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Broome v Azak Cars Ltd - Reference No. MVD 437/2021 [2022] NZMVDT 16 (18 February 2022)

Last Updated: 19 March 2022

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL
I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 437/2021
[2022] NZMVDT 16

BETWEEN ISAAC REUBEN BROOME

Applicant

AND AZAK CARS LTD
Respondent





MEMBERS OF TRIBUNAL
B R Carter, Barrister – Adjudicator
S Gregory, Assessor

HEARING at Auckland on 25 January 2022 (by audio-visual link)



APPEARANCES
I R Broome, Applicant
J Hatch, Witness for the Applicant
D Forian and K Van Der Westhuizen for the Respondent

DATE OF DECISION 18 February 2022

_________________________________________________________________

DECISION OF THE TRIBUNAL

_________________________________________________________________

  1. Isaac Broome’s application to reject the vehicle is allowed.
  2. Azak Cars Ltd shall, within 10 working days of the date of this decision, pay $20,414 to Mr Broome

_________________________________________________________________

REASONS

Introduction

[1] On 30 September 2021, Isaac Broome purchased a 1978 Mercedes-Benz 450SLC for $20,000 from Azak Cars Ltd. Mr Broome did not inspect the vehicle before purchasing it due to COVID-19 restrictions in place at the time, but had been told by Azak Cars that the vehicle had failed a warrant of fitness inspection due to pre-existing rust and was being sold “as where is”.
[2] After taking possession of the vehicle, Mr Broome was immediately unhappy with its cosmetic and mechanical condition, which he considered to be much worse than represented by Azak Cars. Mr Broome then attempted to reject the vehicle, alleging that the vehicle was not in acceptable condition and that Azak Cars had misled him about the vehicle’s condition.
[3] Although it accepts that the vehicle has the defects complained of by Mr Broome, Azak Cars has declined to accept that rejection. It says that the Trade Me listing for the vehicle was clear about its condition and that the vehicle was sold as “a classic 43-year-old vehicle which required a fair amount of work to get it up to spec”. It says that the vehicle’s condition is acceptable taking account of its price and age and the representations it made before purchase.

Relevant background

[4] The vehicle was advertised for sale on the Trade Me website. Relevantly, that Trade Me listing stated:
[5] Mr Broome saw that listing in mid-September 2021 and contacted Azak Cars by email on 22 September. In that email, Mr Broome asked whether he could view and test drive the vehicle. Relevantly, Mr Broome’s email of 22 September also stated:

“I note the car doesn’t have a current WOF, is there a reason for this?

Does the car have any issues at all?

Does everything work and is there any oil leaks or rust at all?”

[6] Kevin Van Der Westhuizen, the Sales Manager at Azak Cars, replied on 23 September 2021. Mr Van Der Westhuizen advised Mr Broome that Azak Cars was not open to the public, as Auckland was at Level 3 of the COVID-19 response framework in place at that time. Mr Van Der Westhuizen also advised:

“The vehicle does not have a current wof due to some rust in the under body,This is the reason we are selling it for so cheap and as is”.

[7] Mr Broome then asked “Are there any other issues with the car? Does everything work?” Mr Van Der Westhuizen replied:

“can’t say there are any other issues with the car with it being a classic we don’t drive them around at all, mechanically it runs well starts fine runs fine windows etc all work other then the rust underneath its in pretty good shape for its age.”

[8] On 27 September 2021, Mr Broome requested photographs of the engine bay, the boot interior, interior ceiling lining and the dashboard. Mr Broome also asked Mr Van Der Westhuizen whether the vehicle had cruise control. Mr Van Der Westhuizen provided photographs and Mr Broome says that he was also told that the vehicle had cruise control. Mr Broome then agreed to purchase the vehicle, sight unseen, for $20,000, which was $2,000 less than the initial asking price.
[9] The vehicle was then delivered to Mr Broome and he was immediately unhappy with its condition. Mr Broome contacted Mr Van Der Westhuizen and asked to return the vehicle. Azak Cars declined to accept the vehicle’s return, saying that it had fairly disclosed the vehicle’s condition.
[10] Mr Broome has since had the vehicle assessed by Jeremy Hatch at Jaguar Workshop in Pukekohe. An invoice dated 19 November 2021, states that Jaguar Workshop inspected the vehicle and found:
[11] I heard evidence from Mr Hatch, who confirmed the existence of each of the issues identified in the 19 November 2021 invoice and I accept the evidence from Mr Hatch as to the vehicle’s condition. Azak Cars did not dispute the existence of those issues.
[12] Nonetheless, Azak Cars says that it should not have liability for the vehicle’s defects. It says that it told Mr Broome of the “classic as is where is status” and it provided additional photographs and a copy of the warrant of fitness inspection sheet, which showed that the vehicle had failed a warrant of fitness inspection. Azak Cars says that this information highlighted that the vehicle had failed a warrant of fitness inspection, that there was “plenty of reconditioning to be done on the vehicle” and that there were “other possible issues with the vehicle being of this age and km”.
[13] Its position is best summarised in the following pre-hearing submission:

We have been as clear as we can about the vehicle’s condition since listing it on Trademe. It has always been sold as a classic 43-year-old vehicle which required a fair amount of work to get it up to spec. Our disclosure around this has been more than adequate and is something which was reiterated to the customer and as well as having been acknowledged by the customer on a number of occasions. There has been no misleading information given or presented to the customer and even under Covid-19 rules, we have been more than happy to forward through any photos or supporting documents to allow the customer to make an informed decision. The final negotiation process entailed the customer making an offer on the vehicle well below our asking price on the basis of it being as is where is and unseen. Our mutual understanding was that both parties have agreed to the classic as-is nature of the transaction.

