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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 21 October 2022
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BETWEEN E RANGI PETER VICTOR HENARE
Applicant
AND AUTOIST LTD
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 21 July 2022 (by audio-visual link)
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APPEARANCES
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E Rangi Peter Victor Henare, Applicant
Richard Collin, Witness for the Applicant
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Jarrod Belling, Director of the Respondent
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DATE OF DECISION 1 September 2022
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
A E Rangi Henare’s claim to reject the vehicle is allowed.
_________________________________________________________________
REASONS
Introduction
[1] E Rangi Henare purchased a 2008 Jaguar vehicle[1] for $27,990 from Autoist Limited (“AL”) on 13 September 2021. The odometer reading on the vehicle was then 72,500 km. Mr Henare wants to reject the vehicle under the Consumer Guarantees Act 1993 (“the CGA”) because he believes it has a significant number of faults.
[2] AL denies there are faults with the vehicle. It says that if there are any faults these are now the responsibility of Mr Henare, given how far he has driven the vehicle since purchase. It also alleges that any faults do not in any event give him the right to reject the vehicle.
Relevant background
[3] Mr Henare first saw the vehicle for sale on Trade Me in around August 2021. The Trade Me advertisement said:
This Euro saloon has been well looked after and has a few extra touches to make it stand out from the rest.... Has been lowered so the CATS have been disconnected – this does appear on the dash but doesn’t effect [sic] the car at all.... Engine and drivetrain are in good condition that run flawlessly with great power when you need it.
[4] Mr Henare had been looking for a suitable V8 vehicle for some time. He was attracted to the vehicle’s unique appearance. He was also attracted to the low mileage and the price.
[5] It was common ground that the vehicle’s suspension had been lowered and that Mr Henare was aware of this prior to sale. There was some confusion at the hearing, however, arising out of the comment in the advertisement that the “CATS” had been disconnected. The confusion was over whether “CATS” was a reference to the vehicle’s catalytic converters or to the electrical suspension on the vehicle, commonly referred to in Jaguar vehicles as “CATS”.
[6] Following the hearing, Mr Belling, who gave evidence for AL, was asked to advise his understanding as to whether the catalytic converters had been removed from the vehicle. In response, he clarified that the catalytic converters were installed in the vehicle and the “CATS” error on the dash was the signal for the suspension damping control when the car was switched to sports mode. He said this no longer worked due to the vehicle having been lowered.
Pre-purchase communications
[7] There were a number of text exchanges between Mr Henare and Mr Belling preceding the sale. AL is based in Auckland and Mr Henare resides in Levin. Mr Henare could not view the vehicle personally as he did not live in Auckland, and Auckland was then under alert level 3 restrictions. Mr Henare therefore had many questions about the vehicle, which he was proposing to buy, sight unseen. For instance, he asked whether Mr Belling knew if there are any issues with the inner wear on the tyres as a result of the vehicle being lowered. Mr Belling replied that the inner guard rubbed, but only when on a full turn. He said you cannot hear it or feel it inside the car. Mr Henare also asked if AL would be able to meet the cost of the exhaust/springs, if need be. Mr Belling was clearly feeling cautious about selling the vehicle to Mr Henare as he replied saying that he did not think this car was for Mr Henare. He said:
Most European cars cost a lot of money to maintain and things do go wrong on them from time to time. Sorry it would be as is where is.
[8] Although very keen on the vehicle, Mr Henare had some hesitation about the need for possible unplanned repairs and maintenance in the future. He asked whether Mr Belling was aware of anything mechanical that needed to be done on the vehicle. He also asked if there was a mechanical warranty he could get with the vehicle that would put his mind at ease. Mr Belling replied saying that there was a warranty that was available and that he would give Mr Henare a price.
[9] The subsequent text messages show that Mr Henare initially wanted to get an Automobile Association (AA) pre-purchase check done. Mr Belling suggested the best thing to do would be to wait until Mr Henare could actually view the vehicle in person after Auckland was out of alert level 3restrictions. Mr Belling said:
I prefer it if you see it and get it checked before any money is sent to me. In that way you will feel better about the purchase.
