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Motor Vehicles Disputes Tribunal of New Zealand |
Last Updated: 18 March 2022
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BETWEEN GURPREET KAUR
Applicant
AND SEVEN SEAS MOTORS LTD
Respondent
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MEMBERS OF TRIBUNAL
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B R Carter, Barrister – Adjudicator
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S Gregory, Assessor
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HEARING at Auckland on 18 January 2022 (by audio-visual link)
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APPEARANCES
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G Kaur, Applicant
J Singh, Witness for the Applicant
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J Nasser for the Respondent
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DATE OF DECISION 9 February 2022
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_________________________________________________________________
DECISION OF THE TRIBUNAL
_________________________________________________________________
_________________________________________________________________
REASONS
Introduction
[1] The 2012 Jaguar XJ[1] that Gurpreet Kaur purchased for $29,500 from Seven Seas Motors Ltd on 28 April 2021 had been recently imported from Singapore. The vehicle was advertised as having an odometer reading of 24,000 km and the mileage showing on the vehicle’s odometer when Ms Kaur purchased the vehicle was about 25,213 km.
[2] The vehicle had relatively minor defects during the first few months of Ms Kaur’s ownership, but in September 2021, the vehicle suffered catastrophic engine failure. Ms Kaur says that she has since discovered that the vehicle’s true odometer reading was much higher than represented by Seven Seas Motors and shown on the vehicle’s odometer. Ms Kaur has obtained Jaguar service records that show that the vehicle’s odometer reading was 187,999 km when the vehicle was serviced in Singapore on 14 August 2020.
[3] Ms Kaur therefore alleges that Seven Seas Motors engaged in misleading conduct in breach of the Fair Trading Act 1986 (the FTA) by misrepresenting the vehicle’s odometer reading and that the vehicle has not been of acceptable quality for the purposes of the Consumer Guarantees Act 1993 (the CGA). Ms Kaur wants to return the vehicle and seeks orders to recover all amounts she has paid in respect of the vehicle and be relieved of her ongoing obligations under the credit contract she entered into with Heartland Bank Ltd to purchase the vehicle (the collateral credit agreement).
[4] Seven Seas Motors says that it is prepared to assist Ms Kaur, but says that she should not be entitled to the outcome she seeks because the engine damage was caused by Ms Kaur, or her mechanic, overfilling the engine with oil.
Relevant background
The Trade Me listing
[5] The vehicle was advertised for sale on the Trade Me website. The Trade Me listing stated that the vehicle’s odometer reading was 24,000 km. After negotiating the price with Jamal Nasser, a director of Seven Seas Motors, Ms Kaur agreed to purchase the vehicle for $29,500.
The VTNZ pre-purchase inspection
[6] Ms Kaur commissioned a pre-purchase inspection from VTNZ before purchasing the vehicle. VTNZ considered that the vehicle was in “very good” overall condition.
The initial problems
[7] About one month after purchase, a “restricted performance” message appeared on the vehicle’s dashboard display. After speaking with Mr Nasser, Ms Kaur had the vehicle assessed by Anything Auto Electrical Ltd in Tauranga. It performed two repairs:
- (a) On 9 June 2021, it found fault codes relating to the mass airflow (MAF) and manifold absolute pressure (MAP) sensors and low boost pressure codes. It removed and replaced cracked and degraded throttle body seals.
- (b) On 17 June 2021, after the same warning message returned, it replaced the throttle body.
[8] Seven Seas Motors paid for both repairs.
The rocker cover oil leaks
[9] On about 12 August 2021, Ms Kaur noticed oil leaking from the engine bay. Ms Kaur then contacted Oil Changers NZ BOP Ltd (Oil Changers), which had serviced the vehicle in January 2021. She says that Oil Changers told her that the vehicle had an oil leak when it serviced the vehicle. Ms Kaur says that Oil Changers also advised her that the vehicle had a faulty oil level sensor.
[10] Ms Kaur then took the vehicle to Duncan & Ebbett in Tauranga on 7 September 2021. Duncan & Ebbett found an oil leak from the oil filter, which it replaced at a cost of $216. It found no other faults with the vehicle but suggested that Ms Kaur allow it to do a full clean of the underside of the vehicle to detect any other leaks. Ms Kaur decided not to perform that further work.
