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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 19 January 2023
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BETWEEN VINCENT MARIA BERING
Applicant
AND THE GARAGE MOTOR GROUP LTD
Respondent
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HEARING at AUCKLAND on 15 November 2022 (by audio-visual
link)
MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
S Gregory – Assessor
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APPEARANCES
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V M Bering, Applicant
C Joy, Witness for the Applicant
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J Lapinig and D Petley for the Respondent
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DATE OF DECISION 21 December 2022
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_________________________________________________________________
DECISION OF THE TRIBUNAL
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A Vincent Bering’s application to reject the vehicle is upheld.
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REASONS
Introduction
[1] Vincent Bering wants to reject the 2012 Mazda CX5[1] he purchased for $19,780 from The Garage Motor Group Ltd on 12 January 2022 because the vehicle has suffered extensive engine damage and the engine required replacement. Mr Bering wants to return the vehicle and obtain a refund of all amounts he has paid and to be relieved of his ongoing obligations under the consumer credit contract he entered into with Oxford Finance Ltd to purchase the vehicle dated 17 January 2022 (the collateral credit agreement)
[2] The Garage Motor Group says Mr Bering should not be entitled to reject the vehicle. It says that Mr Bering and his wife Christine Joy initially agreed to accept a replacement vehicle and then agreed to allow it to replace the engine, which it has now done.
Relevant background
[3] Mr Bering collected the vehicle from The Garage Motor Group on 15 January 2022. Its odometer reading at that time was approximately 108,500 km.
[4] By early February 2022, Mr Bering and Ms Joy say they noticed an issue with the vehicle’s acceleration. Ms Joy says that she was told by The Garage Motor Group that this was normal for a diesel vehicle. On about 18 February 2022, Ms Joy then noticed that the vehicle had started to shudder. Ms Joy contacted The Garage Motor Group, which advised her to have the vehicle assessed by The Garage Motor Group’s preferred repairer. Ms Joy attempted to contact that repairer, without success.
[5] In the meantime, Ms Joy had a child, so the ongoing concerns with the vehicle were of secondary importance. On 8 April 2022, Ms Joy again contacted The Garage Motor Group and advised it that she had been unable to contact the preferred repairer and that the vehicle was still shuddering. The Garage Motor Group advised her to return the vehicle the following week.
[6] The vehicle was returned to The Garage Motor Group on 22 April 2022. Ms Joy says that The Garage Motor Group initially advised her that the vehicle had a fuel injector fault. On 28 April 2022, Ms Joy again contacted The Garage Motor Group and asked for an update. None was received, so Ms Joy advised Jeff Lapinig of The Garage Motor Group that they wanted to reject the vehicle. Ms Joy says that Mr Lapinig told her that she could not reject the vehicle and that instead The Garage Motor Group would repair or replace the vehicle. Ms Joy says that she did not agree to either option.
[7] Ms Joy says that by 20 May 2022, they had still not received any update on the diagnosis of the vehicle, so she contacted Daniel Petley of The Garage Motor Group, and was advised that the vehicle had been taken to a Mazda franchise for assessment as the initial mechanic had not provided a correct diagnosis.
[8] Mr Petley appeared for The Garage Motor Group. He agrees that he spoke with Ms Joy in May 2022. He says that he told Ms Joy that the vehicle was to be assessed by John Andrew Ford & Mazda in Penrose and that she was happy for that assessment to occur.
[9] By mid-June 2022, Ms Joy and Mr Bering had still not been told what was wrong with their vehicle. Ms Joy and Mr Bering then discovered that The Garage Motor Group had made a claim using the Provident Insurance mechanical breakdown insurance policy Mr Bering had purchased with the vehicle. Mr Bering says that he did not authorise this claim and only discovered that a claim had been made when he was contacted by Provident Insurance. He then spoke with Provident Insurance on about 21 June 2022 and was told that the required repairs would cost $15,000 and that the policy would only cover half that cost.
[10] Mr Bering and Ms Joy have provided a “Chain of Events” document from Provident Insurance, which contains a record of all events relevant to the insurance claim. That document records that on 21 June 2022, Mr Bering advised Provident Insurance that he was “not happy with the claim” and declined to authorise the repair.
