Simon v Carson Taylor Company Ltd - Reference No. MVD 076/2023 [2023] NZMVDT 171 (16 August 2023)

Last Updated: 3 October 2023

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 076/2023 [2023] NZMVDT 171 BETWEEN MARLENE SIMON Applicant AND CARSON TAYLOR COMPANY LTD Respondent

HEARING at ROTORUA on 23 June and 7 August 2023 MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator S Gregory – Assessor

APPEARANCES

M Simon, Applicant A Simon and R Simon, Witnesses for the Applicant

C Dunleavy, K Taylor and S Shirley for the Respondent (by audio-visual link)

DATE OF DECISION 16 August 2023

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DECISION OF THE TRIBUNAL

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Marlene Simon’s application is dismissed.

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REASONS

Introduction

[1] Marlene Simon purchased a 2011 Ford Ranger for $7,000 on 21 October 2022. The vehicle has since suffered significant engine and clutch damage and seeks to reject the vehicle and obtain a refund of the purchase price from Carson Taylor Company Ltd (CTCL). CTCL denies selling the vehicle to Mrs Simon and says that the clutch and engine damage may have been caused by misuse during her ownership.

The issues

[2] CTCL denied supplying the vehicle to Mrs Simon. The Tribunal has already considered whether CTCL was a supplier for the purposes of the Consumer Guarantees Act 1993 (the CGA). In a preliminary decision dated 11 July 2023 (the preliminary decision), the Tribunal found that the vehicle was owned and sold by Villa Oaks Farm, but CTCL was nonetheless a supplier for the purposes of the CGA because it acted as Villa Oaks Farm’s agent when the vehicle was sold.
[3] Consequently, the issues requiring the Tribunal’s consideration in this decision are:

• (a) What is the extent and cause of the engine and clutch damage?
• (b) Has the vehicle has been of acceptable quality for the purposes of s 6 of the CGA?

Relevant background

The sale of the vehicle

[4] Mrs Simon wanted to purchase a ute for her son Robin. Mrs Simon, a past client of CTCL, visited its premises in Rotorua to look for a suitable vehicle.
[5] Mrs Simon spoke with Cheryl Dunleavy of CTCL. Ms Dunleavy says that Mrs Simon approached her and asked if CTCL had any utes for sale under $5,000. Ms Dunleavy says that she advised Mrs Simon that CTCL did not have any utes in that price range as its policy is not to sell a Ford Ranger with an odometer reading of more than 200,000 kms or a Toyota Hilux with an odometer reading exceeding 500,000 kms.
[6] Ms Dunleavy says that Mrs Simon then told her that her son was desperate to purchase a vehicle as his previous vehicle had been stolen. Ms Dunleavy says that she has dealt with Mrs Simon for many years, so she decided to help.
[7] The vehicle was owned by Villa Oaks Farm Ltd. Ms Dunleavy says that it was at CTCL’s premises because an employee of CTCL had delivered a new vehicle to Villa Oaks Farm and used this vehicle to return to CTCL. CTCL had intended to then return the vehicle to Villa Oaks Farm at a convenient time. Ms Dunleavy thought that the vehicle may have been suitable for Mrs Simon if the owner agreed to sell it.
[8] Ms Dunleavy then contacted the owner of the vehicle to see if it was prepared to sell the vehicle to Mrs Simon. Villa Oaks Farm agreed that it could sell the vehicle to Mrs Simon on an “as is where is” basis. Ms Dunleavy says that she then advised Mrs Simon that the owner had agreed to sell the vehicle. Ms Dunleavy says that she told Mrs Simon that the vehicle did not belong to CTCL, and that the vehicle was being sold by Villa Oak Farms, not CTCL.
[9] Ms Dunleavy and Keith Taylor, the Dealer Principal at CTCL, both say that Ms Dunleavy contacted Mr Taylor and discussed this transaction with him. Mr Taylor approved, but only on the basis that Ms Dunleavy made it clear that CTCL was not selling the vehicle “on-behalf” of its owner and that CTCL was not to be an agent for the sale of the vehicle. Mr Taylor advises that CTCL does not do on-behalf sales and does not sell vehicles of this age.
[10] Mrs Simon’s son then inspected the vehicle on 20 October 2022 and advised Ms Dunleavy that he would be interested in purchasing the vehicle for $7,000. Ms Dunleavy says that she then contacted the owner, who had initially sought between $7,500 to $8,000 for the vehicle, and it agreed to sell the vehicle for $7,000.
[11] Mrs Simon returned to CTCL’s premises at about 3 pm the following day. Ms Dunleavy says that Mrs Simon wanted to purchase the vehicle immediately. Ms Dunleavy then contacted Villa Oaks Farm’s accountant, who prepared an invoice recording the sale of the vehicle by Villa Oaks Farm to Mrs Simon. That invoice was sent to CTCL, and Ms Dunleavy provided the invoice to Mrs Simon. Relevantly, the invoice records that the vehicle was sold by Villa Oaks Farm to Mrs Simon for $7,000 on an “as is where is” basis.
[12] Villa Oaks Farm wanted Mrs Simon to pay the purchase price directly to it by bank transfer. Mrs Simon wanted to take possession of the vehicle immediately and was concerned that it would take a few days for the funds to clear if paid by bank transfer. Mrs Simon and Ms Dunleavy (after speaking to Villa Oaks Farm) then agreed that Mrs Simon could pay the $7,000 purchase price using CTCL’s EFTPOS facilities, with CTCL then transferring the funds to Villa Oaks Farms.

