Shaw v AJ Motors Ltd - Reference No. MVD 444/2022 [2023] NZMVDT 7 (25 January 2023)

Last Updated: 25 February 2023

IN THE MOTOR VEHICLE DISPUTES TRIBUNAL I TE RŌPŪ TAKE TAUTOHENGA Ā-WAKA MVD 444/2022 [2023] NZMVDT 007 BETWEEN MICHAEL IAN SHAW Applicant AND AJ MOTORS LTD Respondent

HEARING at AUCKLAND on 17 January 2023 (by audio-visual link) MEMBERS OF TRIBUNAL

B R Carter, Barrister – Adjudicator S Gregory – Assessor

APPEARANCES

M I Shaw, Applicant A Shaw, Witness for the Applicant

M Isa and H Z Jiang for the Respondent

DATE OF DECISION 25 January 2023

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DECISION OF THE TRIBUNAL

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A Michael Shaw’s application to reject the vehicle is upheld.

2. AJ Motors Ltd shall, within 10 working days of the date of this decision, pay $21,097.50 to Mr Shaw.

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REASONS

Introduction

[1] Michael Shaw wants to reject the 2011 BMW 523i[1] he purchased for $20,580 from AJ Motors Ltd on 19 May 2022. Mr Shaw says that the vehicle has had several defects since purchase, including engine control unit (ECU), transmission and airbag suspension faults, which mean the vehicle is not of acceptable quality. He wants to return the vehicle and obtain a refund of the purchase price, the cost of diagnosis and repairs to the vehicle and the cost of upgrading the vehicle’s GPS navigation and radio.
[2] AJ Motors says that Mr Shaw should not be entitled to reject the vehicle and that it should be given an opportunity to assess the vehicle and perform all repairs that it should have responsibility for.

Relevant background

[3] Mr Shaw purchased the vehicle on 19 May 2022 but did not collect it until 2 June 2022. It seems that AJ Motors had discovered an ECU fault after Mr Shaw had agreed to purchase the vehicle. An invoice dated 31 May 2022 from East Tamaki Auto Service shows that it replaced the vehicle’s ECU, alternator, three ignition coils and the digital junction box (JBE box). AJ Motors paid $3,151 for those repairs.
[4] When Mr Shaw collected the vehicle on 2 June 2022, he noticed that the rear wiper washer and headlamp washers were not working. On about 9 June 2022, Mr Shaw then noticed an oil leak from the cam cover, which was leaking onto the vehicle’s exhaust. He returned the vehicle to AJ Motors, which rectified the oil leak and an invoice dated 21 July 2022 from East Tamaki Auto Service shows that it replaced a fuse relay box and the headlamp washer motor.
[5] Mr Shaw collected the vehicle on 25 July 2022, and he used the vehicle without incident until about 16 September 2022, when the vehicle began to misfire and lose power. The vehicle was then taken to SD European in Hamilton for assessment.
[6] SD European found that the ECU (which had been replaced in May 2022) was faulty. Mr Shaw then emailed AJ Motors on 3 October 2022, advising it that the vehicle had developed a misfire and that the vehicle was being assessed by SD European. Mr Shaw advised AJ Motors that “we need to get their diagnosis and repair plan and go from there”.
[7] On 13 October 2022, Mr Shaw advised AJ Motors that SD European was looking to source and replace the ECU. SD European then replaced the ECU, at a cost of $2,700.15. Mr Shaw says that he did not ask AJ Motors to replace the ECU as it already had one chance to perform that repair.
[8] SD European also performed a diagnostic scan and found fault codes relating to the vehicle’s transmission. It reprogrammed the transmission, but the fault codes remained. SD European considers that the vehicle has a fault within the transmission mechatronics unit, and that the transmission should be replaced, at an estimated cost of $5,752.86.
[9] Mr Shaw says that the performance of the vehicle’s transmission suggests that it is faulty. He says that the vehicle’s transmission is “rough” at low speeds, with a lag when the vehicle changes from first to second gear and under acceleration.
[10] Mr Shaw collected the vehicle from SD European on 28 October 2022 and says that he has since discovered that the rear suspension airbags are leaking. He has provided photographs of the rear of the vehicle, which show the rear of the vehicle is much lower than the front. Mr Shaw says that the airbag compressors are still working, but the airbags deflate after about five hours.
[11] Mr Shaw says that a further transmission fault has developed in recent weeks. He says that he is having difficulty selecting park and a warning message has appeared three times recently. Mr Shaw has provided a screenshot of that warning message, which states:

Transmission

Secure vehicle with parking brake when stationary. Have the problem checked by Service.

The issues

[12] 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) Are the vehicle’s defects a failure of a substantial character?
• (c) What remedy is Mr Shaw entitled to under the CGA?

Issue 1: Has the vehicle been of acceptable quality?

[13] 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”.
[14] “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.

[15] 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.
[16] I am satisfied that the evidence presented shows that since Mr Shaw purchased the vehicle, it has had the following defects:

• (a) a faulty ECU;
• (b) an oil leak from the cam cover;
• (c) worn ignition coils;
• (d) a faulty JBE box and alternator;
• (e) faulty headlamp and rear window washers;
• (f) leaking rear suspension airbags; and
• (g) a fault with the mechatronics unit, which is affecting the operation of the vehicle’s transmission.

