Shams v 2 Cheap Cars Limited Reference No. MVD 413/2023 [2023] NZMVDT 275 (18 December 2023)

Last Updated: 26 January 2024

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 413/2023 [2023] NZMVDT 275 BETWEEN SUHAIL SHAMS Applicant AND 2 CHEAP CARS LTD Respondent

HEARING at AUCKLAND on 30 November 2023 (by audio-visual link) MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator S Haynes – Assessor

APPEARANCES

S Shams, Applicant

G Moore for the Respondent

DATE OF DECISION 18 December 2023

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DECISION OF THE TRIBUNAL

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A Suhail Shams’ application to reject the vehicle is allowed.

2. Mr Shams’ rights and obligations under the collateral credit agreement with Grant Cashmore Ltd, trading as MTF Finance Penrose dated 5 April 2023 are assigned to 2 Cheap Cars Ltd from the date of this decision.

100. 2 Cheap Cars Ltd shall, within 10 working days of the date of this decision, pay $3,728.40 to Mr Shams.

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REASONS

Introduction

[1] Suhail Shams wants to reject the 2011 Lexus CT Hybrid[1] he purchased for $15,559 from 2 Cheap Cars Ltd on 4 April 2023. Mr Shams says that the vehicle’s hybrid battery system was faulty at the time of purchase, and he discovered a water leak through the roof in September 2023. 2 Cheap Cars agrees that the vehicle had a hybrid battery fault and a water leak and that it has taken longer than it would have liked to remedy those issues.

The issues

[2] 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) Has 2 Cheap Cars failed to rectify the vehicle’s defects within a reasonable time?
• (c) What remedy is Mr Shams entitled to under the CGA?

Relevant background

[3] Mr Shams entered into a loan agreement dated 5 April 2023 (the collateral credit agreement) with Grant Cashmore Ltd, trading as MTF Finance Penrose (MTF) to purchase the vehicle.
[4] Several warning lights illuminated on the day of purchase. Mr Shams says that the hybrid system then stopped working. On 14 April 2023, 2 Cheap Cars cleaned the hybrid battery fan.
[5] Mr Shams says that the vehicle then worked properly until about one month later, the same warning lights returned. Mr Shams returned the vehicle to 2 Cheap Cars. 2 Cheap Cars had the vehicle for seven days and then contacted Mr Shams and advised him that it had replaced a windscreen seal and rectified the vibration. However, 2 Cheap Cars had not remedied the hybrid battery fault and said it would not do so until it had authority from management.
[6] Mr Shams then rejected the vehicle on 18 September 2023 and filed this claim seeking to reject the vehicle on 2 October 2023.

Issue 1: Has the vehicle been of acceptable quality?

[7] 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”.
[8] “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.

[9] 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.
[10] Warning lights relating to the vehicle’s hybrid battery illuminated within days of purchased. 2 Cheap Cars appears to have initially considered that the hybrid battery fan required cleaning but has now confirmed that the hybrid battery was degraded or faulty and required replacement. The vehicle also had a water leak through the windscreen, which has been repaired by replacing the windscreen seal.
[11] Those faults mean the vehicle has not been 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.

Issue 2: Has 2 Cheap Cars failed to rectify the vehicle’s defects within a reasonable time?

[12] 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.
[13] 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.

[14] 2 Cheap Cars has failed to remedy the hybrid battery failure within a reasonable time. Mr Shams returned the vehicle three times for the hybrid battery fault to be remedied and 2 Cheap Cars has not done so.
[15] Garry Moore, who appeared for 2 Cheap Cars, acknowledged that 2 Cheap Cars ought to have rectified the hybrid battery fault when the vehicle was returned the third time. Mr Moore says that 2 Cheap Cars technicians had confirmed the hybrid battery failure by that time and the company should have replaced the battery at that point. Mr Moore says that this failure to replace the battery at that time is the reason why 2 Cheap Cars has offered to refund the vehicle’s purchase price to Mr Shams to settle this dispute, an offer that Mr Shams initially declined because he sought other compensation.
[16] Although it was not included in his claim, in email correspondence with the Tribunal and 2 Cheap Cars, Mr Shams stated that he also sought to recover the cost of using a friend’s vehicle, extra fuel and lost working hours. During the hearing, Mr Shams abandoned his claim for those costs, which was sensible because he had provided no evidence to show that he had incurred those costs.

Issue 3: What remedy is Mr Shams entitled to under the CGA?

[17] Mr Shams was entitled to reject the vehicle under s 18(2)(b)(ii) due to 2 Cheap Cars’ failure to remedy the vehicle’s defects within a reasonable time. Having rejected the vehicle, Mr Shams is entitled to a refund of all money paid and consideration provided for the vehicle.[2] Under s 18(4), Mr Shams is also entitled to recover any loss or damage resulting from the vehicle’s failure to comply with the guarantee of acceptable quality that was reasonably foreseeable as liable to result from the failure.

Loan repayments

[18] As set out above, Mr Shams entered into the collateral credit agreement to purchase the vehicle. Mr Shams has provided a statement of account to show that he has now reduced the outstanding balance on the loan by $3,162.30. Having rejected the vehicle, Mr Shams is entitled to recover that amount from 2 Cheap Cars. Mr Shams is also entitled to recover all interest payments since he rejected the vehicle on 18 September 2023. The interest accrued since that date is $566.10.

The collateral credit agreement

[19] Mr Shams is entitled to have his ongoing rights and obligations under the collateral credit agreement assigned to 2 Cheap Cars. The relevant provisions are set out in ss 89(2) and (3) of the Motor Vehicles 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.

[20] The criteria in s 89(2) of the MVSA for the assignment of rights and obligations under a collateral credit agreement to 2 Cheap Cars are all met in this case:

• (a) The agreement between Mr Shams and MTF is a collateral credit agreement for the purposes of s 89(2) of the MVSA. The agreement was arranged or procured by Mr Shams for the provision of credit by MTF to enable Mr Shams to purchase the vehicle.
• (b) 2 Cheap Cars sold the vehicle to Mr Shams, so it is a party to the contract to purchase the vehicle.
• (c) Mr Shams has exercised the right conferred by the CGA to reject the vehicle and the Tribunal has ordered that 2 Cheap Cars must refund any money paid, or other consideration provided, for that vehicle.
  

Outcome

[21] Mr Shams’ application to reject the vehicle is allowed, and the Tribunal orders that:

• (a) Mr Shams’ rights and obligations under the collateral credit agreement with Grant Cashmore Ltd, trading as MTF Finance Penrose dated 5 April 2023 are assigned to 2 Cheap Cars from the date of this decision.
• (b) 2 Cheap Cars shall, within 10 working days of the date of this decision, pay $3,728.40 to Mr Shams.

[22] The vehicle then belongs to 2 Cheap Cars.

B R Carter
Adjudicator

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[1] Registration plate PUE636

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