The clutch and engine damage

[13] The vehicle’s odometer reading at the time of sale in October 2022 was 423,780 km. Robin Simon was the sole driver of the vehicle. He says that he used the vehicle without any incident until 24 January 2023.
[14] Mr Simon says that he was driving the vehicle down Sunset Rd in Rotorua on that day. He says that he slowed down to drive over a speed bump and shifted the gearbox into neutral gear. Mr Simon says that he then noticed a knocking noise as the vehicle drove over the speed bump. Mr Simon pulled over, by which time the noise had stopped. He continued to drive the vehicle, but the knocking noise returned, and the vehicle was low on power. Mr Simon says that he drove the vehicle slowly home – a journey of about two kilometres. He then turned the engine off and was unable to restart it.
[15] The vehicle was then transported to CTCL and inspected by Shane Shirley, a technician employed by CTCL. Mr Shirley says that he was unable to start the vehicle. He then disassembled the clutch and found that the flywheel had seized and the clutch plate and dual mass flywheel were worn and required replacement. CTCL has provided photographs of those components.
[16] CTCL replaced the damaged clutch and dual mass fly wheel at a total cost of $2,116.73. Mrs Simon has since paid $500 of that amount. Mrs Simon says that she asked Villa Oaks Farm to contribute towards this repair, but it declined.
[17] Mr Shirley says that the vehicle started after the clutch was replaced, but it ran badly. Mr Shirley performed further diagnosis and found significant engine damage, including dislodged rocker arms and two damaged exhaust valves on cylinder one. Mr Shirley says that he also found a brake cleaner product and tools in the engine bay.
[18] CTCL has provided a quote of $7,922.28 to replace the damaged engine. Again, CTCL has provided colour photographs confirming this diagnosis. The odometer reading at that time was 428,933 kms.

Issue 1: What is the extent and cause of the engine and clutch damage?

The engine damage

[19] The engine is damaged and requires repair. The photographs provided by CTCL show two dislodged rocker arms. I also accept Mr Shirley’s evidence that two of the exhaust valves are bent, which is consistent with the knocking noise complained of by Mr Simon.

The extent of the engine damage remains unclear

[20] CTCL says that the engine requires replacement, but aside from identifying the dislodged rocker arms and two bent exhaust valves, it has not performed any further diagnosis to identify what repair is required.
[21] The engine may not require replacement. Mr Gregory, the Tribunal’s Assessor,[1] advises that, given Mr Simon’s limited use of the vehicle after the knocking noise was present, it is entirely possible that the pistons and other components (which are made of sterner material than the valves) have not been significantly damaged. Instead, the vehicle may simply require replacement valves and possibly repairs to the number one piston to make it serviceable. Further assessment therefore is required before any repair should be performed.