[11] Ms Kaur says that the vehicle continued to use oil and the low oil warning message returned. On about 13 September 2021 she purchased a five litre bottle of oil from Repco. Jarnail Singh, Ms Kaur’s husband, says that he then put about two litres of oil into the vehicle. Mr Singh says that the vehicle’s oil gauge then showed that the oil levels were full.
[12] Ms Kaur then contacted Mr Nasser, who denied liability saying that the vehicle had no pre-existing oil leaks. Ms Kaur then asked Mr Nasser if he could recommend a mechanic to assess the vehicle, and Mr Nasser suggested that she take the vehicle to DM Auto Services.
[13] I heard evidence from John Jones of DM Auto Services. Mr Jones says he assessed the vehicle on 14 September 2021 and found oil leaking from the rocker cover onto the exhaust manifold. He also noticed that a harmonic balancer had snapped off the camshaft. Mr Jones replaced the rocker covers at a cost of $2,647.19. Mr Singh collected the vehicle on 20 September 2021.
The engine damage
[14] Mr Singh says that shortly after collecting the vehicle he noticed that it was not performing normally, and the oil level warning message had appeared. Mr Singh returned the vehicle to DM Auto Services. Mr Jones says he put about 500 millilitres of oil in the vehicle at that time.
[15] Mr Singh then took the vehicle for a drive. Shortly into that drive, copious amounts of smoke started coming from the exhaust. Mr Singh pulled over and took a video of the smoke coming from the vehicle. That video shows large clouds of white smoke from the exhaust. The vehicle’s engine can also be heard idling at a much higher rate than normal. Towards the end of the video, a loud metallic rattling noise can be heard shortly before the engine stops.
[16] The vehicle was then returned to DM Auto Services. Mr Jones says that the vehicle would start, but it was “lumpy” and “hairy”. Mr Jones says that he then drained the oil sump, which was overfilled. Mr Jones says that he removed between 9.5 and 10 litres of oil. The normal sump capacity is 6.6 litres.
[17] Mr Jones then dismantled the top of the engine. He says that the engine is damaged and has excessive wear, including damage to the pistons, “oblongated” combustion chambers and wear to the piston caps, that is inconsistent with a vehicle that has driven only 31,000 km.
Other evidence regarding the vehicle’s true odometer reading
[18] Ms Kaur has since obtained an email from Wearnes Automotive, a Jaguar and Land Rover franchise based in Singapore. That email states that the vehicle was last serviced in Singapore on 14 August 2020, when its odometer reading was 187,999 km. That information led Ms Kaur to suspect that the vehicle’s odometer has been tampered with and that the vehicle’s true mileage is much higher than represented by Seven Seas Motors.
The issues
[19] The issues requiring the Tribunal’s consideration in this case are:
- (a) Has Seven Seas Motors engaged in misleading conduct in breach of s 9 of the FTA?
- (b) What remedy in Ms Kaur entitled to under the FTA?
- (c) Has the vehicle been of acceptable quality for the purposes of s 6 of the CGA?
- (d) What remedy is Ms Kaur entitled to under the CGA?
Issues 1: Has Seven Seas Motors engaged in misleading conduct?
[20] Section 9 of the FTA provides:
- 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.
[21] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp 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.
[22] Seven Seas Motors is in trade. It is a registered motor vehicle trader.
[23] Seven Seas Motors represented on the Trade Me listing for the vehicle that the vehicle’s odometer reading was 24,000 km. That representation was misleading in breach of s 9 of the FTA because the vehicle’s true odometer was much higher. In that regard, I accept the information about the vehicle’s service history from Wearnes Automotive, which shows that the vehicle’s odometer reading was 187,999 km in August 2020 – much higher than its current odometer reading.
[24] Even without the information from Wearnes Automotive, I would have concluded that the vehicle had travelled much further than the current odometer reading. In that regard, Mr Gregory, the Tribunal’s Assessor, advises that the wear and tear and repairs performed on this vehicle as set out in the VTNZ pre-purchase inspection report (which found play in a tie rod end and lower suspension control arm bush that are consistent with high mileage), the invoices from Anything Auto Electrical, the evidence from Mr Jones as to the condition of the engine and the photographs of the dismantled engine provided by Ms Kaur by Seven Seas Motors are entirely inconsistent with a vehicle that has travelled only about 31,000 km. Mr Gregory advises that the wear and tear evident in this vehicle is more consistent with a vehicle that has travelled around 200,000 km.
