Walker v Penroses Enterprises Ltd - Reference No. MVD 044/2022 [2022] NZMVDT 145 (12 July 2022)

Last Updated: 16 October 2022

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 044/2022 [2022] NZMVDT 145 UNDER APPEAL BETWEEN MICHAEL WALKER Applicant AND PENROSE ENTERPRISES LTD Respondent

MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator

S Gregory, Assessor

HEARING at Auckland on 17 May and 16 June 2022 (by audio-visual link)

APPEARANCES

M Walker, Applicant T White and W Horner-Pascoe, Witnesses for the Applicant

K Watkins for the Respondent

DATE OF DECISION 12 July 2022

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

1. Michael Walker’s application to reject the vehicle is dismissed.
2. Penrose Enterprises Ltd shall:
   • (a) within 15 working days of the date of this decision, rectify the damage to the right front wheel arch and properly attach the right hand side skirt; and
   • (b) within 10 working days of the date of this decision, pay $574.51 to Mr Walker.

_________________________________________________________________

REASONS

Introduction

[1] Michael Walker wants to reject the 2011 Audi A6 Quattro he purchased for $30,685 from Penrose Enterprises Ltd in November 2018. Mr Walker alleges that:

• (a) Penrose Enterprises engaged in misleading conduct by:
  • (i) describing the vehicle as a “Grade 4.5, undamaged and freshly complied”. Mr Walker says this representation was misleading because the vehicle was damaged in Japan and was an “ungraded write off”; and
  • (ii) selling him an Autolife mechanical breakdown insurance policy.
• (b) The vehicle has not been of acceptable quality because of numerous faults since purchase.

[2] Penrose Enterprises denies liability. It says that the vehicle was not damaged when it was imported into New Zealand and that any damage in Japan was minor and has been properly repaired. It also says that it should have no liability for any defect that has arisen since purchase as those alleged defects are minor and/or unproven.

Relevant background

Purchase of the vehicle by Penrose Enterprises

[3] Penrose Enterprises, through its Japan-based agent World Navi, purchased the vehicle at an auction conducted by the HAA Kobe Auction House (HAA Kobe) on 17 March 2018. HAA Kobe had listed the vehicle with an auction grade of 4, which means that HAA Kobe considered that the vehicle was in good condition for its age, with no obvious signs of significant damage. Photographs of the vehicle from the HAA Kobe auction show no signs of any significant damage to the vehicle.

Entry certification

[4] Penrose Enterprises then imported the vehicle into New Zealand, where it was assessed by VINZ as part of the entry certification process. A VINZ Compliance Certification Checksheet dated 30 May 2018 shows that the vehicle passed entry certification after its window tints were removed, front brake rotors and control arm bushes were replaced, and a brake declaration was provided. The Compliance Certification Checksheet contains no mention of any prior damage or repairs.

Pre-purchase discussions

[5] Mr Walker has previously purchased vehicles from Penrose Enterprises and appears to have some knowledge about vehicles imported from Japan, including the grading system used by Japanese auction companies to indicate the quality of a vehicle.
[6] Mr Walker says he asked Kevin Watkins (General Manager at Penrose Enterprises) and Raj (a salesperson) what the auction grade of the vehicle was and whether it had any accident damage. Mr Walker asked about the accident damage because he had previously purchased a vehicle (not from Penrose Enterprises) that had been classified as imported as damaged and wanted to avoid doing so again. Mr Walker says that he was told that the vehicle was freshly complied, with no accident damage and an auction grade of 4.5. Mr Walker then purchased the vehicle.
[7] Penrose Enterprises denies telling Mr Walker that the vehicle had no accident damage. Mr Watkins says that he simply told Mr Walker that the vehicle was a grade 4 import.