[10] On 9 September 2021, Mr Belling texted Mr Henare to let him know that he had someone interested in the vehicle but that he had said that Mr Henare had the first option. He enquired as to whether anything had changed for Mr Henare. Mr Henare responded saying that he still wanted the vehicle.
[11] The text messages show that Mr Henare then commenced making arrangements to have the AA pre-purchase check booked. On 12 September 2022 he discovered that the AA was fully booked past the 30-day period that MTF would finance him on the vehicle before having to re-apply for finance. He did not want to wait and make another application for finance, as this could lead to delays, so instead decided he would just go ahead with the purchase without the AA check. He conveyed this to Mr Belling and asked where could he deposit the 10% amount?
[12] A vehicle offer and sale agreement was then prepared by AL (“the purchase agreement”). The version of the purchase agreement that was produced in evidence is not signed, but was dated 13 September 2021 This was also the date the deposit of $2,998 was recorded as being paid. The price was recorded as $27,990 for the vehicle, plus an additional $1,990 for a three-year Autosure warranty. The total price was $29,980. The purchase agreement records that the balance of $26,982 (after the deposit was paid) was to be financed by a loan from “MTF Finance”. Subsequently, Mr Henare entered into a loan agreement with Dane Matich Ltd, trading as MTF Finance Wairau Valley (“the loan agreement”).
[13] On 17 September 2021, Mr Henare asked for a copy of the last warrant of fitness check sheet. Mr Belling texted it to him. It recorded “fuel flap to comply”. Mr Belling advised Mr Henare saying that the fuel flap had been sorted.
[14] The parties then exchanged messages regarding delivery of the vehicle. Because of the alert level 3 lockdown requirements that still applied to Auckland, Mr Henare could not come to Auckland to pick up his vehicle. Arrangements had to be made for the vehicle to be transported either directly to him in Levin or to a mid-point located outside the wider Auckland lockdown region.
[15] In the meantime, Mr Belling set about getting a new warrant of fitness for the vehicle. The vehicle did not pass its warrant of fitness. On 28 September 2021, Mr Belling texted Mr Henare as follows:
Got a bit of an issue with the Differential bushings, the whole subframe has to come out but the bushing isn’t available in nz. Will have to be ordered but I have found a whole second hand subframe so waiting to hear back how much and when I could pick I up. But if all goes well we should still be on for Sunday.” An email was produced after the hearing from The Toy Shop, a European vehicle specialist mechanic. The email recorded advice to Mr Belling that if an urgent fix was required, the whole subframe would need to be replaced, but that otherwise it would take 2 to 3 months to replace the differential bushings.
[16] The parties then spoke on the phone. Mr Belling told Mr Henare it would take two months to replace the differential bushings but that he had a “mechanic friend” who could take a look at it and he may be able to repair the problem by sealing the bushings. He said this repair would only last until the next warrant in 12 months time and, at that point, the bushings would need to be replaced. Mr Belling gave Mr Henare the opportunity to withdraw from the agreement, but Mr Henare said he wanted to proceed.
[17] Mr Belling produced an invoice from Direction Automotive Engineering Ltd relating to the work it did to repair the cracked differential bushings. Its invoice records:
Vehicle was brought to me on the 29th September 2021 due to a failed differential bushing noted on the WOF sheet. I was advised the part was unavailable and if there are any other options for bushing.
Upon inspection I found sight hairline cracks in the bushing. Clean surface area. Filled hairline cracks with urethane. Temporary fix only.
The vehicle arrives with Mr Henare.
[18] Arrangements were made for the vehicle to be transported to Rotorua. Mr Henare would drive to Rotorua to collect the vehicle. AL arranged for the vehicle to be transported and Mr Henare separately paid $500 to AL for the transportation cost.
[19] Mr Henare took possession of the vehicle in Rotorua on 4 October 2021. He began the drive home to Levin. As soon as he started driving, he noticed a message on the dashboard which said, “CATS sims fault”. This was a reference to the electrical suspension being disconnected so the vehicle could be lowered. Mr Henare knew to expect that light on the dashboard, so was not perturbed by it.
[20] After driving 200kms, however, Mr Henare noticed another message coming up on the dashboard. This one said, “restricted performance”. The vehicle then went into limp mode and the accelerator would not respond. He pulled the vehicle over safely and turned it off. He texted Mr Belling and asked what the message meant.
