but did not roll back.
[14] Tony’s Tyre Services later confirmed that by the handbrake being pulled up 100%, it meant that the handbrake lever was pulled extreme, up to 6 clicks. This is as far as the handbrake can be pulled up. It also clarified that when the vehicle was parked downhill it moved forwards and when the vehicle was parked uphill it moved backwards.
[15] KSNZ maintains that despite the testing and servicing of VLL, the vehicle is still faulty. It is concerned about the safety of the vehicle generally and wants to reject it. It has not been able to use the vehicle.
Acceleration issue
[16] Additional to the handbrake fault, KSNZ also claims that there is an acceleration fault with the vehicle in that the acceleration is poor or will not engage when the vehicle is first turned on. Video footage was provided illustrating this and Mr Racharla, a technician employed by KSNZ, gave evidence that when he started up the vehicle, the accelerator would not engage.
[17] The report of Tony’s Tyre Service recorded that there was “poor acceleration as soon as the vehicle turned on – one instance. Had to restart the vehicle to make it work.”
The issues
[18] The issues requiring the Tribunal’s consideration in this case are:
- (a) Was there a failure of the guarantee of acceptable quality pursuant to s 6 of the Consumer Guarantees Act 1993 (the CGA)?
- (b) Was the failure of the vehicle of a substantial character?
- (c) What remedy is KSNZ entitled to under the CGA?
Issue 1: Was there a failure of the guarantee of acceptable quality pursuant to s 6 of the CGA?
[19] 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.
[20] 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.
[21] 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 a purchaser’s subjective perspective.
[22] There are two alleged faults with the vehicle, the handbrake fault and acceleration fault. I deal with each in turn.
The handbrake fault
[22] I find that the evidence establishes that the vehicle’s handbrake has a defect in that it is not holding the vehicle as it should. The work performed by VLL to repair the fault by “bedding in” the brakes has not been effective. The video footage produced by KSNZ and the report from Tony’s Tyre Service after the vehicle was assessed and serviced by VLL shows that there is still a problem with the handbrake not holding the vehicle adequately.
[23] I accept the evidence of Tony’s Tyre Service that the vehicle rolled back twice under its testing conditions when the handbrake lever was pulled up 100% (as far as it could go). Tony’s Tyre Service is an independent mechanical business with no vested interest in the outcome of these proceedings.
[24] I find the vehicle has a defect within its handbrake system. I find that this defect has meant that the vehicle was not of acceptable quality pursuant to the CGA.
The acceleration fault
[25] KSNZ claims that the vehicle occasionally has poor acceleration when first turned on.
[26] I accept the evidence of Mr Racharla that on start up of the vehicle the accelerator would not engage. I also accept that the video footage provided by KSNZ illustrates a fault with the accelerator.
[27] No independent diagnostic evidence was provided as to the cause of this alleged fault, although it is noted by Tony’s Tyre Service that on one occasion the vehicle had poor acceleration when it was turned on.
[28] VLL explained there was simply a poor connection at the accelerator pedal but Mr Gregory advises that the video footage shows that the fault reoccurred. Mr Gregory advises that it is likely the vehicle has a fault with its fly by wire throttle system.
[29] I find the evidence establishes there is a fault with the fly by wire throttle system, which amounts to a failure of the guarantee of acceptable quality pursuant to the CGA.
Issue 2: Were the failures of a substantial character?
[30] A failure of a substantial character 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.
[31] The handbrake failure is a failure of a substantial character for the purposes of s 21(a) and (d) because it makes the vehicle inherently unsafe.
[32] The vehicle rolls downhill while the handbrake is engaged, making it unsafe for occupants, other road users and pedestrians. A reasonable consumer fully acquainted with the true nature and extent of this defect, would not have purchased the vehicle.
[33] In its current condition, the vehicle cannot be parked on an incline, essentially making it unusable.
[34] In relation to the fly by wire throttle, Mr Gregory advises that this fault is readily remediable and should be easily fixed. He advises that it does not present any safety concern. For completion, I find that the fault with the fly by wire throttle does not amount to a failure of a substantial character.
Issue 4: What remedy is KSNZ entitled to under the CGA?
[35] Section 18 of the CGA 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.
[36] Under s 18(3) of the CGA, KSNZ has the right to reject the vehicle because the handbrake failure is of a substantial character.
Refund of all amounts paid in respect of the vehicle
[37] KSNZ is entitled to a refund of all amounts paid in respect of the vehicle.[1]
[38] KSNZ entered into the loan agreement specifically to fund the purchase price of the vehicle. It makes monthly repayments of $1,304.01 on the 14th of each month to UDC. To date it has paid $7,824.06. This sum comprises both interest and principal. KSNZ has not been able to use the vehicle at all. I find that it should be awarded the sum of $7,824.06.