The Autolife policy

[8] Mr Walker purchased an Autolife mechanical breakdown insurance policy with the vehicle. Mr Walker says that the policy was not provided to him until three weeks after purchase, and he has since discovered that Autolife has the same owners as Penrose Enterprises and he would not have purchased this policy if he had known of that alleged conflict of interest.
[9] Mr Walker says that the Autolife policy has not covered may of the issues that have arisen with the vehicle since purchase and he alleges that Penrose Enterprises misled him over the terms of the policy and its coverage and exclusions.
[10] Mr Watkins says that Penrose Enterprises sold an Autolife policy to Mr Walker because its usual provider – Autosure – would not insure this vehicle. It says that the Autolife policy contains standard conditions and exclusions and it did not mislead Mr Walker. It also notes that Mr Walker agreed to buy an Autolife policy - the vehicle offer and sale agreement signed by Mr Walker notes that he has agreed to purchase and Autolife policy.

The discovery of pre-existing damage

The Carjam Report

[11] Mr Walker says that he has since discovered that Penrose Enterprise’s pre-purchase representations about the vehicle’s history were misleading because the vehicle was damaged in Japan and categorised as an “ungraded write off”.
[12] In February 2022, Mr Walker obtained a “Japan History Report” for the vehicle from the Carjam website. Relevantly, Mr Walker says that the Japan History Report shows:

• (a) that the vehicle was damaged in Japan - attached to the Japan History Report were photographs of the vehicle, which show damage to the front bumper, driver side front wheel arch and side skirt and that the right front lower control arm has detached from the rear mount; and
• (b) that the vehicle was categorised as an “ungraded write off” by the Hanamaru Auction House (Hanamaru) on 26 February 2018, about three weeks before it was purchased by Penrose Enterprises.

[13] Mr Walker says that the information contained in the Japan History Report shows that the vehicle was extensively damaged in Japan, to the extent that it was deemed a write off by Hanamaru and was sold as the equivalent of a scrap vehicle.
[14] It appears that the vehicle was then repaired by the person who purchased it from Hanamaru because the vehicle was then sold by auction at HAA Kobe on 17 March 2018 – three weeks after it was sold by Hanamaru.

The Prima Collision Repairs assessment

[15] Mr Walker has since had the vehicle assessed by Prima Collision Repairs, which found damage to the right front wheel arch, consistent with “wheel strike”. Prima Collision Repairs found that a seam in the wheel arch had separated and a body bung was missing. It also considered that the right hand side skirt had been replaced at some point, and the replacement side skirt has been poorly repainted and has not been properly attached to the vehicle.
[16] Prima Collision Repairs also considered that the right front wheel had been damaged and was repaired with “body filler”, which it considered to be an unsuitable repair. Prima Collision Repairs charged Mr Walker $574.51 for this assessment. Mr Walker has provided photographs of the affected areas and the right front wheel taken by Prima Collision Repairs.
[17] I heard evidence from Warren Horner-Pascoe of Prima Collision Repairs. Mr Horner-Pascoe says that he removed the guard liners from the right front wheel arch and found impact damage. Mr Horner-Pascoe considered that damage to be structural, as he considers that the wheel arch is part of the vehicle’s monocoque structure. Mr Horner-Pascoe also advised that the seam has been welded, and the weld has a split of about 25 mm to 30 mm in length. Mr Horner-Pascoe says that the affected area will need to be repaired, at a cost of about $1,500. Mr Horner-Pascoe also confirmed that the replacement side skirt has been poorly repainted and has not been properly attached to the vehicle
[18] Mr Walker had earlier submitted that the vehicle may also have damage to another structural component behind the wheel arch that is visible through the missing bung. Mr Horner-Pascoe says that there is no clear evidence of any damage to that other component.
[19] Mr Horner-Pascoe also advised that he performed a 3D chassis measurement and wheel alignment and found that the vehicle was within acceptable tolerances. Mr Horner-Pascoe says that the vehicle remains safe.