[21] Mr Belling replied asking for a picture of the message and said this had never happened to him before. Mr Belling then searched on Google to see what the message could mean. He found that one possible cause was that the catalytic converters may not be working or installed. He called Mr Henare and told him that. Mr Henare recalled that he also said that if he accelerated too much going up a hill, the carbon dioxide levels would register as being at a dangerous level and the vehicle would restrict performance so as to stop any potential damage.
[22] Mr Henare was able to clear the message by stopping and starting the vehicle and continued on with his drive. The message did not return.
4 October 2021 to 31 October 2021
[23] Mr Henare works in Newtown, Wellington. From 4 October 2021 to 31 October 2021, he used the vehicle as his daily commute, to and from his work. The journey is approximately 100kms each way.
[24] Mr Henare noticed an issue when he first went to fill up the vehicle with petrol. It was impossible to pump petrol in without the pump clicking and stopping every few seconds (indicating the tank was full). He said it was quicker and easier to buy a 20 litre cannister of petrol and manually fill the vehicle.
[25] It was common ground that this was an issue that arose because the vehicle had been lowered. Nevertheless, Mr Henare found it inconvenient and, although he knew the vehicle had been lowered, he was not expecting to encounter this added issue.
The tyre blow out on 31 October 2021
[26] On 31 October 2021, Mr Henare was driving to a business meeting in Fielding with Mr Richard Collin, who appeared at the hearing as his witness, and one other person. The vehicle suffered a tyre blowout on this journey.
[27] Mr Henare managed to pull the vehicle over and discovered that the front left tyre had blown out. He went to change the tyre; however, the space saver tyre was in a deteriorated condition. Also, there was no wheel brace supplied with the vehicle, although Mr Henare happened to have another one in the vehicle.
[28] Mr Henare had pulled the vehicle over in a dangerous part of the highway. He put the space saver tyre on the vehicle and, travelling only 50 kms per hour, attempted to drive to Rongotea. After a short time, he heard a “flip flop” sound on the road. He was able to safely pull over and stop. He then noticed that the tread on the space saver tyre had come away and was now too dangerous to drive on. Photographs were produced showing the condition of the space saver tyre. I return to this below.
[29] Mr Henare arranged for a tow truck driver to tow the vehicle to his home at a cost of $250. He texted Mr Belling to let him know what had happened. The towing cost was later reimbursed to him by AL.
[30] Mr Henare arranged for the vehicle to be taken to Beaurepaires in Levin. He was advised that he would have to replace both front tyres, not just one. Mr Henare replaced the tyres at a cost of $1,103.25. Beaurepaires attempted a wheel alignment however this could not be completed because the vehicle had been lowered. The Beaurepaires’ invoice records that the vehicle had then travelled 73,986 km.
Inspection by Armstrongs Jaguar Wellington (Armstrongs)
[31] Mr Henare made a booking to have the vehicle inspected by Armstrongs, a Jaguar specialist in Wellington.
[32] Armstrongs saw the vehicle twice and produced two reports. The first inspection was undertaken on 15 November 2021 and the second on 9 June 2022. The second inspection was undertaken following the Tribunal’s direction for a clearer copy of the report that had already been obtained relating to the first inspection. The two reports that were produced are largely the same. It was not necessary for there to be a full second inspection. It is noted that between the two inspections, the odometer reading has increased from only 77,764, to 77,867 km, so the vehicle has been driven only a short distance during that time. Mr Henare’s evidence was that he did not drive the vehicle after it was first inspected by Armstrongs because Armstrongs said it was unsafe.
[33] Armstrongs charged Mr Henare $755.03 for the first inspection and $241.50 for the second inspection.
[34] A summary of the findings of Armstrongs is as follows:
- (a) the engine has air leaks, causing the engine to run rough and hunting idle. Further time to diagnose the issue was recommended.
- (b) The bonnet release latch handle is missing from the interior of the vehicle.
- (c) The cam sensors are leaking on both banks
- (d) The driver’s side rear differential axle seal is leaking
- (e) The driver’s side rear sway bar interlink has snapped. Replacement recommended.
