Henry v New Zealand Car Canterbury Limited - Reference No. MVD 453/2022 [2023] NZMVDT 21 (15 February 2023)

Last Updated: 23 March 2023

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 453/2022
[2023] NZMVDT 021

BETWEEN MICHAEL SHAYNE HENRY

Purchaser

AND NEW ZEALAND CAR CANTERBURY LIMITED

Trader

HEARING on 9 February 2023
MEMBERS OF TRIBUNAL

D M Jackson, Barrister – Adjudicator

S Gregory – Assessor

APPEARANCES (via Microsoft Teams)

M Henry, Purchaser
C van der Lem, Manager of Trader
M James, Support Person for the Trader

DATE OF DECISION 15 February 2023

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DECISION OF THE TRIBUNAL

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1. Mr Henry’s rejection of his Jeep Cherokee 5.7 V8 is upheld as from 11 November 2022.
2. The collateral credit agreement between Mr Henry and Finance Now Limited dated 21 June 2022 is vested in New Zealand Car Canterbury Limited as from 11 November 2022 but for the principal sum of $3,600 (being Mr Henry’s loss on the trade in of his first vehicle). Mr Henry has no further obligation to make any payments under that agreement but for paying any amounts owing for his first vehicle.

100. New Zealand Car Canterbury Limited must pay Mr Henry the monthly payments made by Mr Henry to Finance Now Limited since 11 November 2022. Mr Henry is directed to obtain this information from the lender and supply it to the case manager. The lender must divide out that aspect of the loan, which remains with Mr Henry (in respect of the first vehicle). The Tribunal will make a further order based on the information supplied.

4. New Zealand Car Canterbury Limited must also pay Mr Henry the principal component of his payments prior to 11 November 2022 under the Collateral Credit Agreement (but no earlier than 21 June 2022). Mr Henry is directed to obtain this information from the lender and supply it to the case manager. The Tribunal will make a further order based on the information supplied.

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REASONS

Introduction

[1] On 13 May 2022, Michael Henry purchased a 2011 Jeep Cherokee from New Zealand Car Canterbury Limited (the Trader) for $20,600.00. On or about 20 June 2022 he traded in that vehicle with the Trader in order to purchase a 2006 Jeep Cherokee 5.7 V8 for $27,782.11. The trade in price for the first vehicle was $17,000 and both purchases were paid for by finance with the company Finance Now Limited. Mr Henry made a $3,600 loss on the trade in, which he accepts is his loss to shoulder.
[2] Approximately three months later, Mr Henry experienced issues with the vehicle’s transmission. He contacted the Trader who asked him to bring the vehicle in for analysis and repair by a repair agent. On 4 October 2022 Mr Henry delivered the vehicle to the repair agent, Aceomatic, for analysis and repair. He has not seen the vehicle again and it has since been referred by Aceomatic to an auto-electrician and then onto a Chrysler Jeep specialist dealer for diagnosis and repair. It would appear the problem is a faulty engine control unit, which replacement part was ordered from the United States of America, but which did not arrive in the country until recently. It has now been fitted and, the Trader says, the vehicle is fixed and ready for collection.
[3] However, this dispute arises because Mr Henry had earlier, on 21 October 2022, given notice to the Trader that he rejected the vehicle. He did so when he learned from the auto-electrician that the fault was in the vehicle’s computer and needed to be referred on to a specialist dealer for diagnosis and repair. He says that given this delayed and incomplete diagnosis, and the fact that the fault was in the engine’s computer, he lost all faith in the vehicle, and its repair. He was left uncertain as to when the vehicle might be available to him again.
[4] Mr Henry had had the use of a loan vehicle (more than one in fact) during this period but returned it to the Trader on 11 November 2022 when he reiterated his rejection of the vehicle. Due to his personal and working requirements, Mr Henry purchased another vehicle during this period.
[5] The Trader did not accept Mr Henry’s rejection of the vehicle so he applied to the Tribunal to reject the vehicle and to be released from his collateral credit agreement.
[6] At the hearing, Mr Henry confirmed that he seeks a refund of the purchase price, plus the interest he had paid on his loan.
[7] The Trader accepts the defect was a breach of the guarantee of acceptable quality but says its repair of the vehicle, whilst taking longer than it would have liked, is the appropriate remedy in this case. It suggests Mr Henry’s use of the vehicle may have contributed to the computer fault. That is, that Mr Henry – who is an outdoorsman and hunter – may have submerged the engine control unit while crossing a river or similar (denied by Mr Henry).
[8] From this background the following issues arise for the Tribunal to determine:

• (a) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
  • (b) Has the Trader refused or failed to rectify the vehicle’s defects within a reasonable time?
• (c) What, if anything, is the appropriate remedy?

