Samuel v Japan Wholesale Cars Limited - Reference No. MVD 389/2021 [2022] NZMVDT 31 (14 March 2022)

Last Updated: 24 April 2022

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 389/2021
[2022] NZMVDT 031

BETWEEN ARUN RAJ SAMUEL

Purchaser

AND JAPAN WHOLESALE CARS LIMITED

Trader

HEARING at Wellington on 17 February 2022
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator
A B Cate – Assessor

APPEARANCES (via Microsoft Teams)

A R Samuel, Purchaser
M M Gheevarughese, Director of Trader
U V Kidangeth, Interpreter

DATE OF DECISION 14 March 2022

___________________________________________________________________

DECISION OF THE TRIBUNAL

___________________________________________________________________

1. Japan Wholesale Cars Ltd must, at its cost:
   • (a) give Arun Samuel’s vehicle a full cut and polish in order to remove as many of the scratches, chips and scrapes as possible;
   • (b) repaint the vehicle’s rear bumper;
   • (c) fix the holes in the driver’s seat;
   • (d) apply a wire brush and rust converter to any corrosion on the sway bar link arms;
   • (e) replace the missing antenna on the roof of the vehicle; and
   • (f) fix the dent in the tailgate.
2. All the repairs in A must be completed by 14 April 2022, unless the Tribunal gives an extension. Any application for extension must be supported with detailed reasons and must be made no later than 14 April 2022. Japan Wholesale Cars must provide Mr Samuel with copies of receipts for the repair work.

100. If Japan Wholesale Cars does not comply with the above orders, Mr Samuel should contact the case manager and the Tribunal will consider whether to make any further orders.
     

___________________________________________________________________

REASONS

Introduction

[1] Arun Samuel is dissatisfied with the 2013 Mitsubishi Outlander plug in hybrid vehicle that he purchased in July 2021 from Japan Wholesale Cars Ltd for $22,200. Mr Samuel alleges the vehicle has a number of cosmetic defects, which he has had difficulty getting Japan Wholesale Cars to address.
[2] The following issues arise for the Tribunal to determine:

• (a) Did Mr Samuel’s vehicle fail to comply with the guarantee of acceptable quality?
• (b) What, if anything, is the appropriate remedy?

Issue 1: Did the vehicle fail to comply with the guarantee of acceptable quality?

[3] Section 6(1) of the Consumer Guarantees Act 1993 (the Act) provides that “where goods are supplied to a consumer there is a guarantee that the goods are of acceptable quality”. According to s 2 of the Act, “goods” includes vehicles.
[4] “Acceptable quality” is defined in s 7 of the Act (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.

...

[5] 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.
[6] In Mr Samuel’s application to the Tribunal he mentioned that Japan Wholesale Cars had promised to rectify body dents, scratches and under chassis rust. Mr Samuel alleges that Japan Wholesale Cars failed to honour this promise.
[7] On behalf of Japan Wholesale Cars, its director Muttel Gheevarughese said that the only defect he agreed to fix was a small paint touchup required on the rear bumper, which Mr Gheevarughese said that he arranged at a cost to his business of $200. No receipt was produced to the Tribunal in respect of this work. Mr Gheevarughese said that he “never offered any cosmetic damage warranty or additional warranty” in respect of the vehicle.
[8] Mr Samuel also expressed concern that Japan Wholesale Cars “forced” him to buy the car. He said that Mr Gheevarughese misled him about the Clean Car Discount available for the vehicle due to its plug-in hybrid status. Specifically, Mr Samuel said that Mr Gheevarughese misled him by telling him that the discount was only available for a limited time and that Mr Samuel would need to be “first in the queue” in order to take advantage of that discount.
[9] Mr Samuel also alleges Mr Gheevarughese applied further pressure on him by registering the vehicle in Mr Samuel’s name on 27 July 2021. This was before the vehicle offer and sale agreement had been signed and when Mr Samuel had only paid a $500 deposit. Mr Samuel said that this was another example of Mr Gheevarughese “forcing” him to buy the vehicle.
[10] There has been a dispute between the parties as to the payment of the full purchase price for the vehicle. Mr Samuel initially only paid $17,000 of the total $22,200 purchase price. Mr Gheevarughese said that Mr Samuel agreed to pay the balance once he had received the Clean Car Discount from the Government. However, Japan Wholesale Cars had to bring proceedings in the Disputes Tribunal before Mr Samuel would pay the balance of $5,200. At the hearing, Mr Gheevarughese confirmed that Mr Samuel has now paid the full purchase price.

Alleged defects

[11] Mr Samuel provided a number of photographs showing various cosmetic defects. The parties attended the hearing from their respective remote locations over the internet, allowing Mr Samuel to show the Tribunal each alleged defect using his phone camera.
[12] The following defects are alleged:

• A dent in the tailgate.
• Various scratches around the vehicle, including on the bonnet, the left front fender, and behind each of the door handles.
• Paint bubbles on the rear bumper.
• A missing radio antenna on the roof.
• A small crack on the rear bumper near the numberplate.
• Chips on the bonnet.
• Curbing scrapes on the right front wheel.
• Underbody surface rust on the exhaust and sway bar link arms.
• Holes in the driver’s seat.
• Soft door rubbers making an “awkward” sound when the doors are closed and causing black marks on the inside of the doors.