The Waka Kotahi information

[20] Mr Walker contacted NZ Transport Agency Waka Kotahi after the vehicle was assessed by Prima Collision Repairs and provided photographs taken by Mr Horner-Pascoe. In an email of 27 May 2022, Rob Pauletic, a Certification Officer at Waka Kotahi, advised Mr Walker that “if the vehicle was presented for entry level inspection today, we would expect the vehicle to be referred to a repair certifier for assessment”.

The Auto Assess Ltd assessment

[21] After the second hearing on 16 June 2022, Mr Walker provided a further assessment from Karl Pemberton of Auto Assess Ltd. Mr Pemberton did not inspect the vehicle and instead relied upon photographs taken by others. Mr Pemberton considers:

• (a) The damage to the driver’s side wheel arch (referred to as the RHF wheelhouse in Mr Pemberton’s report) is a result of “significant impact”, consistent with a wheel strike.
• (b) The structural integrity of the vehicle is compromised due to the initial deformation of the panel and consequential shear and stress fractures occurring as a result.
• (c) The vehicle should have been referred to a collision repair certifier for remedial repairs when it was imported into New Zealand.
• (d) The repairs required to rectify the wheel arch damage will be significant. The subframe/engine, transmission and all attached hardware, dashboard and internal trims, seats carpets would require removal to undertake appropriate repairs. Mr Pemberton considers that a new wheel arch is required and has provided information from Armstrong Prestige (an Audi-franchise) showing that the cost of a new wheelhouse assembly is $6,500 plus GST
• (e) The driver side front wheel is deformed, with distortion visible in multiple spokes and the rim. Mr Pemberton considers that the wheel should have been replaced as the wheel is irreparable.

The vehicle’s other defects

[22] In addition to the damage to the right front wheel, right hand wheel arch and side skirt, Mr Walker says the vehicle has had the following series of defects since purchase:

• (a) In October 2019, when the vehicle’s odometer reading was 75,105 km, a direct shift gearbox (DSG) plug failed and required replacement.[1] Mr Walker paid $600.30 for that repair as it was not covered by the Autolife policy.
• (b) In November 2020, when the odometer reading was 90,038 km, upper and lower suspension bushes required replacement. Mr Walker paid $724.80 for that repair as it was not covered by the Autolife policy.
• (c) In July 2021, when the odometer reading was 102,213 km, a left engine mount required replacement. Mr Walker paid $844.68 for that repair as it was not covered by the Autolife policy.
• (d) In August 2021, when the odometer reading was 103,588 km, the front brake pads and rotors required replacement. Mr Walker paid $879.75 for that repair as it was not covered by the Autolife policy.
• (e) In October 2021, when the odometer reading was 105,146 km the air-conditioning pump required replacement. That repair was partially covered by the Autolife policy. That fault was not properly repaired, and further repairs were required in November 2021.
• (f) Later in October 2021, Mr Walker discovered a coolant leak and a warning light relating to the rear brakes appeared. Mr Walker paid $983.90 to have the coolant leak repaired and the rear brake pads and rotors replaced.
• (g) On 17 November 2021, when the vehicle’s odometer reading was 105,862 km, Mr Walker discovered that the child lock on the rear driver side door did not work. Mr Walker had the vehicle assessed and discovered that a fuse was missing. Mr Walker paid $392.40 to have this repaired. Mr Walker says this fault should have been found when the vehicle went through compliance testing when it was imported.
• (h) On 13 January 2022, when the odometer reading was 108,489 km, a transmission warning light illuminated. Mr Walker has not had this fault diagnosed but was told by Continental Cars that he should refrain from driving until the fault is identified and repaired.
• (i) Mr Walker also says that the driver side sill is becoming detached, with signs of a previous repair.

The issues

[23] Against this background, the issues requiring the Tribunal’s consideration in this case are:

• (a) Did Penrose Enterprises engage in misleading conduct in breach of s 9 of the Fair Trading Act 1986 (the FTA)?
• (b) If so, what remedy is Mr Walker entitled to under the FTA?
• (c) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
• (d) If not, what remedy is Mr Walker entitled to under the CGA?