The cause of the engine damage is unclear

[22] The cause of the engine damage is also unclear. Mr Shirley has identified damage, but there is no clear diagnosis of the cause.
[23] Mrs Simon appears to consider that the engine has simply failed. CTCL considers that the damage may have been caused by someone pouring brake cleaner into the intake system or by Mr Simon driving aggressively over the speed bump, but its evidence on this point was inconclusive. The Tribunal must therefore consider all of the evidence presented to determine the possible causes of the engine damage.
[24] Mr Gregory advises that this type of engine damage can sometimes be caused by a timing belt or chain failure, but that was not the cause of the engine damage in this case, and Mr Shirley has confirmed that the cam timing was correct. Mr Gregory therefore considers that it is much more likely that the engine damage was caused by “overrevving”.
[25] Mr Gregory considers that the dislodged rocker arms and damaged exhaust valves are consistent with overrevving, which occurs when the engine RPM exceeds the designed maximum RPM. The usual causes of overrevving include diesel “runaway” (where, due to a mechanical failure, the engine consumes oil during the combustion process), fuel pump failure or engine control unit modification or failure. There was no evidence presented to show that any of these events have occurred, so I cannot be satisfied that any of those factors caused the engine damage.
[26] Mr Simon’s evidence was that the engine damage occurred when he put the vehicle into neutral when driving over the speed bump. He says that the knocking noise (caused by the piston contacting the number one cylinder exhaust valves and dislodging the rockers) then occurred. Mr Gregory considers that it is not possible for the engine to fail as described by Mr Simon while the vehicle is in neutral gear because there was no load on the engine and the vehicle’s RPM was too low. I therefore find that the engine damage must have occurred when the vehicle was in gear.
[27] Overrevving can occur when the wrong gear is selected on a downshift and the engine damage that then occurred is consistent with the engine overrevving by the wrong gear being selected. Mr Gregory advises that when a lower gear is prematurely selected and the clutch is released, the engine RPM can quickly exceed its designed maximum. In a diesel engine the piston to valve clearance is very close and any small overrevving event can cause the piston to come into contact with the valves, especially in a high mileage ute such as this where the valve springs are likely to be weak, accentuating that risk.
[28] It is therefore unclear precisely what the cause of the engine damage was, but in the absence of evidence proving the engine damage was caused by an inherent defect with the vehicle, I cannot discount the real possibility that the engine damage was caused by overrevving due to Simon incorrectly downshifting gears while driving over the speed bump.

The clutch was damaged and required replacement

[29] CTCL has replaced the vehicle’s clutch. Mr Shirley says that the flywheel had seized, and the clutch plate was burnt and worn. I accept his evidence, which was not disputed by Mrs Simon on this point.
[30] Again, the cause of the clutch failure is unclear. Mr Simon says that the vehicle was performing well before the engine failed, which suggests that the clutch was not badly worn, and the flywheel was not seized before the engine failed. Mr Gregory considers that the flywheel may well have been damaged when the engine was overrevved, as the sudden shock and excessive load put onto the flywheel when the gearbox was shifted into the wrong gear could easily have caused the dual mass flywheel to seize in the position found by Mr Shirley.

Issue 2: Has the vehicle been of acceptable quality?

[31] 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”. “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.

(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.

[32] 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.

The relevant factors

[33] The protections in the CGA are finite, and last only as long as is reasonable in the circumstances of each case, taking into account the factors set out in s 7(1)(f) to (j) of the CGA. In this case, the relevant factors include the price, age and mileage of the vehicle, the nature of the vehicle’s defects, the length of Mrs Simon’s ownership and the distance travelled before those defects became apparent and any pre-purchase representations made about the quality or condition of the vehicle.