The issues

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

Issue 1: Has the vehicle been of acceptable quality?

[15] 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.
[16] 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.

[17] 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”.
[18] The purchaser of an $20,000, 43-year-old Mercedes-Benz SLC 450 with an odometer reading exceeding 130,000 miles should have realistic expectations as to its quality and durability and should understand that the vehicle is likely to have pre-existing defects consistent with its age and mileage and that expensive reconditioning work may be required to bring the vehicle to a high standard. A reasonable consumer’s expectations as to the quality of this vehicle should also have been reduced by Azak Cars’ disclosure that the vehicle was being sold “as is” and had no warrant of fitness due to pre-existing rust.
[19] Nonetheless, although the vehicle was sold “as is” and without a warrant of fitness, the protections in s 6 of the CGA still apply, and the vehicle must be of acceptable quality, taking account the factors set out in s 7(1)(f) to (j). Considering those factors – particularly other pre-purchase representations made by Azak Cars and the nature and extent of the vehicle’s undisclosed defects – I am satisfied that the vehicle was not of acceptable quality.
[20] Azak Cars submitted that its disclosure that the vehicle was sold “as is” and without a warrant of fitness due to pre-existing rust and the other information it provided to Mr Broome before sale would have led a reasonable to consumer to understand that the vehicle required “plenty of reconditioning to be done” and that there were “other possible issues with the vehicle” because of its age and mileage.
[21] If Azak Cars had only represented that the vehicle was being sold “as is” and without a warrant of fitness, there would be real strength to that submission. However, Azak Cars made other pre-purchase representations about the vehicle’s condition. It also represented that the vehicle “runs and drives well”, “is very collectable” and that “mechanically it runs well starts fine runs fine windows etc all work other then the rust underneath its in pretty good shape for its age”. Those representations would have given a reasonable consumer the impression that, aside from the pre-existing rust, the vehicle had no readily identifiable defects of any significance, including any other defects that would cause the vehicle to fail a warrant of fitness inspection.
[22] The vehicle had several readily identifiable defects that are inconsistent with those pre-purchase representations and mean it is not of acceptable quality for the purposes of s 6 of the CGA because it was not as free of minor defects as a reasonable consumer would consider acceptable:
[23] Ultimately, this vehicle is in much worse condition than was represented by Azak Cars. In that regard, I do not accept Azak Cars’ submission that the additional information it provided to Mr Broome before sale (including photographs and the warrant of fitness inspection sheet) informed him of the true condition of the vehicle or the amount of work required to bring the vehicle to an acceptable standard. The warrant of fitness inspection sheet mentioned the pre-existing rust only – there was no mention of any other fault with the vehicle – and the photographs provided to the Tribunal do not accurately reflect the vehicle’s true condition.
[24] In concluding that the vehicle is not of acceptable quality, I have considered Azak Cars’ submission that the vehicle’s price of $20,000 reflected its poor condition and that Mr Broome would had to have paid much more for a similar classic vehicle in good condition. After the hearing, I asked the parties to provide any evidence they would like to provide (including valuation evidence, vehicle listings and/or evidence of past sales of similar vehicles) to assist the Tribunal in determining whether this vehicle’s price was consistent with its condition.
[25] Azak Cars provided no information in response to this request, and the information provided by Mr Broome was inconclusive. Consequently, I do not feel able to accept Azak Cars’ submission that the vehicle’s price was reflective of its actual poor condition, and instead proceed on the basis that the vehicle’s price was consistent with the condition as represented in the Trade Me listing and by Mr Van Der Westhuizen in his correspondence with Mr Broome.

Issue 2: Are the vehicle’s defects a failure of a substantial character?

[26] Under s 18(3) of the CGA, Mr Broome may reject the vehicle if its defects amount to a failure of a substantial character. A failure of a substantial character is defined in s 21 of the CGA:
  1. 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.

[27] Section 21(a) of the CGA applies to this case and I am satisfied that the vehicle’s defects, when considered cumulatively, are a failure of a substantial character. Excluding the pre-existing rust (which was clearly disclosed to Mr Broome), the vehicle still requires extensive repairs to bring it to a standard consistent with Azak Cars’ pre-purchase representations about the vehicle’s condition and I am satisfied that a reasonable consumer would not have purchased this vehicle for $20,000 if they had been fully acquainted with the true nature and extent of the faults present in this vehicle.

Issue 3: What remedy is Mr Broome entitled to under the CGA?

[28] The relevant remedies are set out in s 18 of the CGA, which provides:
  1. 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.

[29] Under s 18(3)(a), Mr Broome is entitled to reject the vehicle because its defects are a failure of a substantial character and he is entitled to recover all amounts he has paid for the vehicle.[2] Under s 18(4), Mr Broome can also recover the $414 cost of having the vehicle assessed by Jaguar Workshop, as that assessment was necessary to determine the true nature and extent of the vehicle’s defects.
[30] The Tribunal therefore upholds Mr Broome’s rejection of the vehicle and orders that Azak Cars shall, within 10 working days of the date of this decision, pay $20,414 to Mr Broome. Azak Cars may then collect the vehicle, at its expense.

DATED at AUCKLAND this 18th day of February 2022

B.R. Carter
Adjudicator


[1] See part 10.2.2(a) of the In-service Certification (WoF and CoF) Vehicle Inspection Requirements Manual for general vehicles.

[2] Consumer Guarantees Act 1993, s 23(1)(a).

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