Issue 1: Did Penrose Enterprises engage in conduct that breached s 9 of the FTA?

[24] Section 9 of the FTA provides:

9. 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.

[25] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corporation 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.

[26] Mr Walker alleges that Penrose Enterprises has engaged in misleading conduct by:

• (a) selling the Autolife policy to him; and
• (b) advising him that the vehicle had not been damaged.

The Autolife Policy

[27] Mr Walker has not proven that Penrose Enterprises engaged in misleading conduct regarding the Autolife policy. Mr Walker agreed to purchase that policy (as noted in the vehicle offer and sale agreement) and there was no evidence presented to show that Penrose Enterprises otherwise misled him about the policy terms and conditions or coverage. Those terms and conditions appear standard for a mechanical breakdown insurance policy, with exclusions for maintenance and wear and tear items. Further, any common ownership between Penrose Enterprises and Autolife is irrelevant in determining whether Mr Walker was misled about the terms and conditions or coverage of the policy.

The previous damage

[28] Mr Walker says that Penrose Enterprises engaged in misleading conduct by describing the vehicle as a grade 4.5 and undamaged vehicle when the vehicle had been damaged in Japan. He says he would not have purchased the vehicle if he had been aware of that damage.
[29] Penrose Enterprises says that it has not engaged in any misleading conduct. It says that it did not know about the pre-existing damage to the vehicle. It says that its agent – World Navi – purchased the vehicle on its behalf from HAA Kobe and that the vehicle had an auction grade of 4, with no obvious damage. It says that it then imported the vehicle and it passed entry certification testing without any repairs being required to the right front wheel arch, wheel or side skirt. Penrose Enterprises says that any repairs performed to those areas must have been done before it purchased the vehicle, without its knowledge.

Mr Walker has not proven that Penrose Enterprises represented that the vehicle was a grade 4.5

[30] As the applicant, Mr Walker bears the onus of proving each of the allegations made. With respect to the allegation that Penrose Enterprises told him that the vehicle had an auction grade of 4.5, I find that Mr Walker has not proven that allegation. He was unable to provide any written evidence of that representation and given that HAA Kobe documents show that the vehicle was a grade 4, consistent with Mr Watkins’ evidence that he told Mr Walker that the vheicle was a grade 4, I cannot be satisfied that Penrose Enterprises represented that the vehicle was a grade 4.5.

Penrose Enterprises told Mr Walker that the vehicle had not been damaged

[31] I find that Mr Walker did ask Penrose Enterprises whether the vehicle had any accident damage and that Penrose Enterprises advised him that it did not. In that regard, I accept Mr Walker’s evidence that he had previously purchased a damaged car and wanted to avoid doing so again, so he asked Mr Watkins whether this vehicle had been damaged.

The vehicle was damaged in Japan

[32] The evidence is clear that the vehicle had been damaged in Japan. The photographs attached to the Japan History Report clearly shows damage to the front bumper and driver side front wheel arch and side skirt and that the front lower control arm has detached from the rear mount.

Penrose Enterprises has engaged in misleading conduct

[33] By advising Mr Walker that the vehicle had not been damaged, when it had, Penrose Enterprises engaged in misleading conduct in breach of s 9 of the FTA.
[34] In making this finding, I also find that Penrose Enterprises did not know of that accident damage and that the damage was repaired before it purchased the vehicle. However, absence of knowledge provides no defence. The FTA is a strict liability statute, in that the representor can have liability under the FTA even if it believes the representation to be true. I am therefore satisfied that Penrose Enterprises Ltd has engaged in misleading conduct in breach of s 9 of the FTA by telling Mr Walker that the vehicle had not been damaged, when it had.

Issue 2: What remedy is Mr Walker entitled to under the FTA

[35] The remedies available for a breach of the FTA are discretionary. They are set out in s 43 of the FTA which is as follows:

43 Other orders

(1) This section applies if, in proceedings under this Part or on the application of any person, a court or a Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:

(a) a contravention of a provision of Parts 1 to 4A (a relevant provision):

(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:

(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:

(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:

(e) conspiring with any other person in the contravention of a relevant provision.