[17] The invoices from East Tamaki Auto Service proves the existence of the faulty ECU, JBE box, alternator, ignition coils, headlamp and rear washers.
[18] The invoices from SD European show that the ECU required replacement again in September 2022, and by that time the mechatronics unit had developed a fault and required replacement. Mr Gregory, the Tribunal’s Assessor, advises that the recent transmission warning messages complained of by Mr Shaw are also consistent with a mechatronics unit fault. The mechatronics unit is an electric valve body that controls the functions of the gearbox, including gear selection and the clutch operation. Mr Gregory says that the difficulty in selecting park is consistent with a mechatronics unit fault. Mr Gregory advises that, at a minimum, the mechatronics unit will require replacement, at an approximate cost of more than $5,000.
[19] Finally, I accept Mr Shaw’s oral evidence that the vehicle’s rear suspension airbags are leaking. I found Mr Shaw to be a clear and reliable witness. His evidence is also supported by photographs that show that the rear of the vehicle is lower than the front, consistent with the conclusion that suspension airbags are leaking and require replacement. AJ Motors says that this is a maintenance item, that it should not have liability for. I disagree. Mr Shaw paid $20,580 for an 11-year-old vehicle with an odometer reading of 78,537 km. The rear suspension airbags required replacement less than five months after purchase, during which time Mr Shaw had driven less than 5,000 km.

Conclusion on acceptable quality

[20] I acknowledge AJ Motors’ submission that many of the vehicle’s defects are related to its electrical system/control modules and were not mechanical issues. That may be the case, but the CGA applies to such defects in the same way as it applies to mechanical defects.
[21] Applying the test in s 7(1)(f) to (j), including the nature and extent of the vehicle’s defects, the vehicle’s price, age and mileage at the time of sale and the length of Mr Shaw’s ownership and the distance travelled before each defect became apparent, I find that the defects listed above mean the vehicle has not been of acceptable quality for the purposes of s 6 of the CGA, because it has not been as free of minor defects or as durable as a reasonable consumer would consider acceptable.

Issue 2: Are the vehicle’s defects a failure of a substantial character?

[22] A failure of a substantial character is defined in s 21 of the CGA:

21. 21 Failure of substantial character

For the purposes of section 18(3), a failure to comply with a guarantee is of a substantial character in any case where—

(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b) the goods depart in 1 or more significant respects from the description by which they were supplied or, where they were supplied by reference to a sample or demonstration model, from the sample or demonstration model; or

(c) the goods are substantially unfit for a purpose for which goods of the type in question are commonly supplied or, where section 8(1) applies, the goods are unfit for a particular purpose made known to the supplier or represented by the supplier to be a purpose for which the goods would be fit, and the goods cannot easily and within a reasonable time be remedied to make them fit for such purpose; or

(d) the goods are not of acceptable quality within the meaning of section 7 because they are unsafe.

[23] Section 21(a) of the CGA applies to this case, and I am satisfied that the vehicle’s cumulative defects are a failure of a substantial character. In Cooper v Ashley & Johnson Motors Ltd, the District Court found that a purchaser may reject a vehicle where there has been an accumulation of defects that amount to a failure of a substantial character, even when those defects may not amount to a failure of substantial character in their own right.[2] The Court noted that a point will eventually be reached where the purchaser could “say convincingly that he or she had no ‘confidence in the reliability of the vehicle’.
[24] In this case, I find that the vehicle’s cumulative defects (as set out in paragraph [16] above) are such that a reasonable consumer would have lost all confidence in the vehicle’s ongoing reliability and that a reasonable consumer would not have purchased this vehicle if they had known of the smorgasbord of issues that would arise so shortly after purchase.

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

[25] 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.

[26] Mr Shaw is entitled to reject the vehicle because its defects are a failure of a substantial character.[3] He is therefore entitled to a refund of all money paid for the vehicle.[4]
[27] Mr Shaw is not entitled to recover the cost of the ECU repairs performed by SD European. Under s 18(2)(b)(i) of the CGA, a consumer must first give the supplier a reasonable opportunity to remedy a failure before having it rectified elsewhere and recovering the cost of repairs from the supplier.[5]
[28] Mr Shaw says that he did not ask AJ Motors to replace the ECU, as it had already replaced the ECU and a fault had returned. Although Mr Shaw’s view is understandable, it sometimes takes more than one attempt to successfully rectify a fault within a vehicle, and I consider that he had an obligation to give AJ Motors one more opportunity to fix the vehicle’s ongoing ECU issues. Mr Shaw did not give AJ Motors this opportunity, so he is not entitled to recover that repair cost.
[29] Under s 18(4) of the CGA, Mr Shaw is entitled to recover the $517.50 cost of the GPS navigation and radio system software upgrades performed by RPM Car Audio (2008) Ltd in June 2022. This vehicle’s GPS navigation was in Japanese at the time of sale and the radio was set for Japanese radio bandwidth, which is different from the New Zealand bandwidth. It is therefore reasonably foreseeable that the purchaser of this vehicle would pay to have the GPS navigation and radio system upgraded for use in New Zealand. Mr Shaw has successfully rejected the vehicle, meaning he has suffered loss by paying for this upgrade.

Outcome

[30] Mr Shaw’s application to reject the vehicle is upheld and AJ Motors shall, within 10 working days of the date of this decision, pay $21,097.50 to Mr Shaw. Mr Shaw must then make the vehicle available to be collected by AJ Motors.

B R Carter
Adjudicator

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[1] Registration number PDR444.

[2] Cooper v Ashley & Johnson Motors Ltd (1996) 7 TCLR 407 (DC).

[3] Consumer Guarantees Act 1993, s 18(3)(a).

[4] Section 23(1)(a).

[5] Acquired Holdings Ltd v Turvey [2007] NZHC 1251; (2008) 8 NZBLC 102,107 (HC).