Lawson v Legacy Motors Limited Reference No. MVD 298/2023 [2023] NZMVDT 237 (14 November 2023)

Last Updated: 19 January 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 298/2023 [2023] NZMVDT 237 BETWEEN JESSICA LAWSON Applicant AND LEGACY MOTORS LTD Respondent

HEARING at HAMILTON on 22 September and AUCKLAND on 2 November 2023 (by audio-visual link) MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator S Haynes – Assessor

APPEARANCES

J Lawson, Applicant H Te Koha and T Pearse, Witnesses for the Applicant

J Smith for the Respondent

DATE OF DECISION 14 November 2023

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DECISION OF THE TRIBUNAL

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Legacy Motors Ltd shall, within 15 working days of the date of this decision:

(a) remedy the oil leak or leaks that are causing oil to leak into the vehicle’s spark plug tubes; and
(b) pay $235.75 to Ms Lawson.

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REASONS

Introduction

[1] Jessica Lawson purchased a 2006 Audi Q7 for $9,500 from Legacy Motors Ltd in November 2022. The vehicle had oil leaks that caused it to consume an excessive amount of oil and faulty ignition coils. Ms Lawson filed an application with the Motor Vehicle Disputes Tribunal in February 2023 seeking to reject the vehicle.
[2] Following a hearing on 16 March 2023, the Tribunal dismissed Ms Lawson’s application to reject the vehicle and ordered that Legacy Motors shall, within 15 working days of the date of that decision:

• (a) remedy the oil leak or leaks that are causing the vehicle to consume an excessive amount of oil
• (b) replace all defective ignition coils; and
• (c) pay $498.30 to Ms Lawson.

[3] Ms Lawson has now filed a new claim. Ms Lawson alleges that Legacy Motors has failed to remedy the oil leaks as ordered by the Tribunal. When she filed this claim, Ms Lawson wanted to reject the vehicle. However, during the hearing on 2 November 2023, Ms Lawson advised the Tribunal that her preferred remedy was to have the vehicle repaired.
[4] Legacy Motors says that it has made reasonable efforts to repair the vehicle and has complied with the Tribunal’s orders. It also says that Ms Lawson may have caused the ongoing oil leaks by putting too much oil into the vehicle.

Relevant background

[5] The background to this claim is set out in the Tribunal’s earlier decision.[1] During the hearings for this claim, other relevant facts became clearer, so I repeat some of that background below for context.

Events up to March 2023

[6] Ms Lawson and her mother, Hayley Te Koha, collected the vehicle from Legacy Motors on 18 November 2022. The vehicle’s odometer reading at that time was approximately 199,000 km.
[7] Two days later an orange engine warning light illuminated. Ms Lawson had the vehicle assessed by a Paeroa based technician on 22 November 2022. Ms Te Koha says that the technician advised her that the vehicle had faulty ignition coils, oil leaks from the rocker cover gasket and the front crank seal and a possible oil leak down the back of the sump.
[8] Ms Te Koha contacted Jay Smith of Legacy Motors, who agreed to have the vehicle assessed by Legacy Motors’ mechanic. Ms Te Koha then delivered the vehicle to S&A Motor Co Automotive Services Ltd in Hamilton.
[9] Legacy Motors provided a copy of an invoice, which shows that S&A Motor Co Automotive Services performed a diagnostic scan and found a misfire on both coil packs. It removed all eight coil packs and spark plugs and found oil leaking into the two cylinder heads. It cleaned the coil packs and spark plugs and replaced both rocker cover gaskets. Mr Smith says that one of the rocker cover gaskets had been replaced before purchase, but he decided to replace both as a precaution.
[10] Ms Te Koha collected the vehicle on 5 December 2022. The orange engine light returned the following day while Ms Lawson was driving. Ms Te Koha advised Mr Smith of the ongoing issues. Mr Smith advised Ms Te Koha that he would speak with S&A Motor Co Automotive Services to see what repairs it had performed. Ms Te Koha again contacted Mr Smith on 16 December 2022. He advised that he was at a funeral and suggested that Ms Te Koha contact S&A Motor Co Automotive Services directly. Mr Smith then messaged Ms Te Koha on 20 December 2022 suggesting that she contact S&A Motor Co Automotive Services to arrange for the vehicle to be assessed. Ms Te Koha was reluctant to do so, so she had the vehicle assessed by Ebbett Audi in Hamilton instead.
[11] Ebbett Audi found that oil was leaking into the spark plugs through the camshaft housing. It says that, as a first step it will need to remove and reseal the camshaft housing and one damaged ignition coil.
[12] About this time, Ms Lawson says that she noticed an unusual “chemically” smell from the engine. She then took the vehicle to Shilton Automotive in Paeroa on about 19 January 2023. Ms Lawson says that Shilton Automotive found that the engine was hot and low on oil. Ms Lawson says that Shilton Automotive topped up the vehicle’s oil levels with about two litres of oil. Ms Lawson and Ms Te Koha then purchased more oil and Ms Te Koha says that she put a further two litres of oil into the vehicle. Shortly afterwards, Ms Lawson says that she stopped driving the vehicle and filed her first claim. The Tribunal then made the orders set out above.