(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—

(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and

(b) whether or not person A made the application or is a party to the proceedings.

(3) The orders are as follows:

(a) an order declaring all or part of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) to be void; and

(ii) if the court or the Disputes Tribunal thinks fit, to have been void at all times on and after a date specified in the order, which may be before the date on which the order is made:

(b) if an order described in paragraph (a) is made in respect of a contract that is associated with a collateral credit agreement, an order vesting in person B all or any of the rights and obligations of person A under the collateral credit agreement:

(c) an order in respect of a contract made between person A and person B, or a collateral arrangement (for example, a collateral credit agreement) relating to such a contract,—

(i) varying the contract or the arrangement in the manner specified in the order; and

(ii) if the court or the Disputes Tribunal thinks fit, declaring the varied contract or arrangement to have had effect on and after a date specified in the order, which may be before the date on which the order is made:

(d) if an order described in paragraph (c) is made in respect of a contract that is associated with a collateral credit agreement, and if that order results in person A no longer having property in the goods that are the subject of the contract, an order vesting in person B the rights and obligations of person A under the collateral credit agreement:

(e) an order directing person B to refund money or return property to person A:

(f) an order directing person B to pay to person A the amount of the loss or damage:

(g) an order directing person B, at person B’s own expense, to repair, or to provide parts for, goods that have been supplied by person B to person A:

(h) an order directing person B, at person B’s own expense, to supply specified goods or services to person A.

(4) In subsection (3)(a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—

(a) is arranged or procured by the supplier of the goods; and

(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.

(5) An order made under subsection (3)(a) to (d) does not prevent proceedings being instituted or commenced under this Part.

(6) This section does not limit or affect—

(a) subpart 5 of Part 2 of the Contract and Commercial Law Act 2017; or

(b) section 317 of the Accident Compensation Act 2001.

[36] Mr Walker wants to return the vehicle and obtain compensation for the loss he claims to have suffered by purchasing a vehicle with significant pre-existing damage. Penrose Enterprises says that Mr Walker should not be entitled to return the vehicle because any damage now present is minor and easily fixed. Consequently, in determining the appropriate remedy, the Tribunal must first determine the true nature and extent of the damage to the vehicle.

The vehicle was not written off and the damage was not structural

[37] For the reasons set out below, Mr Walker has not proven that the damage to the vehicle is as significant as he alleges.

Mr Walker has not proven that the vehicle was written off in Japan

[38] The evidence is not clear as to whether the vehicle was written off in Japan. Damage of the nature shown in the photographs provided by Mr Walker would not ordinarily cause a vehicle to be written off. As discussed below, the damage is not structural and is easily repaired – as evident in the fact that the vehicle was repaired and offered for resale three weeks after it was purchased from Hanamaru in a damaged state.
[39] Further, the fact that Hanamaru classified the vehicle as an ungraded write off is not conclusive evidence that the vehicle was in fact written off. In that regard, it is also noteworthy that the Japan History Report notes that Hanamaru considered that the “Problem Scale” of the damage was “Small”, which is inconsistent with the damage being so significant that the vehicle was written off.

The damage is not structural

[40] For the purposes of entry certification, a table at Note 4 in part 3-1 of the Entry Certification vehicle inspection requirements manual (the Entry Certification VIRM), defines the meaning of a structural component, meaning damage to any of the identified components is considered structural damage for entry certification purchases. For the purposes of the Entry Certification VIRM, structural components are, as a minimum, the following:

a) Engine compartment i. Front crush zones ii. Chassis rails iii. Inner guards iv. Firewall v. Suspension towers and mountings vi. Radiator support panel

b) Exterior i. Door frames, locks and hinges ii. Pillars iii. Sills iv. Roof guttering

c) Luggage/cargo compartment i. Suspension towers and mountings ii. Seatbelt anchorages iii. Floor iv. Rear panel v. Spare wheel well

d) Underbody and/or chassis frame i. Front and rear crush zones ii. Chassis rails and cross members iii. Floor rails iv. Steering and suspension mountings v. Subframe mountings vi. Seat and seatbelt anchorages vii. Sills viii. Floor

e) Passenger compartment (inside vehicle) i. Exposed floor areas ii. Floor to inner sill seams iii. Pillars iv. Cross members v. Seat and seatbelt anchorages