- (f) The engine sump is leaking. Replacement and resealing of the gasket is recommended.
- (g) There is excessive play from the steering system on both sides. Replacement of inner rack ends and tie rods is recommended as well as wheel alignment.
- (h) Lower control arm bushes split on both driver’s and passenger’s sides. Replacement recommended.
- (i) Transmission oil leak diagnosed. Replacement of filter gasket and oil recommended.
- (j) The engine undertray split and covered in oil.
- (k) The front and rear rotors are heavily worn and rusted. Replacement recommended.
- (l) Tyres have worn excessively on inner edges.
[35] The total quoted figure to undertake the repairs recommended by Armstrongs is $14,772.67.
[36] Mr Henare produced a written list of questions that he asked Armstrongs, as well as Armstrongs’ handwritten answers. In its answers, Armstrongs advised that engine material was found in the oil filter. This included bearing material directly from the engine. Bearing material from a vehicle’s engine is yellow and as such its origin can be easily identified.
[37] Mr Henare said that it was Armstrongs who advised him that the blowout had occurred due to the inner wall of the front left tyre rubbing against the front left suspension arm. This was happening because the vehicle had been lowered.
[38] On 17 November 2021, after the first inspection was undertaken, Mr Henare texted Mr Belling and summarised the key findings from the Armstrongs report. He said that Armstrongs had said the vehicle was unsafe to drive. He said that the rear bushings were “screwed”, the sway bar link had failed, the shocks were failing, and there were oil and air leaks. He said the blowout had been caused because of the tyre rubbing on the suspension, even when the car was not on a full turn. Mr Henare had known there would be some rubbing, but believed it would just be when the vehicle was on a full turn. Mr Henare requested rejection and a refund of the vehicle.
[39] There was then a number of subsequent text exchanges between the parties, where there were attempts to negotiate an agreed rejection, but agreement could not be reached.
[40] Mr Henare wants to reject the vehicle and obtain a refund of the purchase price and all monies spent on the vehicle. He has driven the vehicle a total of 5,366 km in the time he has owned it. He filed his application on 28 April 2022 and explained that the delay in bringing the matter to the Tribunal was due to a death in the family and a breakdown of a long-term relationship. He also explained that he has had to work excessive hours for his employer and that he suffered from depression during this period of time. He claims that an accumulation of these factors resulted in the delay in filing his application.
[41] During his ownership of the vehicle, Mr Henare advises that he has caused some kerb damage to two of the mags. He is willing to meet the cost of this and submits that each mag could cost approximately $500. Mr Henare produced photographs of the external damage caused to the mags.
[42] AL denies that he is entitled to rejection. It says:
- (a) Mr Henare knew of the problem with the differential bushes before he purchased the vehicle.
- (b) Mr Henare was aware that he was buying a European vehicle that may need ongoing maintenance and that such ongoing maintenance could be expensive. Mr Henare knew that there were likely to be problems but went ahead with the purchase anyway because he was so keen to secure the vehicle.
- (c) Mr Henare has driven too far in the vehicle to be entitled to rejection. His driving has caused the sway bar to snap and the damage to the sump.
- (d) AL believes that the Armstrongs reports may overstate the problems, significantly. It wants the opportunity to get its own report in order to assess whether it has any liability.
The issues
[43] The issues requiring the Tribunal’s consideration in this case are:
- (a) Was the vehicle of acceptable quality for the purposes of section 6 of the CGA?
- (b) Are the vehicle’s defects a failure of a substantial character?
- (c) Has Mr Henare lost the right of rejection as a result of the damage to the mags?
- (d) What remedy is Mr Henare entitled to under the CGA?
Issue 1: Was the vehicle of acceptable quality?
[44] 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.
[45] 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.
[46] In considering whether or not goods meet the guarantee of acceptable quality, the Tribunal must consider the quality elements as set out in section 7(1)(a)-(e) of the CGA as modified by the factors set out in section 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 Henare’s subjective perspective.
[47] Mr Gregory, the Tribunal’s Assessor, advises:
- (a) The vehicle going into limp mode was likely caused by the air leaks diagnosed by Armstrongs. It is very unlikely to have been caused by any heavy accelerating or manner of driving by Mr Henare.