Events after March 2023

[13] In compliance with the Tribunal’s earlier decision, Legacy Motors arranged to have the vehicle repaired by S&A Motor Co Automotive Services Ltd in Hamilton. An invoice dated 9 May 2023 records that S&A Motor Co Automotive Services found that the vehicle was misfiring, the engine light was present and there was a “notable oil leak”. That invoice also records that S&A Motor Co Automotive Services considered that the engine oil was overfilled by three litres.
[14] S&A Motor Co Automotive Services then replaced the passenger bank rocker cover gasket, sump plug washer and all ignition coils. It then tested the vehicle and found no misfire or visible oil leaks.
[15] The vehicle was then returned to Ms Lawson, who says that the oil leak has returned. At the direction of the Tribunal, Ms Lawson then had an oil consumption test performed by Shilton Automotive. Ms Lawson says that Shilton Automotive found no excessive oil consumption. However, the vehicle continues to leak oil, so Ms Lawson then had the vehicle assessed by Whyteline Ltd on about 9 October 2023.
[16] The Tribunal heard evidence from Troy Pearse of Whyteline Motors. Mr Pearse says that Whyteline Ltd performed a diagnostic scan and found fault codes for misfires on seven different cylinders. It then assessed the vehicle and found that oil was leaking into the spark plug tubes, causing the multiple misfires. Whyteline Ltd also found that the coolant was contaminated with oil and the radiator cap was broken.
[17] Ms Lawson then returned the vehicle to Whyteline Ltd on 16 October 2023 and Whyteline Ltd removed and cleaned the spark plugs and flushed and refilled the cooling system. Whyteline Ltd then assessed the vehicle again on 30 October 2023 and found fault codes relating to multiple cylinder misfires and that the spark plugs and coolant were again contaminated with oil.
[18] Mr Pearse says that Whyteline Ltd also performed a TK test and a compression test to determine whether the vehicle had a blown head gasket or cracked cylinder head, which are common causes of coolant contamination. The vehicle passed both tests, so Mr Pearse believes that it is likely the coolant contamination is caused by a leaking oil cooler in the radiator. Mr Pearse also advises that, given the rocker cover gaskets have previously been replaced, the oil leak into the spark plug tubes is either caused by improperly installed rocker cover gaskets or leaking spark plug seals, which should have been replaced with the rocker cover gaskets.
[19] Mr Smith appeared for Legacy Motors and says that Legacy Motors has repaired the vehicle as ordered by the Tribunal. Mr Smith considers that Ms Lawson may have caused the further oil leaks by overfilling the vehicle with oil as found by S&A Motor Co Automotive Services. Mr Smith considers that the overfilled oil then caused excessive oil pressure in the engine, leading to damaged seals and gaskets that are now leaking.

