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Ashton Four Trustee Limited v Ingham Motor Holdings Limited t/a Mercedes-Benz Auckland - Reference No. MVD 261/2023 [2023] NZMVDT 220 (31 October 2023)

Last Updated: 10 December 2023

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL

I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA

MVD 261/2023
[2023] NZMVDT 220

BETWEEN ASHTON FOUR TRUSTEE LIMITED

Purchaser

AND INGHAM MOTOR HOLDINGS LIMITED TA MERCEDES-BENZ AUCKLAND

Trader

HEARING at AUCKLAND on 14 September 2023
MEMBERS OF TRIBUNAL

J S McHerron, Barrister – Adjudicator
S Haynes – Assessor

APPEARANCES

P J Tweedie, Purchaser
M Collins, General Sales Manager for Trader
C Watson, Service Manager for Trader
J Visser, Workshop Foreman of Trader

DATE OF DECISION 31 October 2023

___________________________________________________________________

DECISION OF THE TRIBUNAL

___________________________________________________________________

Ashton Four Trustee Ltd’s application is dismissed.

___________________________________________________________________


REASONS

Introduction

[1] Ashton Four Trustee Ltd seeks to reject a 2022 Mercedes A250 that it purchased for $78,500 from Ingham Motor Holdings Ltd on or around 13 April 2022. Through its director Paul Tweedie, Ashton Four Trustee says the vehicle has a faulty transmission.
[2] In addition, Mr Tweedie claims that Ingham Motor Holdings failed to disclose that the vehicle had been a demonstrator. Rather, Mr Tweedie says it was his understanding that the vehicle was brand-new.
[3] From the terms of the vehicle offer and sale agreement, an initial issue arises as to whether the parties have contracted out of the Consumer Guarantees Act 1993 (CGA).
[4] From this brief background, the following issues arise for the Tribunal’s determination:

Issue one: Did the parties agree to contract out of the CGA?

[5] In the vehicle offer and sale agreement dated 13 April 2022 between Ashton Four Trustee and Ingham Motor Holdings there is the following exclusion clause:

Business Uses: If the Purchaser is acquiring the goods & services from the Dealer for the purposes of a business in any way, the Purchaser agrees to the following terms:

(a) The guarantees set out in the Sale of Goods Act 1908 and the Consumer Guarantees Act 1993 will not apply and are excluded from this agreement.
(b) The Purchaser may not claim any of the remedies set out in the Consumer Guarantees Act 1993 from the Dealer or from the manufacturer of the goods & services or from any manufacturer of any components or parts in the goods & services.
[6] In its submissions to the Tribunal, Ingham Motor Holdings did not seek to rely on this exclusion provision. However, on behalf of Ashton Four Trustee, Mr Tweedie expressed concern about whether the provision might preclude his company from establishing a claim under the CGA in respect of the vehicle.
[7] The circumstances in which parties are permitted to contract out of the guarantees in the CGA are set out in s 43. The general rule is that contracting out is prohibited. However, a limited exception is offered where the requirements of subss (2) and (2A) are met:
  1. No contracting out except for business transactions

(1) Subject to this section and to sections 40, 41, and 43A, the provisions of this Act shall have effect notwithstanding any provision to the contrary in any agreement.

(2) However, despite subsection (1), parties to an agreement may include a provision in their agreement to the effect that the provisions of this Act will not apply to that agreement, provided that—

(a) the agreement is in writing; and

(b) the goods or services are, or (in connection only with the guarantee of acceptable quality in section 7A) the gas or electricity is, supplied and acquired in trade; and

(c) all parties to the agreement—

(i) are in trade; and

(ii) agree to contract out of the provisions of this Act; and

(d) it is fair and reasonable that the parties are bound by the provision in the agreement.