- (b) The front tyres are rubbing against a suspension component. For now, the issue has been fixed because the tyres have been replaced, but the front tyres will wear again and there could be another tyre blowout in the future. This presents a significant safety concern, going forwards.
- (c) The vehicle has a broken suspension sway bar link. Most likely, this has snapped due to the extra load placed on the sway bar as a result of the vehicle being lowered. It is highly unlikely that this has snapped as a result of Mr Henare’s style of driving.
- (d) A differential side seal is leaking and requires replacement.
- (e) The transmission has a leak which needs to be fixed by way of replacing the pan gasket.
- (f) The vehicle needs a wheel alignment. The vehicle is so low to the ground that the correct alignment specifications might not be able to be achieved.
- (g) The very low engine oil has caused premature and accelerated engine wear leading to contaminants being found in the oil filter. The vehicle is highly likely to suffer major engine failure in the near future.
- (h) There is damage to the sump, which can cause oil pressure problems by restricting oil supply to the oil pickup.
- (i) The poor condition of the space saver tyre would make it unsafe if fitted to the vehicle as it is heavily delaminated and the vehicle should also have been supplied with a wheel brace.
[48] I am satisfied that each of these items are failures that have meant the vehicle has not been of acceptable quality for the purposes of section 6 of the CGA. A reasonable consumer of a second-hand European vehicle should expect the need for ongoing and often expensive maintenance, but I am satisfied that they would not expect the failures listed above to present so soon after purchase, albeit the vehicle has been driven 5,366 kms since purchase.
[49] I find that each one of these failures has separately meant the vehicle was not as durable as a reasonable consumer would expect, given the price, age and mileage of the vehicle.
[50] I have considered the fact that Mr Henare chose not to have an AA inspection undertaken on the vehicle. Also, that he was warned off the vehicle by AL. In its written submission dated 24 August 2022, AL submitted it should not have liability because it encouraged Mr Henare to undertake an AA inspection and it was upfront to Mr Henare that the differential bushings needed replacing.
[51] The CGA guarantees apply, regardless of any encouragement given by a trader to a purchaser to undertake a pre-purchase inspection. Mr Belling’s statement to Mr Henare that the sale of the vehicle “is as is where is” has no application or legal effect in this situation. The CGA guarantees prevail and are not negated by such comments.
[52] In relation to AL’s submission that it warned Mr Henare the differential bushings would need replacing, although I find that Mr Belling did warn Mr Henare about the bushings, I accept Mr Henare’s evidence that he was told they would last until the next warrant in 12 months. That was some time away from purchase. I note further that the invoice from Direction Automotive Engineering Ltd relating to the work it did to repair the cracked differential bushings recorded that its fix was “temporary” only. It was unknown whether Mr Belling had been told the fix would not last very long at all, but this indicates that the bushings were not expected to last very long at all, much less one year.
[53] I have also considered whether Mr Henare being aware of the potential for the tyres to rub on the suspension could be considered as alerting him to a defect, for the purposes of section 7(2) of the CGA. Mr Henare’s evidence, uncontradicted by AL, was that he was only aware that there could be rubbing when the vehicle was on a full turn. Here, the damage has occurred because the tyres were consistently rubbing on the suspension, even when the vehicle was not on a turn. This consistent rubbing would have significantly increased the potential for an early blowout and more rapid wear and tear on the tyres. I therefore find that Mr Henare was not alerted to this defect, being the consistent rubbing, before sale.
[54] In relation to the other alleged defects raised by Armstrongs and referred to in the reports, I accept the submission of AL that to some extent these overstate the position. I am not satisfied these additional alleged defects have meant the vehicle was not of acceptable quality, for the following reasons:
- (a) I am not satisfied that Mr Henare has proven that the inner rack and tie rod ends need to be replaced.
- (b) Minor engine oil leaks are to be expected in a European vehicle of this age and mileage. The oil leaks identified are not severe enough to amount to a failure of the guarantee of acceptable quality.
- (c) The photographs of the lower rear bushes do not show clearly that they need to be replaced. This alleged defect is not proven.
- (d) The rusted front and rear rotors are another aspect expected in a European vehicle of this age and mileage. The fact that the vehicle has likely not been used for an extended period of time will have contributed to this issue.