[25] The only conclusion I can therefore reach is that someone in Singapore has tampered with the vehicle’s odometer. Mr Nasser says that he had no knowledge of any odometer tampering, and in that regard, I accept that the tampering occurred before the vehicle was imported into New Zealand. However, absence of knowledge provides no defence. The FTA is a strict liability statute, in that the representor can have liability under the FTA even if it believes the representation to be true.
[26] Consequently, by representing that the vehicle’s odometer reading was 24,000 km when the vehicle has travelled much further, Seven Seas Motors has engaged in misleading conduct in breach of s 9 of the FTA.
Issue 2: What remedy is Ms Kaur entitled to under the FTA
[27] The remedies available for a breach of the FTA are set out in s 43 of the FTA which is as follows:
43 Other orders
(1) This section applies if, in proceedings under this Part or on the application of any person, a court or a Disputes Tribunal finds that a person (person A) has suffered, or is likely to suffer, loss or damage by conduct of another person (person B) that does or may constitute any of the following:
(a) a contravention of a provision of Parts 1 to 4A (a relevant provision):
(b) aiding, abetting, counselling, or procuring a contravention of a relevant provision:
(c) inducing by threats, promises, or otherwise a contravention of a relevant provision:
(d) being in any way directly or indirectly knowingly concerned in, or party to, a contravention of a relevant provision:
(e) conspiring with any other person in the contravention of a relevant provision.
(2) The court or the Disputes Tribunal may make 1 or more of the orders described in subsection (3)—
(a) whether or not the court grants an injunction, or the court or the Disputes Tribunal makes any other order, under this Part; and
(b) whether or not person A made the application or is a party to the proceedings.
(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.
(4) In subsection (3)(a) to (d), collateral credit agreement, in relation to a contract for the supply of goods, means a contract or an agreement that—
(a) is arranged or procured by the supplier of the goods; and
(b) is for the provision of credit by a person other than the supplier to enable person A to pay, or defer payment, for the goods.
(5) An order made under subsection (3)(a) to (d) does not prevent proceedings being instituted or commenced under this Part.
(6) This section does not limit or affect—
(a) subpart 5 of Part 2 of the Contract and Commercial Law Act 2017; or
(b) section 317 of the Accident Compensation Act 2001.
[28] The Supreme Court in Red Eagle sets out the approach to be taken in applying s 43. The Tribunal must consider whether:
- (a) Ms Kaur was in fact misled or deceived;
- (b) Ms Kaur suffered loss or damage; and
- (c) Seven Seas Motors’ conduct was the effective cause or an effective cause of Ms Kaur’s loss or damage.
[29] Ms Kaur was misled. She saw and relied upon the misleading representation on the Trade Me listing that the vehicle’s odometer reading was 24,000 km.
[30] Ms Kaur has suffered loss or damage. The vehicle’s odometer has been tampered with and that fact means the vehicle is now likely to be worth much less than the $29,500 paid by Ms Kaur. A purchaser of this vehicle can never know what its true odometer reading is because the odometer has been tampered with. That factor, in my view, means the vehicle is likely to be worth much less than the price paid by Ms Kaur, because any reasonable purchaser of the vehicle can have no reassurance as to its true mileage.
[31] Seven Seas Motors’ conduct in representing that the odometer reading was 24,000 km was the effective cause of the loss suffered by Ms Kaur, because I am satisfied that Ms Kaur would not have purchased the vehicle if she had known that the odometer reading was much higher than represented.
Has Ms Kaur damaged the vehicle?
[32] Mr Nasser says that Ms Kaur should not be entitled to the remedy she seeks because the vehicle has been damaged because it was overfilled with oil.
[33] Seven Seas Motors has sought the opinion of Karl Pemberton, a motor vehicle assessor from Auto Assess Ltd. Mr Pemberton has not inspected the vehicle. Instead, he has viewed the video of the vehicle provided by Ms Kaur and considered:
- (a) The video shows the vehicle stationary with the engine emitting extensive amounts of white smoke through its exhaust system.
- (b) The engine idle speed is significant and much higher than a typical idle speed of 800 to 1,000 rpm[3] when the vehicle is parked.
- (c) The smoke and increased idle speed indicate that the vehicle is running off its own engine oil, which is referred to as “diesel engine runaway”.
- (d) Diesel engine runaway occurs when oil vapour enters the engine through the inlet system and most commonly occurs because the vehicle is overfilled with oil. Switching off the engine using the key will not stop the engine once runaway has commenced, because diesel engines are compression ignition engines and only require a source of fuel and compression to run.
