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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 23 November 2022
IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA
MVD 280/2022 [2022] NZMVDT 236
BETWEEN DANIELLE PONT
Applicant
AND MURRAY ARNESON
Respondent
HEARING at Auckland on 22 and 28 September 2022 (by audio-visual link)
MEMBERS OF TRIBUNAL
B Carter, Barrister – Adjudicator
S Haynes, Assessor
APPEARANCES
D Pont, Applicant
M Pont, Witness for the Applicant
M Arnesen, the Respondent
DATE OF DECISION 26 October 2022
DECISION OF THE TRIBUNAL
A Danielle Pont’s application to reject the vehicle is dismissed.
(a) rectify the oil leaks from the rocker cover gaskets
(b) machine the front brake rotors to remove the unacceptable noise
(c) replace the left front wheel bearing
(d) rectify the front bumper rust; and
(e) clean the oil from the power steering rack and rectify any ongoing power steering rack leak.
REASONS
Introduction
[1] On 15 June 2022, Danielle Pont purchased a 2003 Hyundai Santa Fe for
$5,500 from Murray Arnesen, who is a registered motor vehicle trader. Ms Pont now wants to reject the vehicle. She says that, despite Mr Arnesen describing the vehicle has having “no issues” and “no mechanical issues”, the vehicle has numerous pre-existing defects that will be expensive to repair. Ms Pont wants to return the vehicle for a refund of the purchase price.
[2] Mr Arnesen says that any defects the vehicle has are minor, easily fixed and generally consistent with the vehicle’s age. He is prepared to rectify any defects that he should have liability for but says that Ms Pont should not be entitled to reject the vehicle.
Relevant background
[3] Ms Pont saw the vehicle advertised on the Trade Me website. Relevant to this claim, the Trade Me listing stated:
• Very nice example of this super popular model
• No issues with this vehicle
• This vehicle is well above average condition and drives smooth and quiet
• This car does not have any mechanical issues
[4] Mr Arnesen was obliged to ensure that the vehicle had a warrant of fitness issued within one month of the vehicle being supplied to Ms Pont unless Ms Pont acknowledged in writing that the warrant of fitness was older.1 The vehicle’s warrant of fitness was nearly six months old when the vehicle was supplied to Ms Pont and no written consent was obtained.
[5] The vehicle’s odometer reading at the time of sale was about 183,700 km. Shortly after purchasing the vehicle, Ms Pont says that she noticed the brakes creaking and her father, Martin Pont, thought that the brakes looked in poor condition. Mr Pont had also noticed a burning smell from the engine bay and a slight rattling noise and humming sound in the engine. Ms Pont then decided to have a “post purchase inspection” performed by Johns Autos Whangaparaoa Ltd. An invoice dated 28 June 2022 states that Johns Autos found the following:
• the vehicle needs new wiper blades
• the bonnet struts are weak
• both front shock absorbers starting to weep
• the left front wheel bearing is noisy
• the steering rack is leaking oil
• the spare wheel is loose
• there are small dents on the left rear door and guard
• the power steering reservoir has been overfilled.
1 Land Transport Rule: Vehicle Standards Compliance 2002, r 9.12(3).
[6] Ms Pont advised Mr Arnesen of the list of issues found by Johns Autos, rejected the vehicle, and requested a refund of the purchase price. Ms Pont says that Mr Arnesen declined to accept that rejection and asked Ms Pont to return the vehicle to him to enable him to perform any required repairs.
[7] Ms Pont, who lives in Auckland, was reluctant to return the vehicle to Hamilton and says that she told Mr Arnesen that she would not return the vehicle herself, but he could pay to have the vehicle transported from Auckland to Hamilton or to have the vehicle assessed in Auckland.
[8] Ms Pont has since had the vehicle assessed by Keeling Automotive in
Henderson, which identified the following issues:
• the air filter is dirty
• there is a knock on the front suspension, possibly due to the sway bar D
bushes/links
• the rear tyres worn on the edges starting to perish
• front shock absorbers are misting
• the left front wheel bearings rough
• the rear driveshaft coupling is starting to crack
• left hand outer CV boot split
• all brake pads are new, but the rotors have not been machined or replaced
• the rear brake discs are noisy/rusty
• the vehicle has had oil and filter change but not much of a service
• the door hinges are very tight
• transmission fluid is black and dirty
• there is oil leaking from the rocker cover and potentially other places
[9] Ms Pont has also provided a sound file, which she says demonstrates the unusual noise from the engine bay.