(2A) If, in any case, a court is required to decide what is fair and reasonable for the purposes of subsection (2)(d), the court must take account of all the circumstances of the agreement, including—

(a) the subject matter of the agreement; and

(b) the value of the goods, services, gas, or electricity (as relevant); and

(c) the respective bargaining power of the parties, including—

(i) the extent to which a party was able to negotiate the terms of the agreement; and

(ii) whether a party was required to either accept or reject the agreement on the terms and conditions presented by another party; and

(d) whether all or any of the parties received advice from, or were represented by, a lawyer, either at the time of the negotiations leading to the agreement or at any other relevant time.

[8] Subsections (2) and (2A) of s 43 were substituted for the former s 43(2), when it was repealed on 17 June 2014, to mirror the equivalent provision in the FTA.[1] The repealed former provision allowed a supplier to contract out of the provisions of the CGA in respect of “a consumer who acquires, or holds himself or herself out as acquiring...goods or services for the purposes of a business...”. The main differences between the pre and post-2014 amendment versions of s 43 are that, in the current provisions (as applied to motor vehicles):
[9] As to whether the parties agreed, by the provision set out above, to contract out of the CGA, there was no evidence that either party specifically turned their minds to this issue. On behalf of Ashton Four Trustee, the agreement appears to have been signed by Mr Tweedie’s mother, Justina Tweedie. Ms Tweedie did not attend the hearing, give evidence or address this point in any written submissions. However, there was no evidence that either party specifically turned their mind to or negotiated an exclusion from the CGA. On this basis, I do not think it can fairly be said that the parties agreed to contract out of the CGA. However, I will proceed with the analysis on the basis that the clause set out above records an agreement to contract out of the CGA.
[10] Before determining whether that agreement to contract out of the CGA was valid, I turn to consider, in terms of s 43(2)(d), whether it is fair and reasonable that the parties be bound by their written agreement to contract out of the CGA. I will refer to the factors set out in subs (2A) (above).

The subject matter of the agreement

[11] The subject matter of this agreement is a medium-sized Mercedes car. This is a vehicle that is ordinarily acquired for personal, domestic or household use and may also be acquired for commercial use, as was the case in respect of Ashton Four Trustee’s vehicle.

The value of the goods

[12] Ashton Four Trustee paid $78,500 for the vehicle. This is a neutral factor in determining whether it is fair and reasonable that the CGA is excluded.

Respective bargaining power of the parties

[13] My assessment is that the clause set out above was tucked into the agreement on the mistaken assumption that it would be valid for Ingham Motor Holdings to unilaterally contract out of the CGA if a vehicle it sold was acquired for business purposes, as it may have been possible to do under the pre-2014 law. But unilateral contracting out of the CGA in respect of consumer goods is no longer possible since the amendments in that year.[2]
[14] There was no evidence of any specific discussion between the parties relating to contracting out of the CGA, as the post-2014 amended law now requires. In this sense, I consider that the respective bargaining power of the parties was unequal. In particular:

Whether the parties received legal advice or were represented by a lawyer

[15] There is no evidence that either party was represented by a lawyer or that Mr Tweedie (or Justina Tweedie) received legal advice in connection with the purchase of the vehicle.

Other relevant circumstances

[16] The list of matters in s 43(2A) is not exclusive. The Tribunal may consider additional relevant factors, consistent with the consumer protection purpose of the CGA, in determining whether it is fair and reasonable that the parties are bound by exclusion clauses. Here, I consider it relevant that the formulation of the exclusion clause seems to assume that it follows from the fact that a vehicle is being acquired for business purposes that the CGA does not apply. While this may be a fair reflection of the pre-2014 law, as described above, it is no longer a valid presumption. A party seeking to rely on an exclusion is unlikely to be able to show that it is fair and reasonable that parties are bound by that exclusion provision if the party cannot show that the provision was reached through a process involving genuine negotiation and agreement, rather than being slipped into the small print of the vehicle offer and sale agreement and invoked unilaterally.