[39] For completion, I record that KSNZ made an initial deposit of $2000 on 16 November 2021 however this was refunded to KSC when the advance came through from UDC. It is therefore not entitled to recover that sum.
Assignment of the loan agreement
[40] KSNZ is entitled to have its ongoing rights and obligations under the loan agreement assigned to VLL. The relevant statutory provisions are set out in ss 89(2) and (3) of the Motor Vehicle Sales Act 2003 (the MVSA), which state:
89 Jurisdiction of Disputes Tribunal
...
(2) A Disputes Tribunal may order that the rights and obligations of the buyer of a motor vehicle under a collateral credit agreement vest in a motor vehicle trader if—
(a) the collateral credit agreement is associated with the contract for the sale of that motor vehicle; and
(b) the motor vehicle trader is a party to that contract for sale; and
(c) either one of the following circumstances applies:
(i) the buyer exercises the right conferred by the Consumer Guarantees Act 1993 to reject that motor vehicle and, on a claim by the buyer under section 47(1) of that Act, the Disputes Tribunal orders the motor vehicle trader to refund any money paid, or other consideration provided, for that motor vehicle; or
(ii) the Disputes Tribunal finds that the buyer has suffered, or is likely to suffer, loss or damage by the conduct of the motor vehicle trader that constitutes, or would constitute, any of the conduct referred to in section 43(1) of the Fair Trading Act 1986 and the Disputes Tribunal makes an order under section 43(2) of that Act declaring the whole or any part of the contract for sale to be void.
(3) For the purposes of subsection (2), collateral credit agreement, in relation to a contract for the sale of a motor vehicle, means a contract or agreement arranged or procured by the motor vehicle trader or the buyer for the provision of credit by a person other than by the motor vehicle trader to enable the buyer to pay the price reserved by the contract for sale in respect of the motor vehicle.
[41] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to VLL are all met in this case:
- (a) the loan agreement is a collateral credit agreement for the purposes of s 89(2) of the MVSA in that it was associated with the purchase agreement. The loan agreement was arranged or procured by VLL and KSNZ for the provision of credit by UDC to enable KSNZ to purchase the vehicle;
- (b) VLL sold the vehicle to KSNZ, so it is a party to the purchase agreement; and
- (c) KSNZ has exercised the right conferred by the CGA to reject the vehicle and the Tribunal has ordered that VLL must refund any money paid, or other consideration provided, for that vehicle.
[42] Accordingly, under s 89(2) of the MVSA, all of KSNZ’s rights and obligations under the loan agreement are assigned to VLL from the date of this decision.
Other losses claimed
[43] Pursuant to s 18(4) of the CGA, KSNZ is additionally entitled to damages for any loss or damage resulting from the failure which were reasonably foreseeable as liable to result from the failure.
The invoice from Tony’s Tyre Service
[44] KSNZ has incurred the sum of $200 in having the vehicle assessed by Tony’s Tyre Service. I am satisfied that this is loss which was reasonably foreseeable as liable to result from the failure I have identified above.
AA insurance
[45] KSNZ also claims for the cost of insuring the vehicle. It produced a copy of its insurance policy with AA which records that the annual policy amount is $2630.17, with fortnightly instalments of $101.16 starting from 31 December 2021. As at 8 July 2022 it has incurred a liability to make 14 instalments of that fortnightly amount. The total sum is $1,416.24.
[46] KSNZ has suffered no loss by purchasing insurance. It has had the benefit of that insurance policy throughout its ownership of the vehicle, and undoubtedly if the vehicle had been stolen or damaged, it would have made an insurance claim. I therefore do not allow a refund of the insurance costs in favour of KSNZ.
[47] For completion I mention that during the hearing, Mr Alexander expressly confirmed VLL was not relying on any exclusion clause contained within the purchase agreement.
Outcome
[48] KSNZ’s claim to reject the vehicle is allowed.
[49] VLL must, within 10 working days of the date of this decision, pay $8,024.06 to KSNZ.
[50] KSNZ’s rights and obligations under the loan agreement are assigned to VLL from the date of this decision.
[51] VLL is entitled to possession of the vehicle.
DATED at AUCKLAND this 12th day of July 2022
D A Watson
Adjudicator
This decision has been appealed. The outcome of that appeal was unknown at the date of the publication of this decision.
[1] Section 23(1)(a) of the CGA.
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2022/142.html