[10] After the hearing on 22 September 2022, Ms Pont took the vehicle to VTNZ in Westgate for a warrant of fitness inspection. The vehicle failed that inspection due to:
• a “rough” front wheel bearing
• oil leaking onto the exhaust manifold
• a leak from the middle steering rack
• corrosion in the front bumper structure; and
• the front windscreen washer was not working properly.
[11] The VTNZ inspector also noted that the tread depth on the rear tyres was getting low, and that the tread and the vehicle’s oil leaks required attention soon.
[12] Mr Arnesen says that he had driven the vehicle himself for about six weeks before he sold it to Ms Pont. He says that the vehicle had no obvious mechanical issues, oil leaks or burning smells and that the vehicle was serviced and went through a “39 Point Vehicle Check” before it was sold, and no significant issues were found.
[13] Mr Arnesen says that he was therefore surprised when Ms Pont contacted him following the Johns Autos report. Mr Arnesen says that he never refused to refund the purchase price. Instead, he says that he told Ms Pont that he would like the opportunity to assess the vehicle to determine what is wrong with it before deciding what he should do.
[14] Mr Arnesen thinks that the noise from the engine bay is caused by the air conditioning clutch, which is a normal noise in a vehicle of this age and mileage. Mr Arnesen also says that many of the issues found by Johns Autos and Keeling Automotive are consistent with the vehicle’s age and mileage and do not require any kind of repair, but if repairs are required, he is happy to perform those repairs at his expense. Finally, Mr Arnesen says that someone may have tampered with the vehicle to create the issues now present, as those issues were not present when the vehicle was in his possession.
The post hearing inspection
[15] Mr Haynes, the Tribunal’s Assessor, inspected the vehicle after the 28
September 2022 hearing. A copy of his inspection report has been provided to the parties. Mr Haynes assessed the vehicle for oil leaks, power steering leaks, brake performance and engine performance.
[16] Mr Haynes found the following:
(a) the vehicle has a longstanding oil leak from the rocker cover gaskets, with oil leaking onto the exhaust manifold
(b) there is oil on the power steering pump and high pressure power steering hose and the right hand side inner rack boot, but that oil was black – which is consistent with an engine oil leak rather than a power steering fluid leak. Mr Haynes therefore considers that the engine oil leak should be rectified, the engine bay steam cleaned, and the power steering reinspected to determine whether any power steering leak exists
(c) the vehicle’s brakes operate within safety tolerances, but the front brakes are noisy due to a 2mm lip on the brake rotors; and
(d) the engine makes a faint noise, but only at operating temperature between 1,000 and 1,500 RPM. Mr Haynes says that this noise is caused by a lazy or weak hydraulic lifter. Mr Haynes says that this noise is consistent with the wear and tear one can expect in a vehicle of this age and mileage and does not require repair. However, Mr Haynes notes that the noise may be rectified when the oil is changed at the vehicle’s next service, or by using a slightly thicker oil and/or lifter additive.
[17] Mr Arnesen prepared his own report following this inspection. He alleges that all six bolts holding the rocker covers to the cylinder head were loose. He says that the bolts were not loose when the vehicle was sold to Ms Pont and that someone has since tampered with the vehicle by loosening the bolts, causing the oil leak. Mr Arnesen also submitted that the noise from the engine is consistent with the vehicle’s age and mileage and is “nothing of concern”.
[18] In a further post hearing submission, Mr Arnesen stated the vehicle’s issues were minor and that he was prepared to replace the vehicle’s rocker cover gaskets, skim all four brake rotors, replace the left front wheel bearing and clean the engine. Mr Arnesen again reiterated his belief that Ms Pont should not be entitled to reject the vehicle.
[19] In response to Mr Haynes’ report, Ms Pont reiterated her desire to reject the vehicle, submitting that Mr Arnesen made misleading pre-purchase representations about the condition of the vehicle and that the vehicle now has numerous mechanical issues that require repair.
The issues
[20] In determining this claim, the issues requiring the Tribunal’s consideration are:
(a) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
(b) Are the vehicle’s defects a failure of a substantial character? (c) What remedy is Ms Pont entitled to under the CGA?
(d) Has Mr Arnesen engaged in misleading conduct in breach of s 9 of the
Fair Trading Act 1986 (the FTA)?
(e) If so, what remedy is Ms Pont entitled to under the FTA?
Issue 1: Has the vehicle been of acceptable quality?
[21] Section 6(1) of the CGA provides that “where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”.