Remedy sought by Mr Samuel

[13] Mr Samuel did not make it clear in his application what remedy he was seeking. Nor did he make it clear in his application what was necessary by way of repairs and the estimated cost. The Tribunal asked him to provide this additional information.
[14] Mr Samuel clarified in his response that he was seeking a refund of the vehicle’s purchase price, following which he would return the vehicle in its original condition to Japan Wholesale Cars.
[15] In addition, Mr Samuel provided the Tribunal with two estimates of repair costs. The first was a quote from Dittmer Collision Repair for respraying the damage on all panels at a cost of $9,010.25. The second estimate was from Palmerston North Partsworld for replacement parts, namely the aerial and door rubbers, costing $707.25.

Tribunal’s assessment

[16] Mr Samuel has not persuaded me that Japan Wholesale Cars “forced”, coerced, or otherwise exerted undue pressure on him to buy the vehicle.
[17] The Government’s Clean Car Discount scheme was partially introduced in July 2021, the same month in which Mr Samuel purchased his vehicle. The scheme is designed to incentivise demand for zero- and low-emission vehicles. It will soon become a “feebate” scheme, in which a fee will be placed on high-emitting vehicles when they are first registered in New Zealand, to disincentivise purchase of them. Revenue from the fees will be used to fund rebates on zero- and low-emission vehicles. In this way, the scheme is eventually intended to be cost-neutral to the Crown, by recalibrating fee and rebate amounts so that they balance each other out.
[18] However, legislation will only authorise the fees to be introduced from 1 April 2022.[1] The Government did not want to delay the whole scheme until then, as it would deter people from buying cleaner cars in the meantime. So, the Government introduced the rebate side of the scheme first, as this did not require legislative change. A specific amount of money was allocated by the Government for use as rebates, to bridge the initial cashflow deficit caused by the rebate side of the scheme starting before the fee side.[2]
[19] Mr Samuel claims Mr Gheevarughese told him that the Clean Car Discount was only available for a limited time and that he should be “first in the queue”. Mr Gheevarughese did not dispute that he said these words or words to this effect to Mr Samuel.
[20] Mr Samuel is correct that the Clean Car Scheme is an ongoing scheme that is intended to operate indefinitely. In that sense, Mr Gheevarughese was wrong about the scheme only being available for a limited time.
[21] However, when Japan Wholesale Cars sold the vehicle to Mr Samuel, the Government was advertising the scheme as being subject to limits based on available funding. At that time, the Clean Car Discount eligibility criteria advertised on Waka Kotahi New Zealand Transport Agency’s (Waka Kotahi) website stated that Clean Car Discount rebates were available until 31 December 2021.[3] As well, the website stated (and still states) that there are funding restrictions. If the Government’s rebate funds are exhausted, then no rebate will be paid.[4] This warning reflected the fact that the Government did not know what the level of consumer interest in clean cars would be. It needed to preserve its ability to curtail rebates if demand was higher than the approved funding level.
[22] I do not consider that Mr Samuel has established that Japan Wholesale Cars misled him about the scope or limitations of the Clean Car Discount scheme. Mr Samuel has not established that Japan Wholesale Cars did any more that encourage him to purchase the vehicle quickly, based on uncertainties about the scheme’s scope and duration that were communicated by the Government itself in its publicity about the scheme.
[23] In relation to the allegation that Japan Wholesale Cars registered the vehicle in Mr Samuel’s name after he had only paid a $500 deposit, I do not accept that this by itself created any obligation upon Mr Samuel to go ahead and complete the purchase. Putting a vehicle into someone’s name by registering a vehicle is a way of indicating who is the person that is legally responsible for the vehicle. It is not the same thing as legal ownership, because the Motor Vehicle Register does not record legal ownership. It is the purchaser’s responsibility to let Waka Kotahi know of a change in legal responsibility by putting the vehicle into their name on the Register. However, it is common for motor vehicle traders to take care of the registration process for new purchasers.[5]
[24] There was nothing legally wrong in Japan Wholesale Cars registering the vehicle in Mr Samuel’s name after he had paid a deposit. All that it signified was that from that date onwards, 29 July 2021, Mr Samuel was legally responsible for the vehicle. It did not signify on its own that Mr Samuel had bought the vehicle. Nor did it create any additional legal obligation on him to complete the sale if he did not want to do so.
[25] There was insufficient evidence to support Mr Samuel’s allegation that Japan Wholesale Cars made specific promises to him to repair any specific damage to the vehicle.
[26] We asked Mr Samuel to provide all relevant correspondence in relation to any promises made by Japan Wholesale Cars, but he said that this all occurred orally.
[27] When faced with an allegation that something was said by one party which is denied by another party, it is often difficult for the Tribunal to make a clear finding as to what was said and agreed. That is why it is advantageous for parties to put any such agreements in writing; for example as a special condition in the vehicle offer and sale agreement. In the absence of such written agreement, on the facts of the present case it is not possible to make any findings as to any specific promises made by Japan Wholesale Cars to fix any particular damage on the vehicle.
[28] However, Mr Samuel still has rights as a consumer under the Act. The vehicle that Japan Wholesale Cars sold to him must be of acceptable quality. The Tribunal will assess whether the vehicle was acceptable in appearance and finish and as free from minor defects as a reasonable consumer would regard as acceptable. The assessment of whether a vehicle is of “acceptable quality” involves having regard to the factors set out at s 7(1)(f)–(j) of the definition of “acceptable quality” in s 7 of the Act (above).
[29] It was concerning that Mr Gheevarughese said that he never offered any cosmetic damage warranty or additional warranty in respect of the vehicle. On its face, this appeared to be an attempt to deny Mr Samuel his rights under the Act. As such, this would be an unlawful attempt to contract out of Japan Wholesale Cars’ obligations under the Act, which is an offence under the Fair Trading Act 1986.[6]
[30] However, at the hearing, Mr Gheevarughese accepted that he was bound to follow the law regarding a consumer’s rights and the trader’s corresponding obligations under the guarantee of acceptable quality.
[31] The Tribunal’s Assessor, Mr Cate, carefully reviewed the photographs Mr Samuel produced, as well as the evidence from the hearing. Based on that review, Mr Cate does not think the vehicle’s underbody corrosion looks particularly serious. Moreover, considered individually, each of the various scratches, scrapes and scuffs is not necessarily inconsistent with what a reasonable consumer would regard as acceptable in a vehicle of this age and mileage.
[32] However, Mr Cate and I agreed that, overall, the vehicle’s presentation is unacceptable. In particular, I find the following defects failed to comply with the guarantee of acceptable quality:

• (a) the dent in the tailgate;
• (b) the paint bubbles on the rear bumper;
• (c) the holes in the driver seat;
• (d) the missing antenna; and
• (e) corrosion on the sway bar link arms.

[33] In addition, the vehicle should be given a cut and polish so that its overall cosmetic presentation is brought up to a level that would be acceptable to a reasonable consumer.

Issue 2: What is the appropriate remedy?

[34] The remedies available to a consumer where a vehicle does not comply with the guarantee of acceptable quality are set out in s 18 of the Act which provides:

18. 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.

[35] The primary remedy available to a consumer where a vehicle fails to comply with the guarantee of acceptable quality is set out in s 18(2)(a) and allows the consumer to require the supplier to remedy the failure within a reasonable time.
[36] The appropriate remedy in the present case is to give Japan Wholesale Cars an opportunity to remedy the defects identified above at [32]-[33]. If Japan Wholesale Cars fails to remedy those failures within a month after the date of this decision, then it is on notice that Mr Samuel will either be entitled to have those failures remedied elsewhere and to return to the Tribunal to get an order that Japan Wholesale Cars must pay him the reasonable costs of those repairs. Alternatively, Mr Samuel may wish to reject the vehicle because that will be an indication that Japan Wholesale Cars has refused to fix the vehicle’s failures. The Tribunal will consider whether making further orders along these lines is justified, if needed.

Conclusion

[37] Accordingly, the remedy in this dispute is that within one month of the date of this decision, Japan Wholesale Cars must, at its cost:

• (a) give Mr Samuel’s vehicle a full cut and polish in order to remove as many of the scratches, chips and scrapes as possible;
• (b) repaint the vehicle’s rear bumper;
• (c) fix the holes in the driver’s seat;
• (d) apply a wire brush and rust converter to any corrosion on the sway bar link arms;
• (e) replace the missing antenna on the roof of the vehicle; and
• (f) fix the dent in the tailgate.

[38] If Japan Wholesale Cars remedies all of these defects in a satisfactory manner and provides proof to the Tribunal and Mr Samuel that it has done so, then it will have satisfied its obligations under the Act.
[39] However, if Japan Wholesale Cars does not comply with the Tribunal’s orders, Mr Samuel will be entitled to return to the Tribunal for further orders as described above.

J S McHerron
Adjudicator

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[1] Land Transport (Clean Vehicles) Amendment Act 2022.

[2] Hon Michael Woods, “Clean Car Discount” Undated Cabinet Paper to the Cabinet Economic Development Committee, available at https://www.transport.govt.nz/assets/Uploads/CabinetPaper-CleanCarDiscount.pdf.

[3] This has subsequently been extended to 31 March 2022.

[4] Waka Kotahi New Zealand Transport Agency, clean car discount eligibility criteria, https://www.nzta.govt.nz/vehicles/clean-car-programme/clean-car-discount/clean-car-discount-eligibility-criteria/eligibility-criteria-for-vehicles-first-registered-between-1-july-2021-and-31-march-2022/.

[5] See Waka Kotahi factsheet 9 “Vehicle Registration for Light Vehicles (3,500 kilograms or less)”, June 2018 and factsheet 41 “Buying or Selling a Vehicle”, April 2021.

[6] Consumer Guarantees Act 1993, s 43(4), Fair Trading Act 1986, s 13(i).