- (e) In this case, the engine idle speed has increased to such a rate that the engine has seized.
- (f) On the balance of probabilities, the engine has seized because the engine oil level was significantly overfull, leading to the engine runaway occurring.
[34] Mr Gregory agrees with Mr Pemberton’s assessment. Mr Gregory says that the metallic rattling sounds apparent towards the end of the video are evidence that the engine has suffered severe damage, including likely damage to the big end bearings, pistons and cylinder heads.
[35] Given Mr Jones’ evidence that he removed between 9.5 and 10 litres of oil from the engine, Mr Gregory considers that it is almost certain that the engine damage was caused by the vehicle being overfilled with oil, causing the engine runaway as described by Mr Pemberton. Mr Gregory also notes that, although the engine may already have been worn given its true mileage, that wear would only have required a general engine overhaul sometime in the future. The damage caused by the vehicle being overfilled with oil necessitates a much more substantial, and expensive, repair.
[36] Ms Kaur submitted that the vehicle was overfilled with oil because the oil level sensor was faulty. Other than her assertion that the oil level sensor was faulty, there was no other evidence presented to prove any fault with the oil level sensor. Indeed, Mr Gregory notes that the oil level sensor appears to have been working correctly, as the vehicle’s oil gauge (which takes information from the oil level sensor) showed that the oil levels increased when Mr Singh put oil into the vehicle.
[37] Consequently, I conclude that the engine damage was caused by the vehicle being negligently overfilled with oil during Ms Kaur’s ownership, rather than because of any defect with the vehicle. I note that Ms Kaur denies overfilling the engine with oil, but the evidence – particularly the evidence from Mr Jones as to the amount of oil that he drained from the engine – is clear that the engine was overfilled with oil.
What remedy is Ms Kaur entitled to?
[38] 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.[4]
[39] I consider that a reasonable consumer would not have purchased this vehicle if they had been appraised of the fact that its odometer had been tampered with. Ordinarily in those circumstances I would order a full refund of all amounts paid for the vehicle and compensation for other related costs. However, such orders would not do justice to the parties in this case, as those orders would not account for the fact that Ms Kaur has significantly damaged the vehicle by negligent use.
[40] Taking account of the damage to the engine, which will be expensive to repair, I consider that the appropriate remedy under the FTA in this case are orders under s 43(2) and s 43(3)(a)(ii) declaring the agreement to purchase the vehicle void from the date of this decision.
[41] That order has the effect of cancelling the agreement to purchase the vehicle, with the ownership of the vehicle transferring to Seven Seas Motors, but with no other financial compensation being paid to Ms Kaur (other than for the repair of the rocker cover gasket leak for the reasons set out in paragraphs [48] to [57] below).
[42] Ms Kaur sought to recover loss she claims to have suffered as a result of purchasing the vehicle, including all payments she has made under the collateral credit agreement and the cost of the Giltrap assessment, the VTNZ pre-purchase inspection report and the cost of having the engine stripped by DM Auto Services.
[43] Ms Kaur has caused several thousands of dollars’ worth of additional damage to by the engine being negligently overfilled with oil, and I feel obliged to take that damage into account when determining a fair remedy. Consequently, I decline to make any orders compensating Ms Kaur for those claimed losses, because I consider that the value of the financial compensation sought is equivalent to the value of the damage caused by negligently overfilling the engine with oil.
The collateral credit agreement
[44] Because the Tribunal has declared the agreement to purchase the vehicle void, Ms Kaur is also entitled to have her ongoing rights and obligations under the collateral credit agreement assigned to Seven Seas Motors.
[45] The relevant provisions are set out in ss 89(2) and (3) of the Motor Vehicle Sales Act 2003 (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.
[46] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to Seven Seas Motors are all met in this case:
- (a) the agreement between Ms Kaur and Heartland Bank Ltd is a collateral credit agreement for the purposes of s 89(2) of the MVSA. The agreement was arranged or procured by Ms Kaur for the provision of credit by Heartland Bank to enable Ms Kaur to purchase the vehicle;
- (b) Seven Seas Motors sold the vehicle to Ms Kaur, so it is a party to the contract to purchase the vehicle; and
- (c) the Tribunal has found that Ms Kaur has suffered loss by conduct of Seven Seas Motors that constitutes a breach of s 9 of the FTA and the Tribunal has made an order under s 43(2) of the FTA declaring the agreement to purchase the vehicle void.