[22] “Acceptable quality” is defined in s 7 of the CGA (as far as is relevant) as follows:
7 Meaning of acceptable quality
(1) For the purposes of section 6, goods are of acceptable quality if they are as—
(a) fit for all the purposes for which goods of the type in question are commonly supplied; and
(b) acceptable in appearance and finish; and
(c) free from minor defects; and
(d) safe; and
(e) durable,—
as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to—
(f) the nature of the goods:
(g) the price (where relevant):
(h) any statements made about the goods on any packaging or label on the goods:
(ha) the nature of the supplier and the context in which the supplier supplies the goods:
(i) any representation made about the goods by the supplier or the manufacturer:
(j) all other relevant circumstances of the supply of the goods.
[23] Whether a vehicle is of acceptable quality is considered from the point of view of a reasonable consumer who is fully acquainted with the state and condition of the vehicle, including any hidden defects.
[24] A reasonable consumer who pays $5,500 for a 19-year-old vehicle with an odometer reading of more than 186,000 km should understand that the vehicle will have wear and tear consistent with that age and mileage and that it may require (sometimes expensive) repairs and maintenance over its remaining life. However, a reasonable consumer is also entitled to expect that the vehicle will be of acceptable quality at the time of sale, including that it will be free of undisclosed significant defects and be sufficiently durable.
[25] Further, a reasonable consumer’s expectation as to the quality and durability of this vehicle would have been substantially increased by the pre- purchase representations made by Mr Arnesen, including representations that the
vehicle had “no issues”, “no mechanical issues”, was in “well above average condition” and “drives smooth and quiet”.
[26] Johns Autos and Keeling Automotive have identified many issues with this vehicle, which have caused grave concern to Ms Pont. That concern is understandable, as Ms Pont has been led to believe that the vehicle requires extensive and expensive repairs.
[27] After considering all the evidence presented, including the VTNZ warrant of fitness inspection and the report from Mr Haynes, I find that most of the issues complained of by Ms Pont do not require immediate repair, do not make the vehicle unsafe and are the type of issue that a reasonable consumer can expect in a vehicle of this age and mileage. Included in this category are:
(a) The engine noise. The engine does make a faint noise at operating temperature between 1,000 and 1,500 RPM – as found by Mr Haynes and as shown in the videos provided by Ms Pont, but that noise is minor and not unusual for a vehicle of this age and mileage and does not require repair.
(b) The exhaust repairs. Photographs provided by Ms Pont show that the exhaust has previously been repaired. That repair has not been performed to a high standard. However, the exhaust was assessed by VTNZ, and if any leak was present, it would have failed that warrant of fitness inspection due to that leak. No leak was found, so I am satisfied that the exhaust remains in acceptable condition.
(c) The misting/weeping shock absorbers, the cracked/split/broken CV joints, the cracked driveshaft coupling and sway bar D bushes and links. Again, each of these components would have been assessed during the VTNZ warrant of fitness inspection. If those components had degraded to the point that they required replacement or made the vehicle unsafe, that would have been identified during the warrant of fitness inspection. Those components passed the warrant
of fitness inspection, so I am satisfied that they remain in acceptable condition and do not require repair.
[28] However, some of the issues present in this vehicle are not acceptable in a recently purchased vehicle of this age and mileage, specifically:
(a) The condition of the left front wheel bearing. All three companies who inspected this vehicle for Ms Pont found that the left front wheel bearing was worn and requires replacement. Mr Haynes advises that this is a warrant of fitness failure.
(b) The vehicle has oil leaks from its two rocker cover gaskets, which are causing oil to leak onto the exhaust. This is also a warrant of fitness failure. Mr Arnesen submits that these oil leaks have been caused by someone tampering with the vehicle to cause the leak. Ms Pont denies this allegation, and I accept her evidence. I found her to be a clear and consistent witness. I also note that Mr Haynes advises that the oil leaks from the rocker cover are longstanding, consistent with the oil leak being present well before the vehicle was sold to Ms Pont.
(c) There is oil contamination around the power steering rack. VTNZ considers that the vehicle has a power steering leak, although Mr Haynes believes that the fluid may be engine oil rather than power steering fluid. Either way, the oil contamination is unacceptable and needs to be rectified, either by repairing the engine oil leak or any underlying power steering leak.
(d) The front bumper corrosion. The vehicle failed the VTNZ warrant of fitness inspection due to this corrosion. A reasonable consumer would not expect a recently purchased vehicle to have corrosion that would cause it to fail a warrant of fitness inspection.