[55] I therefore find that the presence of bearing material in the oil filter, the condition of the front tyres caused by rubbing on the suspension, the condition of the space saver tyre and lack of a wheel brace, the broken sway bar link, the leaking differential seals, the leaking transmission, the dented sump and the need for a wheel alignment have all meant that the vehicle was not of acceptable quality.
Issue 2: Are the vehicle’s defects a failure of a substantial character?
[56] The relevant remedies available to Mr Henare are set out in section 18 of the CGA, which provides:
- Options against suppliers where goods do not comply with guarantees
(1) Where a consumer has a right of redress against the supplier in accordance with this Part in respect of the failure of any goods to comply with a guarantee, the consumer may exercise the following remedies.
(2) Where the failure can be remedied, the consumer may—
(a) require the supplier to remedy the failure within a reasonable time in accordance with section 19:
(b) where a supplier who has been required to remedy a failure refuses or neglects to do so, or does not succeed in doing so within a reasonable time,—
(i) have the failure remedied elsewhere and obtain from the supplier all reasonable costs incurred in having the failure remedied; or
(ii) subject to section 20, reject the goods in accordance with section 22.
(3) Where the failure cannot be remedied or is of a substantial character within the meaning of section 21, the consumer may—
(a) subject to section 20, reject the goods in accordance with section 22; or
(b) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.
(4) In addition to the remedies set out in subsection (2) and subsection (3), the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.
[57] Under section 18(3) of the CGA, Mr Henare may reject the vehicle if it has defects that amount to a failure of a substantial character. A failure of a substantial character is defined in section 21 of the CGA as follows:
- 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.
[58] Section 21(a) of the CGA applies to this case. The question I must answer is whether the faults that this vehicle has, are such that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased the vehicle.
[59] There is a basis for the Tribunal to find, in certain situations, that a vehicle’s cumulative defects, taken together, can amount to a failure of a substantial character. In Cooper v Ashley & Johnson Motors Limited,[2] the District Court found the purchaser in that case was able to reject a vehicle where there was an accumulation of minor defects amounting to a failure of a substantial character.
[60] I have little hesitation in finding that a reasonable consumer, fully acquainted with the true nature and extent of the faults, would not have purchased this vehicle. The failures that I have identified will in totality be expensive to repair. Most of these failures have rendered the vehicle unusable. They relate to significant parts of the vehicle. I find that the cumulative defects, being the presence of bearing material in the oil filter, the condition of the space saver tyre and lack of a wheel brace, the broken sway bar link, the leaking differential seals, the leaking transmission, the dented sump and the need for a wheel alignment mean that there has been a failure of a substantial character.
[59] Section 21(d) of the CGA also applies to this case. I find that the vehicle was unsafe, as a result of the blowout caused by the tyres rubbing on a suspension component. This issue has now been rectified but the blowout could have resulted in serious harm to Mr Henare and anyone travelling with him.
[60] For this reason, I consider this defect to separately amount to a failure of a substantial character.
Issue 3: Has Mr Henare lost the right to reject the vehicle as a result of damage to the vehicle?
[61] Section 20 of the CGA sets out the circumstances in which a purchaser loses the right to reject a vehicle. Relevant to this case, section 20(1)(c) of the CGA states:
20 Loss of right to reject goods
(1) The right to reject goods conferred by this Act shall not apply if—
...
(c) the goods were damaged after delivery to the consumer for reasons not related to their state or condition at the time of supply.
[62] It was common ground that the vehicle was damaged after it was sold to Mr Henare. There is now scratching to the rims of two of its mags, otherwise known as “kerbing”. The scratching has occurred when the mags have pushed up against a kerb. The question I must decide is whether this scratching amounts to “damage” for the purposes of s 20(1)(c) of the CGA.
[63] In Joden Finance Ltd v Prerssilp,[3] Judge Harrison found that in order to qualify as “damage”, for the purposes of section 20(1)(c) of the CGA, the damage had to amount to some loss in value of the vehicle or reasonably significant cost of repair, justifying a finding that damage greater than wear and tear has occurred.[4]
[64] Mr Gregory advises that the rim damage is easily repairable, but that repair is in any event unnecessary, because it is purely cosmetic.