Price, age and mileage of the vehicle

[34] Mrs Simon paid $7,000 for a 11-year-old ute with an odometer reading of 423,780 km. A reasonable consumer must have realistic expectations as to the quality and durability of a ute of this price, age and mileage.

Pre-purchase representations about the quality and condition of the vehicle

[35] The realistic expectations of a reasonable consumer would have been further reduced by the pre-purchase representations made by CTCL. As set out in the Tribunal’s preliminary decision, I accept the evidence of Ms Dunleavy of CTCL as to the pre-sale discussions with Mrs Simon. Relevant to this analysis, I accept her evidence that she told Mrs Simon that the vehicle did not belong to CTCL and that it was not at CTCL’s premises to be sold. I also accept Ms Dunleavy’s evidence that she then decided to assist Mrs Simon by asking Villa Oaks Farm whether it would sell the vehicle to Mrs Simon. I also find that Ms Dunleavy advised Mrs Simon that the vehicle was being sold on an “as is where is” basis by Villa Oaks Farm and that CTCL had not performed any assessment on the vehicle.
[36] Mrs Simon says that the vehicle was being sold by CTCL and that it had a for sale sign in the driver’s window. Mrs Simon also says that CTCL did not tell her that the vehicle was being sold on an “as is where is” basis. I prefer Ms Dunleavy’s evidence on this point. Ms Dunleavy’s evidence is corroborated by the fact that the agreement to purchase the vehicle was between Mrs Simon and Villa Oaks Farm and that agreement clearly states that the vehicle was sold on an as is where is basis.
[37] Although a supplier cannot avoid its obligations under the CGA by describing a vehicle as being sold on an “as is where is” basis, such representations can be relevant in determining whether a vehicle is of acceptable quality, particularly when determining the expectations that a reasonable consumer should have for the quality and durability of the vehicle.

The length of Mrs Simon’s ownership and distance travelled

[38] The clutch failure and engine damage occurred in late January 2023, about three months after purchase. Mr Simon had driven about 5,150 kms in that time.

The extent of the engine and clutch damage

[39] As the Applicant, Mrs Simon bears the onus of proving that the vehicle has engine damage that means it is not of acceptable quality. Relying on the assessment performed by CTCL, Mrs Simon alleges that the engine has suffered significant damage and requires replacement. As set out above, the Tribunal is not satisfied that the engine damage is as serious as alleged and further diagnosis is required to determine the true extent of that damage. The evidence is clear that the clutch was damaged and required replacement.

The cause of the engine and clutch damage

[40] To be entitled to any remedy under the CGA, Mrs Simon must also prove that the engine and clutch damage was caused by an inherent fault with the vehicle. As set out above, in the absence of any evidence to show that the overrevving incident that caused the engine damage was due to an inherent engine fault, I cannot discount the possibility that the engine and clutch damage was caused by Mr Simon selecting the wrong gear when downshifting.

The Tribunal’s assessment

[41] Considering the relevant factors, including the realistic expectations that a reasonable consumer must have for a vehicle of this price, age and mileage, the uncertain extent and cause of the engine damage, and the length of Mrs Simon’s ownership and the distance travelled in that time, I find that the clutch failure and engine damage does not breach the guarantee of acceptable quality because Mrs Simon has not proven that the clutch failure and engine damage were due to an inherent fault with the vehicle or that those faults mean the vehicle was not as free of minor defects or as durable as a reasonable consumer would consider acceptable.

[42] Mrs Simon’s claim is therefore dismissed.

B R Carter
Adjudicator

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[1] Assessors are appointed by the Minister of Commerce and Consumer Affairs under s 88(3) of the Motor Vehicle Sales Act 2003, having regard to the Assessor’s personal attributes, qualifications and skills and knowledge of, or experience in, the different aspects of matters likely to come before the Tribunal. Under cl 10 of Sch 1 of the Motor Vehicle Sales Act, an Assessor sits as a member of the Tribunal and has a duty to assist the Adjudicator in the determination of the claim, although the Adjudicator alone determines the claim.