The issues

[20] Against this background, the issues requiring the Tribunal’s consideration in this case are:

• (a) Has the vehicle been of acceptable quality for the purposes of s 6 of the Consumer Guarantees Act 1993 (the CGA)?
• (b) What remedy is Ms Lawson entitled to under the CGA?

Issue 1: Has the vehicle been of acceptable quality?

[21] 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.

[22] 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 oil leak into the spark plug tubes

[23] The ongoing oil leak into the spark plug tubes breaches the guarantee of acceptable quality because the vehicle has not been as free of minor defects or as durable as a reasonable consumer would consider acceptable. The evidence shows that this leak has been present throughout Ms Lawson’s ownership and has not been properly remedied. Mr Haynes, the Tribunal’s Assessor, advises that it is likely that the vehicle has leaking spark plug seals that should have been replaced during the earlier repairs. The other possible explanation, which is less likely, is that the replaced rocker cover gaskets were not properly installed and are not seating properly.
[24] Despite the vehicle being overfilled with oil by Ms Te Koha, I find that it is unlikely that this has contributed to the oil leaks now present for two reasons. First, the vehicle was not driven any significant distance between the time Ms Te Koha put too much oil into it and it was repaired by S&A Motor Co Automotive Services. Second, the evidence clearly shows that the vehicle already had oil leaks into the spark plug tubes well before the oil levels were overfilled.

The oil leak into the coolant

[25] The Tribunal agrees with Mr Pearse’s diagnosis that, in the absence of evidence of a blown head gasket or cracked cylinder head, it is most likely that the coolant contamination is caused by a leaking oil cooler inside the radiator. That defect does not breach the guarantee of acceptable quality.
[26] A consumer who purchases a vehicle of this price, age and mileage should understand that the vehicle will have wear and tear consistent with that age and mileage and that the vehicle is likely to require future maintenance and repair, which may be expensive to perform. That consumer has the protections afforded by s 6 of the CGA that the vehicle will be of acceptable quality, but a supplier’s obligations under s 6 of the CGA are finite and, at some point, the risk of the vehicle developing defects must transfer from the supplier to the purchaser. The point in time at which that risk transfers from the supplier to the consumer is determined with reference to the factors in s 7(1)(f) to (j) of the CGA.
[27] When I consider the factors in s 7(1)(f) to (j) of the CGA, I am satisfied that the oil leak into the coolant does not breach the guarantee of acceptable quality. Ms Lawson paid $9,500, 16-year-old Audi Q7 with an odometer reading of approximately 199,000 km. The oil leak into the coolant was not discovered until October 2023, by which time Ms Lawson had owned the vehicle for about 11 months.
[28] Given the price, age and mileage of the vehicle at the time of sale, the nature of the defect that has caused the coolant contamination and the length of Ms Lawson’s ownership before that defect was identified, I consider that, with respect to the oil leak into the coolant, the vehicle has been as free of minor defects and as durable as a reasonable consumer would consider acceptable.

Issue 2: What remedy is Ms Lawson entitled to under the CGA?

[29] The relevant remedies 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.

[30] Ms Lawson wants to have the vehicle repaired, rather than reject it. Under s 18(2)(a), she is entitled to have the ongoing oil leak into the spark plug tubes repaired, as that defect breaches the guarantee of acceptable quality. Ms Lawson is not entitled to any remedy for the coolant contamination, as that defect does not breach the guarantee, so Ms Lawson must assume responsibility for that repair.
[31] Under s 18(4), Ms Lawson is also entitled to recover the cost of having the oil leak into the spark plug tubes diagnosed. The invoices from Whyteline Ltd total $471.50, but that includes costs for the diagnosis of the coolant contamination, which must be excluded from this calculation. I therefore find that Ms Lawson is entitled to recover half of that diagnosis cost.

Outcome

[32] Legacy Motors shall, within 15 working days of the date of this decision:

• (a) remedy the oil leak or leaks that are causing oil to leak into the spark plug tubes; and
• (a) pay $235.75 to Ms Lawson.
  

B R Carter
Adjudicator

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[1] Lawson v Legacy Motors Ltd [2023] NZMVDT 53 (30 March 2023).