[65] I am satisfied that the kerbing is minor in nature and does not amount to “damage” for the purposes of section 20(1)(c) of the CGA.
[66] It follows that Mr Henare has not lost the right to reject the vehicle.
Issue 4: What remedy is Mr Henare entitled to under the CGA?
[67] Under section 18(3) of the CGA, Mr Henare has the right to reject the vehicle because the vehicle’s cumulative defects meant that there was a failure of a substantial character. AL submitted that it is within its “legal rights” to get its own assessment of the vehicle. This is incorrect. Where there is a failure of a substantial character, a purchaser is entitled to reject the vehicle.
[68] It follows that Mr Henare is therefore entitled to a refund of all amounts paid by him in respect of the vehicle.[5]
The deposit
[69] Mr Henare paid a deposit of $2,998 towards the cost of the vehicle. The sum of $2,998 is recoverable from AL.
Loan payments
[70] Mr Henare is also entitled to reimbursement of part of the loan payments he has made to MTF Finance. Following directions issued by the Tribunal for him to provide information about all payments made, including a breakdown of principal and interest, he filed material which included the loan agreement, a transaction history instalment schedule and payment schedule. He submitted that he believed he had paid $7,636.15 to date.
[71] It was not easy to reconcile the submission made by Mr Henare about what he believed he had paid with the information he provided. The transaction history statement does not match up with the payment schedule and it is hard to understand how his calculation was arrived at. Also, the transaction history statement shows that there have been various dishonour fees incurred and paid by him over the course of the loan. It is likely that the amounts he has actually paid include these dishonour fees. AL should not be held responsible for those fees. [72] Given the difficulties in accurately reconciling the information, I consider it is safest to rely on the payment schedule provided by Mr Henare as evidence of what has been paid. I find that on or before 21 August 2022, payments of $6,631.35 were due by him, including interest, and likely paid by him towards the loan. This sum does not include any of the dishonour fees I have referred to above, that appear to have additionally been paid. The instalment schedule document Mr Henare filed shows that, of that sum, $2,161.89 was for interest incurred on or after 15 November 2021 (when the first Armstrongs report was issued) and $233.19 was for interest owing as at 21 October 2021.
[72] I find that Mr Henare is entitled to recover the sum of $6,631.35, but that there should be two deductions from that figure. The first deduction is the interest payment of $233.19 for interest as at 21 October 2021. Up until that time, Mr Henare had the benefit and use of the vehicle. He should therefore not be entitled to recover interest payments payable as at that date.
[73] The second deduction is for the interest payments from 15 November 2021 (when the first Armstrong's report was issued) up to and including 21 April 2022. This sum amounts to $1,334.95. During this period there was a delay in progressing matters, following initial communications. Mr Henare offered personal reasons why he had delayed bringing his claim until 22 April 2022, but had he filed his application earlier, then the matter would have been resolved earlier and AL’s liability for the added interest payments most likely would have been reduced.
[74] The total payment that must be made by AL to Mr Henare in respect of the loan agreement is therefore $5,063.21.
Assignment of the loan agreement
[75] Mr Henare is not entitled to recover the full amount of the purchase price but he is entitled to have his ongoing rights and obligations under the loan agreement assigned to AL. The relevant statutory provisions are set out in sections 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.
...
[76] The criteria in section 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to AL are all met in this case:
- (a) the loan agreement is a collateral credit agreement for the purposes of section 89(2) of the MVSA in that it was associated with the purchase agreement. The loan agreement was arranged or procured by Mr Henare for the provision of credit by MTF Finance to enable him to purchase the vehicle;
- (b) AL sold the vehicle to Mr Henare, so it is a party to the purchase agreement; and
- (c) Mr Henare has exercised the right conferred by the CGA to reject the vehicle and the Tribunal has ordered that AL must refund any money paid, or other consideration provided, for that vehicle.
[77] Accordingly, under section 89(2) of the MVSA, all of Mr Henare’s rights and obligations under the loan agreement are assigned to AL from the date of this decision.
Deduction for the Autosure warranty
[78] The amount borrowed from MTF Finance included the cost of the Autosure warranty of $1,990.