[11] Text messages between Mr Bering, Ms Joy and The Garage Motor Group provide the best evidence as to what happened next. By this time, Ms Joy says that she had commenced discussions with Maurice Casado, the owner of The Garage Motor Group, who had asked to be given a further opportunity to resolve Ms Joy and Mr Bering’s concerns. Ms Joy says that The Garage Motor Group then tried to convince Ms Joy and Mr Bering to swap the vehicle for a Kia Sportage. They test drove the Sportage a few times. Ms Joy was initially interested in swapping the Sportage for the CX5, but on 7 July 2022, Ms Joy advised Mr Casado that they did not want to purchase the Sportage.
[12] On 14 July 2022, Ms Joy then sent a text message to Mr Petley stating:
[13] Ms Joy received no direct response to this message.
[14] The Provident Insurance Chain of Events documents states that Provident Insurance then left a message with Mr Bering on 26 July 2022 regarding the insurance claim to have the vehicle repaired. On 26 and 27 July July 2022, Ms Joy and Mr Petley then corresponded by text message, as set out below:
[15] Ms Joy and Mr Bering say that they then spoke with Provident Insurance, which is consistent with the Provident Insurance Chain of Events document. That document records that on 27 July 2022, Provident Insurance spoke with Mr Bering and he “confirmed the car yard is paying the over & above amount for this claim”. The engine was then replaced by Alert Automotive Ltd, with The Garage Motor Group paying the excess amount.
The issues
[16] The issues requiring the Tribunal’s consideration in this case 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 Mr Bering entitled to under the CGA?
Issue 1: Has the vehicle been of acceptable quality?
[17] 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”.
[18] “Acceptable quality” is defined in s 7 of the CGA (as far as is relevant) as follows:
- 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.
[19] 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.
[20] Ms Joy and Mr Bering paid $19,780 for a ten-year-old vehicle with an odometer reading of about 108,500 km. Although the Tribunal was not provided with any clear evidence about the vehicle’s actual faults, The Garage Motor Group advised that the vehicle’s engine was damaged, most likely due to faulty fuel injectors that allowed the engine oil to become contaminated with diesel, diluting the oil’s lubricating properties. The Garage Motor Group also agrees that this damage was due to an inherent defect with the vehicle rather than a cause attributable to Ms Joy or Mr Bering’s use of the vehicle.
[21] Given the price, age and mileage of the vehicle and the nature and extent of the engine damage, I find that the vehicle has not been of acceptable quality for the purposes of s 6 of the CGA as it was not as free of minor defects or as durable as a reasonable consumer would consider acceptable.
Issue 2: Are the vehicle’s defects a failure of a substantial character?
[22] 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.
[23] The engine damage is a failure of a substantial character for the purposes of s 21(a) of the CGA. A reasonable consumer would not have purchased this vehicle if they had known that the engine would require replacement so shortly after purchase.
Issue 3: What remedy is Mr Bering entitled to under the CGA?
[24] The relevant remedies are set out in s 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.
[25] Mr Bering wants to reject the vehicle. The Garage Motor Group says that Mr Bering cannot do so as he initially agreed to accept the Sportage as a replacement vehicle and then agreed to allow The Garage Motor Group to repair the vehicle using the mechanical breakdown insurance policy.
The Tribunal’s assessment
[26] I am satisfied that Mr Bering and Ms Joy advised The Garage Motor Group early on that they wanted to reject the vehicle. The evidence shows that Mr Bering and Ms Joy were initially told that the vehicle may have a fuel injector fault, but I accept their evidence that they nonetheless advised The Garage Motor Group that they wanted to return the vehicle. At that time, The Garage Motor Group represented that, irrespective of Mr Bering’s wishes, it had the right to repair the vehicle. It had no such right, as the engine failure was a failure of a substantial character (as set out above) and Mr Bering was entitled to reject the vehicle rather than give The Garage Motor Group an opportunity to repair it.
[27] Mr Bering and Ms Joy were not then told of the true extent of the engine failure until they spoke with Provident Insurance on about 21 June 2022. At about that time they had also started discussions with The Garage Motor Group about purchasing the Sportage as a replacement. The evidence presented shows that Mr Bering and Ms Joy test drove the Sportage and were close to accepting the Sportage as a replacement, but never concluded that agreement. I accept Ms Joy and Mr Bering’s evidence that they made no binding commitment to accept the Kia Sportage as a swap for their vehicle.
[28] In that regard, I note that there is no signed agreement for the acquisition of the Sportage, and one would have expected The Garage Motor Group, as a registered motor vehicle trader, to ensure that such an agreement was completed if Mr Bering and Ms Joy had agreed to accept the Kia Sportage. Further, I note that they only considered accepting the Sportage as a replacement because The Garage Motor Group refused to accept their legitimate request for a refund of the purchase price.