[41] Mr Horner-Pascoe considered that the wheel arch was part of the floor, and therefore structural. Mr Pemberton provided no explanation as to why he considered any damage to be structural, other than to say that the structural integrity of the vehicle is compromised due to the initial deformation of the panel and consequential shear and stress fractures caused by the wheel strike.
[42] Mr Gregory, the Tribunal’s Assessor, advises that the damage is not structural because it has not affected any part of the vehicle’s monocoque structure. The floor is behind the wheel arch, and the wheel arch does not form part of the floor. Mr Gregory advises that because none of the affected areas are listed in this table, the vehicle did not have structural damage as defined by the entry certification VIRM and therefore further repairs were not required to pass entry certification.
[43] Mr Gregory also advises that it is noteworthy that the entire wheel arch can be replaced (as shown in Mr Pemberton’s report). If the wheel arch was part of the vehicle’s monocoque structure, as Mr Horner-Pascoe believes, then the wheel arch could not simply be replaced.
[44] I therefore find that the damage is not structural, and that the vehicle’s structural integrity remains unaffected. In that regard, I note Mr Horner-Pascoe’s evidence that the vehicle remains “as safe as any other vehicle on the road” and that the 3D chassis measurements performed by Prima Collision Repairs show that the chassis is straight and the vehicle is structurally sound – contrary to Mr Pemberton’s assertion that the structural integrity of the vehicle is compromised.

The vehicle should have been flagged as imported as damaged and referred to a repair certifier

[45] The vehicle was assessed by VINZ when it was imported into New Zealand as part of the entry certification process, and the damage was not deemed significant enough to require further assessment or repair.
[46] Mr Walker submitted that the vehicle should have been flagged as damaged and sent to a repair certifier for assessment and that the VINZ inspector must have failed to inspect the affected area.
[47] I find that the VINZ inspector did inspect the repaired area of the vehicle and concluded that the repair did not require repair certification and otherwise complied with the requirements for entry certification of an imported vehicle as set out in the Entry Certification VIRM. Photographs provided by Mr Walker clearly show the initials “SO” written on the driver side front wheel guard. Those same initials are also written on other areas of the vehicle, and Mr Gregory advises that it is common practice for an inspector to write their initials in each area that is inspected.
[48] However, I also find that the VINZ inspector should have flagged the vehicle as damaged and referred the vehicle to a repair certifier. Part 3-4 of the Entry Certification VIRM sets out the circumstances in which a vehicle should be referred to a specialist repair certifier for repair certification. Under part 3-4 a vehicle must also be referred where repaired damage is more than cosmetic damage to outer body panels and some of the vehicle manufacturer’s seams or joints have been disturbed or damaged during the repair.
[49] This vehicle met those criteria. As shown in the photographs provided by Mr Walker, the repaired damage was not merely cosmetic and the manufacturer’s seams had been disturbed (ie welded) during the repairs performed in Japan. The vehicle should therefore have been flagged as damaged and referred to a repair certifier for assessment.
[50] Had that occurred, the repair certifier would then have been able to determine whether further repairs were required and whether the imported as damaged flag should remain with the vehicle.