[47] Accordingly, under s 89(2) of the MVSA, all of Ms Kaur’s rights and obligations under the collateral credit agreement are assigned to Seven Seas Motors from the date of this decision.
Issue 3: Has the vehicle been of acceptable quality?
[48] 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.
[49] 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.
[50] In considering whether or not goods meet the guarantee of acceptable quality, the Tribunal must consider the quality elements as set out in s 7(1)(a)-(e) of the CGA as modified by the factors set out in s 7(1)(f)-(j), from the perspective of a “reasonable consumer”. The test is an objective one; it is not a view of those factors from Ms Kaur’s subjective perspective.
The engine damage
[51] The engine damage does not breach the guarantee of acceptable quality because it was caused by Ms Kaur, her husband or her mechanic overfilling the engine with oil. The engine only failed because it was overfilled with oil, and as set out in s 7(4), goods will not fail to comply with the guarantee of acceptable quality if the goods have been used in a manner which is inconsistent with the manner in which a reasonable consumer would use the vehicle.
The oil leaks from the rocker cover
[52] The oil leak from the rocker cover gaskets does breach the guarantee of acceptable quality. I accept Mr Jones’ evidence that the vehicle had an oil leak from the rocker cover gaskets in September 2021 and that oil was leaking onto the exhaust manifold.
[53] Mr Gregory advises that such an oil leak is a warrant of fitness failure because it is a fire hazard. That oil leak occurred within five months of purchase and means that the vehicle was not of acceptable quality for the purposes of s 6 of the CGA because it was not as free of minor defects or as durable as a reasonable consumer would consider acceptable, particularly given its represented mileage of only 24,000 km.
Issue 4: What remedy is Ms Kaur entitled to under the CGA?
[54] 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.
[55] Ms Kaur cannot reject the vehicle because it has been damaged. Section 20 of the CGA sets out the circumstances in which a purchaser loses the right to reject a vehicle. Relevant to this case, s 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.
[56] As set out above, the vehicle’s engine has been damaged since purchase due to it being negligently overfilled with oil. The engine now requires replacement or substantial overhaul and I am satisfied that the damage is sufficient to amount to damage for the purposes of s 20(1)(c) of the CGA and that Ms Kaur has lost any right she had to reject the vehicle under the CGA.
[57] Consequently, the only remedy Ms Kaur is entitled to under the CGA is an order under s 18(2)(b)(i) that Seven Seas Motors compensate her for the cost of replacing the rocker cover gaskets. I am satisfied that Ms Kaur notified Seven Seas Motors of the oil leaks from the rocker cover gaskets, and it declined to take responsibility. Ms Kaur was therefore entitled to have the oil leaks rectified elsewhere and recover that cost from Seven Seas Motors.
Costs
[58] Ms Kaur sought to recover the $50 fee for filing this claim. Under cl 14(1)(a)(ii) and (b) of Sch 1 to the Motor Vehicle Sales Act 2003, the Tribunal may award costs (such as the filing fee) against a party where the matter ought to have been settled before a hearing, but that party fails to participate in pre-hearing settlement discussions, or where the other party fails to attend without reasonable cause.
[59] Seven Seas Motors has successfully defended a large part of Ms Kaur’s claim, so I am not satisfied that this is a claim that ought reasonably to have been settled before the hearing. Further, Seven Seas Motors attended the hearing, so Ms Kaur not entitled to recover costs on that basis.
Orders
[60] The Tribunal therefore orders that:
- (a) the agreement to purchase the vehicle is declared void from the date of this decision;
- (b) Ms Kaur’s rights and obligations under the collateral credit agreement with Heartland Bank Ltd dated 15 March 2021 are assigned to Seven Seas Motors Ltd from the date of this decision; and
- (c) Seven Seas Motors shall, within 10 working days of the date of this decision, pay $2,647.50 to Ms Kaur.
DATED at AUCKLAND this 9th day of February 2022
B.R. Carter
Adjudicator
[1] Registration number NLZ330 (since changed to GURRAJ) and VIN number SAJAC2221CNV36373.
[2] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
[3] Mr Pemberton’s email states “800 – 100 rpm”, but that is clearly an error, and I am satisfied that he meant 800 to 1,000 rpm, which is the common idle speed of a diesel engine.
[4] Red Eagle Corp Ltd v Ellis [2010] NZSC 20; [2010] 2 NZLR 492, at [31].
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