Conclusion

[17] I conclude that it is not fair and reasonable that the parties are bound by the contracting out provisions in the vehicle offer and sale agreement. Therefore, the CGA applies to the sale of the Mercedes-Benz to Ashton Four Trustee.
[18] Accordingly, I will proceed to consider whether the vehicle failed to comply with the guarantee of acceptable quality in the CGA.

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

[19] 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.
[20] “Acceptable quality” is defined in s 7 of the CGA (as far as is relevant) as follows:
  1. 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.

...

(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.


[21] 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.
[22] Ashton Four Trustee’s Mercedes-Benz has a seven-speed dual-clutch transmission. The transmission has two separate clutches, one for each of the odd and even gear sets. Its ability to pre-select a gear in one gear set while the other is being used, makes gear changes much faster than in a manual transmission. Dual-clutch transmissions can also have a favourable effect on fuel economy compared to other types of transmission. No driver inputs are required to change gears – the electronic and hydraulic systems automatically engage both clutches. The vehicle only has two pedals, accelerator and brake. It has no clutch pedal. This is relevant as, despite Ingham Motor Holdings’ recommendation that he only use his right foot for both accelerator and brake (to avoid pressing both pedals at the same time and potentially confusing the transmission control system), Mr Tweedie’s driving style involves using both his feet on the pedals.
[23] Mr Tweedie said that the vehicle’s transmission problems started to occur early in 2022. He said he took the vehicle to Mercedes-Benz North Shore but he says he was told by the technicians there that was nothing to worry about.
[24] Mr Tweedie said that the vehicle’s transmission problems worsened in early 2023. His mother took the vehicle back to Mercedes-Benz North Shore on or around 16 March 2023. At this time, the vehicle had 11,053 km on its odometer. The reported problem, as recorded on the service invoice, was that the vehicle “feels almost like clutch is slipping when driving”. Mercedes-Benz North Shore carried out a diagnostic scan and found a fault in the internal temperature sensor in the vehicle’s transmission control unit. Mercedes-Benz North Shore replaced the transmission control unit and carried out various tests to confirm that the vehicle was performing correctly.
[25] The vehicle was returned from Mercedes-Benz North Shore with, according to Mr Tweedie, the transmission problems still present. He said that he or his mother phoned Mercedes-Benz North Shore to point this out, but they were told it was nothing to worry about.
[26] However, on 22 March 2023, the vehicle lost all drive and became undriveable. Mr Tweedie arranged for it to be towed to Mercedes-Benz Auckland (the trading name of Ingham Motor Holdings), in Newmarket.
[27] Mercedes-Benz Auckland kept the vehicle for several weeks while tests were carried out. Fault code PO79500 presented when the vehicle was scanned. This fault code signifies a pressure regulating valve malfunction.
[28] On 11 April 2023, Mercedes-Benz Auckland replaced another part of the transmission known as the valve body, due to a harsh shift concern when the vehicle was cold. However, the workshop initially reported the presence of an ongoing concern, namely a flare between the first and second gear shift. Mercedes-Benz Auckland considered replacing the dual clutch mechanism or indeed the entire transmission, but it decided not to do so after further testing and adaptation was carried out and no further abnormalities were found.
[29] Mercedes-Benz New Zealand Customer Service and National Technical Manager Glyn Griffiths provided a report of a cold start test drive on 28 April 2023, after the valve body had been replaced. The vehicle was taken on a 12 km test drive around Newmarket and on the Southern Motorway. Mr Griffiths reported that, during this test drive, the vehicle performed correctly, with smooth gear changes on upshift and downshift. Four other people test drove the vehicle, including Mercedes-Benz Auckland’s head technician. After the test drive, the vehicle was scanned using the Mercedes-Benz Xentry diagnostic tester and no faults were recorded. Mercedes-Benz Auckland concluded the vehicle was ready to be handed back to Mr Tweedie.
[30] However, Mr Tweedie continued to report ongoing concerns with the vehicle’s transmission, namely:
[31] These problems were, according to Mr Tweedie, worse when the vehicle was cold.
[32] Mr Tweedie also produced evidence from Michael Clarke of Kaspa Transmissions who drove the vehicle several times and experienced “a range of, for lack of a better word, odd issues”. Sometimes, Mr Clarke said, the vehicle drove perfectly, and sometimes it was a bit “bumpy”. Once, he said, he got “a very small flare from 1st to 2nd, but it was nothing significant enough to put my finger on”. Mr Clarke said he was not sure what was going on but it does not feel 100% right. He suggested Mr Tweedie monitor the issue to see how it made progress and then his workshop may be able to establish what the issue is and how to resolve it.
[33] Mr Tweedie provided a further report from A Automotive dated 3 August 2023 which recorded that no faults regarding the transmission were in the vehicle’s computer system. However, after three test drives, the following observations were recorded:

...hesitation followed by violent bucking of vehicle upon accelerting up gentle gradiant, problem seems to occur more than often when vehicle has been running for over 5 mins, once problem has occurred the issue seems to resolve itself until next key cycle. Another noticeable issue is that the transmission cycles between the gears 2nd – 3rd early in the morning upon gentle throttle opening , once the car warms up the issue goes away , another issue that may not be associated with the problem but I noticed was the economy gauge dances around alot even though the throttle opening is constant

[34] At the hearing, the Tribunal’s Assessor, Mr Haynes and I accompanied Mr Tweedie and Mr Visser, Ingham Motor Holdings’ workshop foreman, on a test drive of the vehicle. Mr Tweedie drove us around central Auckland for about 20 minutes attempting to demonstrate the vehicle’s alleged fault.
[35] After the test drive, Mr Visser scanned the vehicle for fault codes and none were found. I then gave each party the opportunity to make further written submissions regarding their observations on the test drive.
[36] Mr Tweedie submitted that:
[37] Mr Visser observed that the vehicle behaved as expected given the nature of the driver inputs (Mr Tweedie was driving). Mr Visser accepted there was a small hesitation when Mr Tweedie accelerated and then decelerated. However, Mr Visser considered this was explained by the vehicle “not [being] driven in a manner that is consistent and recognises that the gearbox in this instance would have been confused as to whether the car was being asked to speed up or slow down”.
[38] Mr Visser considered there were no abnormalities in the vehicle’s operation during the test drive. He noted that the eco-stop/start function was operating as usual when the vehicle stopped. However, on one occasion, the engine did not cut out as Mr Tweedie had put the transmission into neutral before taking off from the lights which resulted in the engine revving without any propulsion.
[39] Mr Visser provided the report of the Xentry diagnostic scan of the vehicle after the test drive, confirming there were no current faults with the vehicle’s transmission control (or any other aspects of the vehicle).

Tribunal’s assessment

[40] Neither Mr Haynes nor I observed any fault with the vehicle’s transmission during the test drive. Rather, as Mr Visser has expressed, any driveability concerns that were observed appear to relate to the way in which the vehicle was being driven by Mr Tweedie.
[41] I observed that Mr Tweedie was occasionally operating the vehicle’s two pedals with both of his feet, something that Mercedes has expressly advised him not to do. Indeed, on 28 April 2023, Michael Collins, the General Sales Manager of Mercedes-Benz Auckland advised Mr Tweedie that “two foot” driving will confuse a dual clutch transmission and will be the reason he could notice something others could not. Mr Tweedie responded:

Regarding “2 foot” braking, I brake with my left foot, as I am regularly involved in motorsport and I drive like this, it is common. At no point was both the brake and accelerator pressed at the same time.

[42] In my observation, Mr Tweedie did not drive the vehicle smoothly during the test drive; I would describe his style of driving on the test drive as abrupt and jerky.
[43] Moreover, neither of the reports produced by Mr Tweedie establish a fault in the vehicle. Although they point to subjective driveability concerns, they point to the absence of any diagnostic fault codes and are, at best, inconclusive as to the presence of any ongoing tangible fault.