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

[9] 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”. According to s 2 of the CGA, “goods” includes vehicles.
[10] Relevantly, “acceptable quality” is defined in s 7 of the CGA 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.

...

[11] 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.
[12] Mr Henry described that soon after delivery of the vehicle the battery failed requiring him to jump start it, and which battery he had replaced (without reference to the Trader). He described the vehicle as running smoothly until he experienced gearbox transmission issues including the vehicle “jumping” during gear changes.
[13] As outlined above, the Trader does not dispute that the fault, which was (eventually) diagnosed as a faulty engine control unit breaches the guarantee of acceptable quality. It says it relied on its repair agents to diagnose and fix the fault and the delays experienced were unfortunate. The delay in receiving the replacement engine control unit from overseas was unavoidable.

Tribunal’s assessment

[14] The Tribunal’s Assessor, Mr Gregory, had no questions for either witness. Rather, his assessment of the extensive written material, responsibly compiled and submitted by Ms van der Lem for the Trader, correctly diagnoses the problem as a failed engine control unit. Mr Gregory noted that it is not uncommon for a faulty engine control unit to affect the gearbox transmission in a way, which might suggest the transmission is at fault. However, Mr Gregory considers a five-week delay in diagnosing the true fault to be unacceptable. Ordinarily, a suitably qualified and experienced transmission expert or auto-electrician ought to identify a faulty engine control unit within a fortnight or so of diagnostic testing. The diagnosis and repair here was simply too slow.
[15] I have no hesitation therefore in finding that the vehicle was not as free from minor defects nor as durable as a reasonable consumer would regard as acceptable, in light of its age, mileage and price. The engine control unit was defective and given Mr Henry’s limited use of the vehicle since purchase I find that there is a real possibility that the defect was present at the time of purchase.

Conclusion

[16] Accordingly, I conclude that the vehicle failed to comply with the guarantee of acceptable quality.

Issue 2: Has the Trader refused or failed to rectify the vehicle’s defects within a reasonable time?

[17] Section 18(2)(b)(ii) of the CGA enables a consumer to reject goods where a supplier has been required to remedy a failure but refuses, fails or does not succeed in doing so within a reasonable time.
[18] Section 18 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.

[19] The vehicle was delivered to the Trader’s repair agent on 4 October 2022. It was not repaired until 8 February 2023, the day before the hearing of Mr Henry’s claim. A four-month delay is unacceptable and plainly so. The repair did not occur within a reasonable time, therefore. I record that this is not a case of a Trader refusing to repair or being obstructive or difficult. On the contrary, the Trader relied, in good faith, on its repair agents which were delayed in their diagnosis of the fault and its repair, and then by the logistics of retrieving a replacement engine control unit from overseas. A slow response from its repair agents and/or delays experienced in sourcing replacement parts has placed the Trader, as a supplier under the CGA, in default of its obligation to remedy the defect in a reasonable time.
[20] I pause to record here that the reasons for Mr Henry’s rejection of the vehicle on 21 October 2022 were two-fold: the delayed and incomplete diagnosis of the fault to that point; and the likely diagnosis of a fault within the vehicle’s computer. Mr Henry accepted that had the repair been carried out within a matter of two, three or even four weeks, he would not have rejected the vehicle (and would have accepted the repair as the appropriate outcome). However, it was his concern as to the incomplete nature of the diagnosis and the uncertainty of what the problem was, and how it might be fixed, and the stigma of owning a vehicle with unresolved “computer” issues, which prompted him to reject the vehicle. I do not view this case or this defect as a failure of substantial character, therefore. This is a case of a failure to repair within a reasonable time. Mr Henry did not jump the gun in rejecting the vehicle. His rejection and its justification were prescient.

Issue 3: What is the appropriate remedy?

[21] 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 CGA, 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.