[29] I therefore find that the vehicle has not been of acceptable quality due to
the defects listed in paragraph [28] above because the vehicle was not as free of minor defects as a reasonable consumer would consider acceptable.
[30] The other defects alleged by Ms Pont do not breach the guarantee of acceptable quality. In reaching that conclusion, I acknowledge the pre-purchase representations made by Mr Arnesen, but I as set out above, I am satisfied that most of the issues complained of by Ms Pont are consistent with the vehicle’s age and mileage, do not require repair and do not affect the performance or safety of the vehicle.
Issue 2: Are the vehicle’s defects a failure of a substantial character?
[31] A failure of a substantial character is defined in s 21 of the CGA:
21 Failure of substantial character
For the purposes of section 18(3), a failure to comply with a guarantee is of a substantial character in any case where—
(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
(b) the goods depart in 1 or more significant respects from the description by which they were supplied or, where they were supplied by reference to a sample or demonstration model, from the sample or demonstration model; or
(c) the goods are substantially unfit for a purpose for which goods of the type in question are commonly supplied or, where section 8(1) applies, the goods are unfit for a particular purpose made known to the supplier or represented by the supplier to be a purpose for which the goods would be fit, and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose; or
(d) the goods are not of acceptable quality within the meaning of section 7 because they are unsafe.
[32] Each of the defects that breach the guarantee of acceptable quality can be easily and quickly fixed Given the realistic expectations that a reasonable consumer must have for the quality and durability of a vehicle of this price, age and mileage, I am not satisfied that the defects that breach the guarantee of acceptable quality are a failure of a substantial character. Certainly, a reasonable consumer can expect those defects to be rectified by the supplier, at its expense,
however the defects are not such that the vehicle is unsafe or that a reasonable consumer would have declined to purchase the vehicle.
Issue 3: What remedy is Ms Pont entitled to under the CGA?
[33] The relevant remedies are set out in s 18 of the CGA, which provides:
(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.
[34] Under s 18(2)(a), Ms Pont is entitled to have the defects that breach the guarantee of acceptable quality rectified within a reasonable time.
Issue 4: Has Mr Arnesen engaged in misleading conduct?
[35] Ms Pont alleges that Mr Arnesen misrepresented the vehicle’s condition in the Trade Me listing for the vehicle.
[36] 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.
[37] 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.
[38] As noted above, Mr Arnesen made pre-purchase representations about the vehicle’s condition, including representations that the vehicle had “no issues”, “no mechanical issues”, was in “well above average condition” and “drives smooth and quiet”.
[39] Due to the defects listed above the breach the guarantee of acceptable quality, the vehicle was not in the condition represented by Mr Arnesen. The vehicle was not “well above average condition” and had mechanical and other issues, including rust and oil leaks.
[40] Mr Arnesen says that some of those issues, including the oil leak, were not present when he sold the vehicle. For the reasons set out above, I find that they were present, and that the defects that breached the guarantee of acceptable quality would have been evident on a cursory inspection of the vehicle and would also have been found if Mr Arnesen had obtained a warrant of fitness within one month of supplying the vehicle to Ms Pont, as required by law.
[41] I therefore find that Mr Arnesen has engaged in misleading conduct in breach of s 9 of the FTA, as he misrepresented the vehicle’s condition.
Issue 5: What remedy is Ms Pont entitled to under the FTA?
[42] The remedies available for a breach of the FTA are set out in s 43(3) of the
FTA which is as follows:
2 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
43 Other orders
...
(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.
...
[43] 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 policy 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 particular circumstances of the case.3
[44] In this case, given the relatively minor nature of the vehicle’s faults and the ease with which they can be rectified, I consider that the remedy that best does justice to the parties is an order under s 43(3)(g) requiring Mr Arnesen to repair the vehicle’s significant defects, at his cost (including transportation). Once those repairs are complete, Ms Pont will have the vehicle in the condition initially represented by Mr Arnesen.
Outcome
[45] Ms Pont’s application to reject the vehicle is dismissed and the Tribunal orders that Mr Arnesen, within 10 working days of the date of this decision:
(a) rectify the oil leaks from the rocker cover gaskets
(b) machine the front brake rotors to remove the unacceptable noise
(c) replace the left front wheel bearing
(d) rectify the front bumper rust; and
(e) clean the oil from the power steering rack and rectify any ongoing power steering rack leak.
[46] All repair and transportation costs are to be met by Mr Arnesen.
B.R. Carter
Adjudicator
3 Red Eagle Corp Ltd v Ellis [2010] NZSC 20; [2010] 2 NZLR 492 at [31].
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