Conclusion

[44] In the absence of fault codes pointing to a defect, or evidence of a specific mechanical fault, it is not possible for the Tribunal to conclude, either from the test drive or the other evidence presented, that the vehicle currently fails to comply with the guarantee of acceptable quality.
[45] It is accepted that the vehicle has previously presented with two transmission faults. However, these have both been remedied.
[46] Ashton Four Trustee has not established any basis on which it would be entitled to reject the vehicle. Nor is there sufficient evidence to establish the vehicle currently has a fault or that any repairs are required.
[47] Ingham Motor Holdings has at all times encouraged Mr Tweedie to bring the vehicle back for further assessment if he or his mother experiences further faults with it. It has also encouraged Mr Tweedie to take the vehicle to Mercedes-Benz North Shore or Mercedes-Benz Botany for assessment if he is not happy with the explanations offered by Mercedes-Benz Auckland.

Issue three: Has Ashton Four Trustee established a breach of the FTA?

[48] Section 9 of the FTA provides:
  1. 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.

[49] The test for establishing a breach of s 9 was set out by the Supreme Court in Red Eagle Corp Ltd v Ellis:[3]

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. It is not necessary under s 9 to prove that the defendant’s conduct actually misled or deceived the particular plaintiff or anyone else. If the conduct objectively had the capacity to mislead or deceive a hypothetical reasonable person, there has been a breach of s 9. If it is likely to do so, it has the capacity to do so. Of course the fact that someone was actually misled or deceived may well be enough to show that the requisite capacity existed.

[50] Mr Tweedie argued that Ingham Motor Holdings misled him because he understood he was buying a new vehicle on behalf of Ashton Four Trustee. Subsequently he has realised that the vehicle was a demonstrator and had been registered two months before purchase.
[51] I do not consider that Mr Tweedie’s argument that his company was misled can be upheld. The sales documents are clear that the vehicle was a demonstrator. Indeed, a proposal document from Ingham Motor Holdings to Justina Tweedie dated 2 April 2022 clearly states that the vehicle is being offered at a “demo price”, i.e. less than full retail. Further, the vehicle was clearly advertised as a “demonstrator” (although it appears Mr Tweedie may not have seen the advertisements).
[52] The vehicle offer and sale agreement also set out the date on which the vehicle was first registered, which was in February 2022, and the vehicle offer and sale agreement states the vehicle comes with the balance of the manufacturer’s new car warranty. The fact that the vehicle was displayed with a consumer information notice also serves to indicate the vehicle was, technically, used, something Mr Tweedie is likely to have been aware of from his many years as a motor vehicle trader.[4]
[53] Finally, in Mr Tweedie’s own correspondence with Ingham Motor Holdings, in an email dated 21 April 2023, he states in his own words that the salesperson had told him that the vehicle was “as new”. This suggests an awareness by Mr Tweedie that, although not technically new, the vehicle was “as new” as it had only recently been registered and had travelled only about 20 km.
[54] In combination, this is sufficient to find that Ingham Motor Holdings did not mislead Ashton Four Trustee that the vehicle was a demonstrator.
[55] It follows that I do not consider that Mr Tweedie has established any misleading conduct on the part of Ingham Motor Holdings in respect of the sale of the vehicle as a demonstrator rather than as a brand-new vehicle.

Conclusion

[56] Ashton Four Trustee Ltd’s application is dismissed.

J S McHerron
Adjudicator

[1] Consumer Guarantees Amendment Act 2013, s 13.

[2] Another sign that Ingham Motor Holdings’ exclusion provision in its standard form vehicle offer and sale agreement has failed to keep up with law changes is that it still refers to the Sale of Goods Act 1908. This Act was repealed in 2017, when it was replaced by pt 3 of the Contract and Commercial Law Act 2017.

[3] Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

[4] Only used motor vehicles offered or displayed for sale by motor vehicle traders or through a car market operator must display a consumer information notice: Consumer Information Standards (Used Motor Vehicles) Regulations 2008.

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