It is likely that no repairs would have been required and the damaged flag would have been removed

[51] Referral to a repair certifier does not necessarily mean that the vehicle has damage that requires repair. Instead, the repair certifier must assess the vehicle further to determine whether repairs are required, and whether the imported as damaged flag should remain. The criteria that the repair certifier must follow are set out in the Light vehicle repair certification requirements manual (the Light vehicle repair certification VIRM).
[52] When those requirements are considered in this case, I find that it is likely that the vehicle did not require any further repairs at the time and that the vehicle would therefore have passed entry certification and any imported as damaged flag would have been removed.
[53] Under part 2 of the Light vehicle repair certification VIRM, further repairs would have been required if the wheel arch repair performed in Japan adversely affected and/or did not comply with manufacturer’s instructions for the vehicle’s chassis rails, sills, A-pillars, other pillars and doors, bumpers and energy absorbers, various plastic components and points of attachment. Mr Gregory advises that none of those areas are affected by the wheel arch repair.
[54] Further, although the evidence shows that a weld has now split, I find it likely that the weld had not split when the vehicle was assessed at the border. If the weld had split by that time, I have no doubt that the VINZ inspector would have referred the vehicle to a repair certifier, as it would have been obvious that the repair had partially failed, and repair certification was required.
[55] Consequently, I find it likely that the weld had not failed and did not require further repair at that time. That being the case, I find that the repair certifier would have removed any damage flag attached to the vehicle and the vehicle would then have passed entry certification testing without further repairs being conducted.

The wheel arch and side skirt repair has now degraded and requires repair

[56] The wheel arch repair has now degraded. One of the welds has split and the side skirt is no longer properly attached. Mr Horner-Pascoe, who is the only qualified witness to have inspected the vehicle, says that the vehicle remains safe, but I am nonetheless of the view that the split weld and loose side skirt need to be rectified.
[57] Mr Horner-Pascoe says that the damage to the wheel arch can be repaired and estimates that repairs will cost about $1,500. Mr Pemberton, who has not assessed the vehicle, says that the repair cost will be substantially higher and that the vehicle may not be economical to repair. Mr Gregory advises that the damage is repairable, and the entire wheel arch does not require replacement. Mr Gregory advises that the damage can be repaired in the manner described by Mr Horner-Pascoe.

The right front wheel is in acceptable condition

[58] Mr Walker also alleges that the right front wheel is damaged and requires replacement. The evidence shows that the wheel damage is minor and does not require repair. The vehicle has passed four warrant of fitness inspections since purchase. If the wheel was damaged to the extent alleged by Mr Walker and Mr Pemberton, it would have failed those inspections. Mr Gregory also advises the photographs provided by Mr Walker show no obvious cracking or other damage that would cause the vehicle to fail a warrant of fitness inspection.
[59] Further, if the wheel was deformed and distorted to the extent alleged by Mr Pemberton (remembering he has not inspected the wheel) Mr Gregory advises that it is likely that the wheel could not be balanced and the vehicle would have shuddered when driven. Mr Walker reported no such shudder.

What remedy is Mr Walker entitled to?

[60] The remedies in s 43(3) of the FTA are discretionary, and the discretion is to be exercised so as to give effect to the purpose of the FTA, which includes to protect the interests of consumers. The object of the remedies in s 43(3) of the FTA is to do “justice to the parties in the circumstances of the particular case”.[3]
[61] In this case, because Penrose Enterprises did not intentionally mislead Mr Walker and because the damage is minor, non-structural and easily repaired, I find that the remedy that best does justice between the parties is:

• (a) an order under s 43(3)(g) of the FTA that Penrose Enterprises rectify the damage to the right front wheel arch and properly attach the driver side skirt; and
  • (b) an order under s 43(3)(f) that Penrose Enterprises compensate Mr Walker for the costs he has incurred in proving the damage to the vehicle, which in this case is the $574.51 cost of the assessment performed by Prima Collision Repairs. Mr Walker is not entitled to recover any amounts relating to the assessment performed by Mr Pemberton, as that assessment did not prove any additional faults nor further Mr Walker’s claim in any meaningful way.