[79] This is a warranty that Mr Henare has had the benefit of, in theory, even though he has not had to use it. This is a cost he must therefore bear himself and so must therefore be deducted from the sum I have ordered above to be paid by AL. This is because the cost of this insurance was included in the amount that was borrowed from MTA Finance and, as I have ordered above, the loan agreement is now assigned to AL.
Other losses claimed
[80] Pursuant to s 18(4) of the CGA, Mr Henare is additionally entitled to damages for any loss or damage resulting from the failures which were reasonably foreseeable as liable to result.
The cost of the two Armstrongs reports
[81] Mr Henare has incurred the cost of producing two reports from Armstrongs. I am not satisfied that the second report was necessary, for reasons discussed above, but I do allow the cost of the first report, being $755.03.
[82] Mr Henare incurred the cost of tyre replacement in the sum of $1,103.25 with Beaurepaires.
[83] I have found that the tyre blowout was a failure of the guarantee of acceptable quality. I have also found that it was a failure of a substantial character because it meant that the vehicle was unsafe. Mr Henare was not entitled to reject the vehicle on the basis of this failure, however, because he repaired the failure. Pursuant to section 18(3)(b) of the CGA, he is, however, entitled to obtain from AL damages in compensation for any reduction in value of the vehicle below the price paid.
[84] In this case, I consider that fixing an appropriate compensation amount for the reduction in value recoverable under section 18(3)(b) should involve an assessment of what was the reasonable cost of repairing the tyre blowout. A reasonable repair cost is an indication of the reduction in the vehicle’s value as a result of the engine damage. It would be a factor taken into account in assessing value by any prospective buyer or trader.
[85] Mr Gregory advises that, with a tyre blowout in a vehicle like this, it can be necessary to replace the opposite tyre, as well as the blown-out tyre. This is because both tyres must be of the same construction and type for warrant of fitness purposes. He also advises that it can be necessary to conduct a wheel alignment at the same time. He advises that the Beaurepaires’ invoice was therefore reasonable for the work involved in repairing the failure.
[86] In assessing the appropriate damages amount, I have considered whether any element of betterment with the repair is also relevant. If I had not otherwise ordered rejection above, then Mr Henare would have the benefit of two brand new tyres, and the final reduction in value amount would reflect that. Here, however, I have ordered rejection. Mr Henare is not receiving any betterment from the new tyres. I therefore do not reduce the reduction in value amount to reflect any betterment in favour of Mr Henare. Ultimately, in this case, it is AL which stands to benefit from the new tyres, because I have ordered rejection of the vehicle on other grounds.
[87] Taking into account the foregoing factors I assess that the appropriate reduction in value of the vehicle below the price paid is the amount of the Beaurepaires’ invoice. AL must pay this sum to Mr Henare.
Refunds offered by AL
[88] For completion I note that AL emphasised in its submission dated 24 August 2022 that it offered refunds to Mr Henare some time ago, the first such offer being before the date of the first Armstrongs report. These were not however full refunds of all amounts paid, and Mr Henare cannot in my view be criticised for pursuing this matter through the Tribunal.
Outcome
[89] Mr Henare’s claim to reject the vehicle is allowed.
[90] AL must, within 10 working days of the date of this decision, pay $7,929.49 to Mr Henare, calculated as follows:
Deposit $2,998.00
Amount ordered pursuant to the loan agreement $5,063.21.
Cost of the first Armstrongs’ report $755.03
Reduction in value for the tyre blowout $1,103.25
Less the cost of the Autosure warranty $1,990.00
[91] After the sum of $7,929.49 has been paid by AL to Mr Henare, AL must arrange to uplift the vehicle from Mr Henare, at a time and place convenient to him and at its cost.
[92] Mr Henare’s rights and obligations under the loan agreement are assigned to AL from the date of this decision.
DATED at AUCKLAND this 1st day of September 2022
D A Watson
Adjudicator
[1] Registration plate NCH411.
[2] Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407 (DC).
[4] On appeal, Katz J held that the District Court was right to find that minor damage to goods, such
as that associated with fair wear and tear, would not result in the purchaser losing their right to
reject.
[5] Section 23(1)(a) of the CGA.
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