[22] The primary remedy available to a consumer if a vehicle fails to comply with the guarantee of acceptable quality is set out in s 18(2)(a). Under that provision, the consumer may require the supplier to remedy the failure within a reasonable time. If the supplier refuses or fails to remedy the failure within a reasonable time (or it cannot be remedied at all) then the consumer may, subject to s 20, reject the vehicle.
[23] If the breach is of substantial character the consumer may exercise remedies under s 18(3) in addition to subs (2) and (4), where the breach is able to be remedied. Having determined the vehicle was not of acceptable quality, the Tribunal must evaluate whether the breach is of substantial character.
[24] I have determined that Mr Henry is entitled to reject the vehicle regardless under s 18 (2)(b)(ii) for the Trader’s failure to repair within a reasonable time.
[25] I have had regard to the Trader’s argument that Mr Henry has had the vehicle for too long and has used it too much to be able to reject it now. That argument disregards the fact that Mr Henry gave notice of rejection on 21 October 2022, no more than four months after purchase. Regardless, Mr Henry confirmed his rejection of the vehicle within a reasonable time of the unsuccessful diagnosis of the vehicle’s engine control unit fault (which as at 21 October remained at large and was not repaired).
[26] I reject the Trader’s suggestion that Mr Henry might have contributed to the engine control unit fault by submerging the vehicle whilst crossing a river. Mr Henry denied that he used the vehicle to cross any river or ford. I accept his evidence and find that his use has not contributed or caused the faulty engine control unit or otherwise disqualified him from rejecting the vehicle.

Mr Henry notified the Trader of his rejection and the grounds for rejection

[27] Section 22 of the CGA provides that a consumer “shall exercise the right to reject goods ... by notifying the supplier of the decision to reject the goods and of the ground or grounds for rejection”.
[28] The grounds for rejection were clear as at the date of Mr Henry’s email of 21 October 2022. That the repairs have been diagnosed and carried out subsequent to Mr Henry’s rejection does not invalidate his right to reject the vehicle.
[29] Again, there is nothing to suggest that Mr Henry has lost his right of rejection on any of the grounds in s 20 of the CGA. Accordingly, I conclude that Mr Henry validly rejected the vehicle as from 21 October 2022. He is entitled to a refund of the purchase price.[1]

The Tribunal can vest Mr Henry’s loan in the Trader

[30] Mr Henry financed the purchase of his vehicle through a loan by Finance Now Limited. This is a “collateral credit agreement” for the purposes of s 89 of the Motor Vehicle Sales Act 2003. Under that provision, the Tribunal has jurisdiction to 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 the collateral credit agreement is associated with the contract for the sale of that motor vehicle, that the trader is a party to that contract for sale of the motor vehicle and the Tribunal upholds a rejection of the vehicle and orders the trader to refund the purchase price.
[31] As all of these conditions are met in the present case, the Tribunal has jurisdiction to vest the loan between Mr Henry and Finance Now Limited in the Trader. The operative date for the vesting of the collateral credit agreement in the Trader is not the date of rejection, 21 October 2022, however. I fix that date as being 11 November 2022, which is the date on which Mr Henry returned his loan vehicle to the Trader and purchased his replacement vehicle. Mr Henry cannot deny that he had possession and use of the Trader’s loan vehicle until that later date.

Conclusion

[32] For the above reasons, I make the following orders:

1. Mr Henry’s rejection of his Jeep Cherokee 5.7 V8 is upheld as from 11 November 2022.
2. The collateral credit agreement between Mr Henry and Finance Now Limited dated 21 June 2022 is vested in New Zealand Car Canterbury Limited as from 11 November 2022 but for the principal sum of $3,600 (being Mr Henry’s loss on the trade in of his first vehicle). Mr Henry has no further obligation to make any payments under that agreement but for paying for his first vehicle.

100. New Zealand Car Canterbury Limited must pay Mr Henry the monthly payments made by Mr Henry to Finance Now Limited since 11 November 2022. Mr Henry is directed to obtain this information from the lender and supply it to the case manager. The lender must divide out that aspect of the loan, which remains with Mr Henry (in respect of the first vehicle). The Tribunal will make a further order based on the information supplied.

4. New Zealand Car Canterbury Limited must also pay Mr Henry the principal component of his payments prior to 11 November 2022 under the collateral credit agreement. Mr Henry is directed to obtain this information from the lender and supply it to the case manager. The Tribunal will make a further order based on the information supplied.
   

D M Jackson
Adjudicator

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[1] Consumer Guarantees Act 1993, s 23(1)(a).