[62] In reaching this conclusion, I expressly find that the damage, once repaired, will not affect the vehicle’s resale value and, in that regard, I do not accept Mr Walker’s submission that he has any legal obligation to disclose the existence of this damage to any prospective purchaser. As I have noted earlier, the evidence does not show that the vehicle was written off in Japan, the damage was not structural, the vehicle’s structural integrity remains intact, and once the ordered repairs are completed there should be no future concerns relating to that previous damage. In that regard, I consider that Mr Walker’s preferred remedy – to return the vehicle and obtain compensation – is disproportionate to the harm he has suffered.

Issue 3: Has the vehicle been of acceptable quality?

[63] 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.
[64] 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.

[65] 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 Walker’s subjective perspective.

The wheel arch damage

[66] The damage to the wheel arch and the loose side skirt means the vehicle is not of acceptable quality. The previous repair has degraded, and a welded seam now split. That damage needs to be appropriately repaired.

The remaining defects

[67] The remaining defects alleged by Mr Walker do not breach the guarantee of acceptable quality. Mr Walker paid $30,685 for a seven-year-old Audi A6 Quattro with an odometer reading of 67,207 km at the time of sale. A reasonable consumer who has purchased a European vehicle of this price, age and mileage must have realistic expectations as to its quality and durability and should understand that the vehicle will have pre-existing wear and tear consistent with its age and mileage and that defects, that might be expensive to repair, can arise as the vehicle is used.
[68] They should also understand that a supplier’s obligations under s 6 of the CGA are finite and, at some point, the risk of a used motor vehicle developing defects must transfer from the supplier to the purchaser. The point in time at which that risk transfers is determined with reference to the factors in s 7(1)(f) to (j) of the CGA.
[69] The wheel damage is minor and does not require repair for the reasons set out above.
[70] The next of the faults complained of by Mr Walker (the DSG plug fault) occurred 11 months after purchase, by which time Mr Walker had driven about 8,000 km. Considering the minor nature of that fault, the length of time since purchase and the distance travelled before the fault became apparent, I find that the fault occurred too long after purchase for the protections in the CGA to apply.
[71] The assessment is the same for the remaining faults alleged by Mr Walker. The faults complained of by Mr Walker are, in the main, minor and consistent with the ordinary wear and tear that a reasonable consumer should expect from using a European vehicle of this age and mileage and all occurred too long after purchase for Penrose Enterprises to have any liability under the CGA.
[72] I acknowledge that the undiagnosed transmission fault could be expensive to fix, but that fault first became apparent more than three years after purchase, by which time Mr Walker had driven more than 40,000 km in the vehicle. Given the price, age and mileage of the vehicle at the time of sale, the length of Mr Walker’s ownership and the distance travelled since purchase, the protections in s 6 of the CGA no longer apply.

Issue 4: What remedy is Mr Walker entitled to under the CGA?

[73] The only defects that breaches the guarantee of acceptable quality is the damage to the front wheel arch and the loose side skirt. For the reasons set out above, that damage is not a failure of a substantial character for the purposes of s 21 of the CGA. The damage is minor, not structural and easily rectified. Accordingly, Mr Walker is not entitled to reject the vehicle.
[74] Under s 18(2)(a), Mr Walker is entitled to have the wheel arch damage rectified within a reasonable time and under s 18(4) of the CGA, he is also entitled to recover the reasonable costs incurred in diagnosing that damage. Because I have already found that Mr Walker is entitled to those remedies under the FTA, no further orders are required under the CGA.

Outcome

[75] Mr Walker’s application to reject the vehicle is dismissed and The Tribunal therefore orders that Penrose Enterprises Ltd shall:

• (a) within 15 working days of the date of this decision, rectify the damage to the right front wheel arch and properly attach the right hand side skirt; and
• (b) within 10 working days of the date of this decision, pay $574.51 to Mr Walker.
  

DATED at AUCKLAND this 12th day of July 2022

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.

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[1] The vehicle’s odometer reading at the time of sale was 67,207 km.

[2] Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

[3] Red Eagle Corporation Ltd v Ellis, above n 2, at [31].