[29] While those events were occurring, I am satisfied that Mr Bering never withdrew his rejection of the vehicle. This can be seen in the text message from Ms Joy to Mr Petley on 14 July 2022 where she asks how she can cancel the Provident Insurance policy. Ms Joy would not have asked that question if Mr Bering intended to accept the return of the vehicle or if Mr Bering and Ms Joy had agreed to allow the vehicle to be repaired using the policy.
[30] Other text messages also show that Mr Bering and Ms Joy sustained their rejection of the vehicle. On 27 July 2022, Ms Joy told Mr Petley that she had sent an email rejecting the vehicle to The Garage Motor Group, before Mr Bering spoke with Provident Insurance to authorise the use of the insurance policy to repair the vehicle. In my view, that is clear evidence that Mr Bering had sustained his rejection of the vehicle and was only agreeing to allow The Garage Motor Group to use the insurance policy because of its continued (and mistaken) insistence that it had the right to repair the vehicle.
The Tribunal’s conclusion
[31] Mr Bering is entitled to reject the vehicle under s 18(3)(a) of the CGA because the engine damage is a failure of a substantial character. Under s 23(1)(a), he is therefore entitled to a refund of all amounts paid for the vehicle, which in this case is $2,091.50, comprising:
- (a) $600.23 being all payments of principal (the amount paid excluding any interest component and account maintenance fees) made under the collateral credit agreement until 21 September 2022;[2] and
- (b) $1,491.27 being all payments (including interest and fees) made since 21 September 2022.
The collateral credit agreement
[32] Mr Bering is also entitled to have his ongoing rights and obligations under the collateral credit agreement assigned to The Garage Motor Group. The relevant provisions are set out in ss 89(2) and (3) of the Motor Vehicle Sales Act 2003 (the MVSA), which state:
89 Jurisdiction of Disputes Tribunal
...
(2) A Disputes Tribunal may order that the rights and obligations of the buyer of a motor vehicle under a collateral credit agreement vest in a motor vehicle trader if—
(a) the collateral credit agreement is associated with the contract for the sale of that motor vehicle; and
(b) the motor vehicle trader is a party to that contract for sale; and
(c) either one of the following circumstances applies:
(i) the buyer exercises the right conferred by the Consumer Guarantees Act 1993 to reject that motor vehicle and, on a claim by the buyer under section 47(1) of that Act, the Disputes Tribunal orders the motor vehicle trader to refund any money paid, or other consideration provided, for that motor vehicle; or
(ii) the Disputes Tribunal finds that the buyer has suffered, or is likely to suffer, loss or damage by the conduct of the motor vehicle trader that constitutes, or would constitute, any of the conduct referred to in section 43(1) of the Fair Trading Act 1986 and the Disputes Tribunal makes an order under section 43(2) of that Act declaring the whole or any part of the contract for sale to be void.
(3) For the purposes of subsection (2), collateral credit agreement, in relation to a contract for the sale of a motor vehicle, means a contract or agreement arranged or procured by the motor vehicle trader or the buyer for the provision of credit by a person other than by the motor vehicle trader to enable the buyer to pay the price reserved by the contract for sale in respect of the motor vehicle.
[33] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to The Garage Motor Group are all met in this case:
- (a) The agreement between Mr Bering and Oxford Finance is a collateral credit agreement for the purposes of s 89(2) of the MVSA. The agreement was arranged or procured by Mr Bering for the provision of credit by Oxford Finance to enable Mr Bering to purchase the vehicle.
- (b) The Garage Motor Group sold the vehicle to Mr Bering, so it is a party to the contract to purchase the vehicle.
- (c) Mr Bering has exercised the right conferred by the CGA to reject the vehicle and the Tribunal has ordered that The Garage Motor Group must refund any money paid, or other consideration provided, for that vehicle.
Outcome
[34] The Tribunal upholds Mr Bering’s rejection of the vehicle and orders that:
- (a) Mr Bering’s rights and obligations under the collateral credit agreement with Oxford Finance are assigned to The Garage Motor Group from the date of this decision; and
- (b) The Garage Motor Group shall, within 10 working days of the date of this decision, pay $2,091.50 to Mr Bering. Mr Bering must then make the vehicle available to be collected by The Garage Motor Group.
B R Carter
Adjudicator
[1] Registration plate number LGH788
[2] The date of this application.
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URL: http://www.nzlii.org/nz/cases/NZMVDT/2022/286.html